New AssetMark Study Reveals Investors Systematically Underestimate Risk

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Jun 12, 2014, 10:00 ET

CONCORD, Calif., June 12, 2014 /PRNewswire/ -- AssetMark, Inc., a leading strategic provider of innovative investment and consulting solutions serving independent financial advisors, today released findings from its inaugural Mass Affluent Investor Risk Barometer. The study, which was conducted in April by Koski Research on behalf of AssetMark, examines mass affluent investor sentiment and the crucial role that advisors play helping their clients navigate complex trade-offs between risk and reward. See executive summary for key study findings.

"We believe it's important for advisors to educate their clients and talk to them about the need to be realistic when balancing risk and reward," said Charles Goldman, President and CEO, AssetMark. "Our research indicates that too many investors overestimate their ability to cope with significant losses." Nearly half of the study respondents said they would risk 25 percent to 100 percent of their portfolios for commensurate returns. "Given the relatively recent memory of 2008, this is surprising," said Mr. Goldman.

Additional key findings from the study:

Overwhelmingly, mass affluent investors (95 percent) claim that they are in the market "for the long haul;" however, more than half (58 percent) expect advisors to change their investments frequently to keep up with changing market conditions.
Ninety percent of respondents state growth is a primary objective (43 percent are looking for growth; 47 percent, growth and income).
Yet, 68 percent are more concerned about the safety of their investments than about maximizing their returns (for investors over age 50, the number is 77 percent).
Three quarters expect their investment portfolios to increase in the next year, on average by 12 percent, despite the average return of 7.7 percent over the last 10 years for the S&P 500.
Sixty-five percent say they have kept the same amount of risk in their portfolio since 2008.

"We found that investors expect more from their portfolios than is realistic and this can cause some dissatisfaction," said Zoe Brunson, AssetMark's Director of Investment Strategies. "For instance, investors reported that the size of their portfolio, on average, had increased 14.2 percent in the last year and nearly half (48 percent) were not happy with their 2014 returns year-to-date."

"It's critical that advisors set the right expectations with their clients. Focus on building a portfolio to meet client goals rather than chasing last year's winner. Aim to be balanced across strategies that do well in rising markets and strategies that also do well in falling markets," Ms. Brunson added.

The study findings are reinforced by advisor sentiment. "More than half of the advisors polled at our recent Premier Consultant meetings indicated that ensuring that clients understand the tradeoff between risk and reward is the largest challenge they face when it comes to meeting client expectations this year," said Mr. Goldman. "Uncovering the specific issues where clients most need guidance and understanding investors' varying perspectives on risk help advisors strengthen their relationships by instilling confidence and clarity."

"At AssetMark, we provide tools and content from both an investments and a practice management perspective to help advisors have these conversations so they can go deeper with clients and truly make a difference in their lives," added Mr. Goldman.

About AssetMark, Inc.
AssetMark, Inc. is an independent strategic provider of innovative investment and consulting solutions serving financial advisors. AssetMark provides investment, relationship and practice management solutions that advisors utilize in helping clients achieve their investment objectives and life goals. The firm has approximately $22 billion in assets on its platform and a history of innovation spanning over 20 years. AssetMark works in collaboration with independent advisors who make a difference in the lives of their clients. For more information, visit www.assetmark.com and follow @AssetMark.

Study Methodology
The Mass Affluent Investor Risk Barometer was conducted on behalf of AssetMark by Koski Research between April 16 and 24, 2014. The online study interviewed 501 mass affluent investors (investable assets between $250,000 and $1 million) between the ages of 30 and 70 who work with a financial advisor and are primary or shared decision-makers regarding investments.

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Jennifer Connelly Public Relations
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SOURCE AssetMark