- Data regarding financial advisors' top concerns for 2020 highlighted a potential economic slowdown and difficulty finding and keeping talent as the two biggest issues they could face.
- Competition within the financial advisor industry could be increasingly prevalent this year, making it harder to find and retain good talent.
- Geopolitical tensions will likely have the biggest impact as an investing challenge, with a "bear market" and the 2020 election also causing some headaches.
With the first month of 2020 quickly coming to a close, financial advisors need to determine what they should look out for in the coming months. If newly released data from Hartford Funds is an accurate barometer, some advisors have a particularly gloomy outlook on the rest of the year.
During the Schwab IMPACT conference in San Diego last November, Hartford Funds polled 109 financial advisors in person on the biggest challenges they anticipated for the new year. As professionals who have to predict the future in a sense, the financial advisors identified several common worries that may impact their industry as well as small businesses in 2020.
Researchers found that financial advisors are largely worried about two things: an economy on the decline, and political situations at home and around the world that could cause unrest. While it's hard to find solutions to those problems in a quick and satisfactory way for all involved, preparing for the worst now could be a huge step not just for their practices, but for investment portfolios in general.
Sourcing and retaining talent may cause problems
Last year, plenty of headlines bemoaned the lack of good talent and the need to hold on to the good talent you already have. When polled, 31% of advisors said they expected that narrative to continue in 2020.
Researchers said this point "underscores the importance of finding and retaining the right talent to maintain an advantage as competition increases." Most of the focus in this instance was on the actual financial advisor industry, though the general concept applies to other sectors.
"With the potential for a correction ahead and a wave of advisors on the cusp of retirement, it's critical for advisors to identify and nurture talent to help weather potential volatility," said Julie Genjac, managing director of applied insights at Hartford Funds. "Both specialized and intrapersonal skills will be at a premium as firms must find new ways to provide value to clients."
In preparation for any potential shortcomings, Hartford Funds representatives said "developing expertise in emerging investment trends is one area advisors may want to double down on." Approximately 54% of those polled said they do not implement environmental, social and governance (ESG) products, even though they've been a focal point for the industry. Researchers found that 26% of advisors polled have "little to no confidence" in ESG's potential for strong investments, while 19% are just unsure.
Geopolitics and the economy will impact client portfolios
With the 2020 general election slated for November and ongoing tensions around the world threatening upheaval in the global market, financial advisors were already wary of 2020. As we head into February, researchers found that advisors are particularly cognizant of these issues' overall impact.
According to the survey, 34% said geopolitical tensions, like the United States' ongoing trade spats with China, will set the stage for some of the biggest investing challenges. The results of the presidential election will also have a major impact on the economy. As such, 20% of those polled said the presidential election cycle will make things harder.
"Advisors are actively anticipating – and assumedly planning for – the geopolitical events and risks that will impact their clients' returns in 2020," Genjac said. "Often more challenging than safeguarding a portfolio is managing the emotional impulses of investors when volatility strikes. Now is the time for advisors to be proactive in connecting with their clients on the price of panic and building a plan to achieve their long-term financial goals."
Aside from external forces, 23% of investors polled for the study said they feared a potential down – or "bear" – stock market, indicating a declining Washington. Regardless of their fears over a slower economy, less than 10% of advisors felt concerned about "a slowing pipeline of clients in the year ahead."