River guides told us the rapids would capture our attention, but the canyon would capture our hearts. They delivered on both and we’ll have a lifetime of memories of whitewater rafting on 18 miles of the remote Tuolumne River. They painted expectations before we embarked on a voyage through 20 Class IV rapids and a night under the stars. Bring your cameras, listen to your guide, work as a team, and stay in the boat. If you fall overboard, keep eyes and feet downstream, and swim to safety. And don’t stand up until you’re in knee deep water. The river’s rich with submerged foot entrapments. If your feet are stuck in fast current, you’ll go down face first. It’s tough to fight the powerful current… it generally wins. Good advice for investing.
Charles Schwab released two studies and I’ll share key findings and their relevance to you. Independent Advisor Outlook Study (IAOS) measured advisors’ views – this was the 13th semi-annual study and represented 1,016 advisors. Advice and Affluent Investor: A Study of Attitudes and Behaviors (AAIS) surveyed more than 1,000 investors who receive some sort of advice.
• One size doesn’t fit all – Investors saw themselves as either “Make our own decisions, though receive advice and guidance from a professional” (59%) or “Use someone to make investment decisions without us getting very involved” (38%). Both involve a trusted relationship. Few in the AAIS saw themselves as advanced investors (11%); more call themselves intermediate (68%) or beginners (21%).
• A job that needs to get done – Half of the respondents view investing as a chore they neither love nor hate. Yet investors are more involved (41%) in their investment decisions (2013 vs 2012). You need to be more serious about your finances that anyone. Conversations are healthy – “Help me understand…” or “Are we going to be ok?”
• Common and differing outlooks – Both advisors and investors are more confident. Advisors (59%) and investors (65%) believe the S&P 500 will rise for the next six months (April and May surveys). Here’s the disconnect: (a) An equal portion of investors feel their portfolio returns will mimic the S&P over the same period [perhaps… if they have an S&P-like portfolio], and (b) the level of ease (or difficulty) to achieve investment goals. Half of investors feel it will be “extremely or very easy” to achieve their goals in current conditions. A similar proportion of advisors feel it’ll be “difficult.” Have some forgotten that volatility also has a “down” button, or US equities are only one investment option? Both groups have concerns about uncertainty, rising taxes, inflation, and interest rates.
• Less hand holding required – Advisors said one in five clients need reassurance about achievement of their long-term goals (down from one in three last year). Investors are more concerned with capital preservation (63%). I wonder if they’re talking about stability – avoiding a trek to Mt. Everest, then plummeting to the floors of Death Valley. And some folks are building or rebuilding their wealth. Also a vast majority (81%) said their primary investment goal was to build a retirement income stream to last their lifetime (I presume includes inflation protection).
I wasn’t too surprised in the two survey results. However, calm waters breed complacency. Keep a firm grip on the oars. Rapids are downriver. Listen to your guide. Smile. Stay in the boat. And if you go overboard, keep your feet up and remember to breath. They’ll get you.