Individual investors in 2016 are facing many emotional conflicts that if left unresolved, could put their financial future at risk. Globally, they say they want to grow assets but they hesitate to take on risk. They want to evaluate investment performance based on personal goals, but many admit to not having clear goals. They know they’re faced with funding a greater share of their retirement, but may not realize just how much it all adds up to.
Natixis Global Asset Management’s Fifth Annual Global Survey of Individual Investors finds investors are struggling to reconcile these conflicts and have few tools to help them. But as they look to address critical questions about their risk, return, and retirement, large numbers say they believe professional advice can increase their chances of success.
Cautious, but searching for double-digit returns
A majority individuals call themselves “cautious” investors. But they also tell us they will need to generate returns of 9.5% above inflation to meet their goals. Pursing real returns of 12% to 13% is likely to expose investors to significant volatility. Not many are likely to stomach the risk. In fact, 79% of investors worldwide say they’d take safety over investment performance. What investors need is education about risk and help in understanding their own ability to handle it.
Goal-oriented, but lacking clear goals
More than seven in ten investors say they evaluate their investments performance against personal goals and more than three-quarters would be happy to achieve their goals even if they underperformed the market. But we find that just 49% of the investors say they have clear financial goals in the first place. Fewer still say they have a financial plan. The first step forward for any investor is to take the time to write down their goals and work with a financial professional to help set a realistic plan for reaching them.
Understand retirement, but underestimating what’s needed
Government benefits and employer pensions once shared equal duty with personal savings for retirement funding, but 77% of investors now believe the responsibility of shoring up retirement is increasingly theirs. Few may realize just how much this responsibility really adds up to. Despite saving an average of 12% of salary toward the goal, most believe they will need to replace only 64% of current income in retirement – significantly less than the 75% to 80% most experts recommend. When it comes to retirement funding, investors need to consider longevity risk as their biggest challenge. Determining how much you save needs to begin with asking pointed questions about how much you will actually need to live in retirement.
Professional help on their own terms
Investors have much to resolve and need help getting past the challenges they face. A majority of individuals (64%) tell us believe professional advice is worth the fee. Even more (66%) say individuals who get professional advice are more likely to meet their goals. However, we find that investors today have a clear vision of what they want from an advisor – and it’s not a hot stock tip. They want their investment professional to help them become more informed investors. They want solutions for managing risk. They want help setting goals and plans. In short, they want a more collaborative relationship with their advisor.
As financial professionals the best way we can put investors first is to get on the same side of the table with clients. We need to put risk first in the investment discussion to help them realize what they can realistically expect from their investments. We need to stop talking about investment products, get clients focused on goals, and start talking about building a portfolio designed to fit their unique objectives. If investors are to be successful, we need to help them gain more knowledge about investing and the markets. It’s our responsibility to help them make more informed decisions about their financial future.
Download this whitepaper for more on our 2016 Global Survey of Individual Investors.
Source: Natixis Global Asset Management, Global Survey of Financial Advisors conducted by CoreData Research, June-July 2014. Survey included 1,800 financial advisors in 10 countries. Natixis Global Asset Management, Global Survey of Individual Investors conducted by CoreData Research, May 2014. Survey included 5,950 investors in 14 countries.
This material is provided for informational purposes only and should not be construed as investment advice. The views and opinions expressed above may change based on market and other conditions. There can be no assurance that developments will transpire as forecasted.
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