Unlocking Real Value Blog

AK In The News: Weak U.S. Growth Sapping Equity Flows

I was quoted in an article yesterday in Ignites (A Financial Times Service) about why retail investors remain on the sidelines. A recent poll indicated that industry participants believe that investors will return to equities once employment and income growth return. This was the most popular belief, followed by progress by Congress on reducing the deficit and fixing the federal tax system.

While I don’t disagree with these answers, I also believe that it’s a little more complicated than that. For one thing, as I am quoted: “Investors who missed the equity markets rebound may also be fearful of “getting in again at the wrong time” because they are hearing that indices are nearly back to their all-time hight. Additionally, even investors already in the equity markets are “nervous and cutting exposures” because of uncertainty over the presidential election and about the federal budget.”

Many investors also still fee the scars of 2008, so it’s not as simple as one event getting them back into the market. Herein lies the opportunity for advisors – educating investors about the equity markets, and getting them comfortable with the ups and downs, is an important way to start to get them to be more open to once again investing in equities, and then when some of the economic and political mess starts to clear, they will be more likely to do so.

As I say in the article, it’s more about “helping investors get comfortable with investing than thinking any one event will precipitate a mass entry into the market.”

Advisors should be patient, take the time to educate clients and prospects via White Papers and perhaps one-on-one educational counseling sessions, and make it clear that they are with the client for the long-term, irregardless of when that long-term begins.

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