Data reveals that overall, we’re feeling more experienced as investors and more comfortable with market volatility. A research report from benchmarking firm, Hearts & Wallets, finds the number of households feeling inexperienced with investing has declined significantly since it began tracking the sentiment in 2011.
Mindset Shifts
When it comes to investment decisions, American households seem to be feeling both more prepared and more willing to consider financial advice, with Millennials making a dramatic shift in their consideration of volatility. Specifically, comparing saving and investing attitudes between 2011 and 2023, Hearts & Wallets shares:
Americans are feeling more experienced with investing and are embracing the benefits of professional financial advice while emphasizing the importance of emergency funds and keeping a wary eye on inflation….The report shows that 31% of households feel experienced with investing – the highest level since the survey began tracking the metric in 2011 when just 18% of U.S. households expressed that same feeling. According to the report, those consumers who see themselves as experienced investors are more likely to both make decisions on their own and to use paid investment professionals. Meanwhile, 28% of households feel very inexperienced with investing – a drop of 17 percentage points since 2015.
Accepting market volatility is a given when it comes to investing, and, more households overall are gaining comfort with this, as Millennials in particular have made a big sentiment shift:
In 2011, only 16% of millennials were comfortable accepting market volatility, five percentage points lower than Gen X and the baby boomers. In the subsequent years, millennials have changed their views dramatically on the issue. In the most recent Hearts & Wallets survey, 46% of millennials said they were comfortable with volatility, which was 18 points higher than Gen Z and 22 percentage points higher than baby boomers. Gen Z saw a marked decline from 43% feeling comfortable with volatility in 2022 to 28% in 2023. Overall, 34% of households say they are “very” or “somewhat” comfortable accepting volatility in exchange for a possibly higher return, an increase of 15 percentage points from 2011.
More and more households are also acknowledging the important role paid advice can play related to investment choices, though there is skepticism about the source and quality of financial advice: “32% of households see value in paying for financial advice, the highest that figure has been since it was first tracked in 2013, when 18% expressed the same sentiment….However, ‘despite progress in perceptions about advisors, the financial advice profession faces headwinds in articulating value proposition and justifying price….Consumers are undecided how recommendations from robo-advisors and online tools compare to those of human portfolio managers and advisors.’”
Investor Predictions?
Increased comfort with market volatility is probably a good thing for retirement savers, especially since when eyeing 2024, 500 institutional investment managers surveyed by Natxis predict plenty of uncertainty steering forward:
Two-thirds of institutional investors said uncertainty in the markets will prevail during the next year, and respondents were nearly evenly split on whether to be bearish or bullish on stocks, with a slight edge to those who are bearish (54% vs. 46%). The uncertainty of the economic picture factors heavily in institutional investors’ market outlook for 2024. Almost six in 10 (59%) are projecting higher levels of volatility for equity markets, while 39% see a similar uptick for bonds.
Despite some deceleration during 2023, inflation remains above the pre-pandemic norm. While 40% of respondents said they see inflation remaining at elevated levels, 40% see further reductions during 2024. In addition, while interest rate cuts have been an effective tool for cooling the inflation rate, 60% of institutions agree that higher inflation is the new normal. The majority (62%) of respondents said interest rates pose the greatest portfolio risk for 2024.
Plenty To Worry About
Given their fiduciary obligation to administer retirement plans for the benefit of participants, plan sponsors always have plenty to worry about. As if ERISA litigation over investment options and fees is not enough, there are even scary repercussions associated with how limiting investment options negatively impacts retirement funds over time.
Unfortunately, being “darned if you do, and darned if you don’t” is part of life as a plan sponsor. But, you no longer have to shoulder all the risks alone: armed with Colonial’s liability coverage, if you face claims of alleged or actual breaches of duty in connection with the employee retirement plan, you’ll be protected with defense costs and penalty limits up to $1,000,000.
At Colonial, a whole year of Fiduciary Liability coverage is less than a few dollars a day, and we even include Cyber Liability coverage to further protect you, your business and the retirement plan.
Protection’s just a few clicks away:
Obtain Fiduciary With Cyber Liability Insurance Right Here
Serving customers since 1930, Colonial Surety is the trusted source for the pension industry to secure legally required ERISA bonds, fiduciary liability insurance and cyber-liability insurance. We help safeguard plan sponsors, pension professionals and financial advisors — and keep their businesses compliant — with pain-free, efficient, and friendly service every time. Colonial Surety Company is rated “A Excellent” by A.M. Best Company, US Treasury listed and in business all across the country.