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Financial Advisor Survey

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The Challenges and Opportunities for 2022

Our team at Frontier Asset Management recently conducted a survey of financial advisors on the opportunities and challenges facing their business and their clients in 2022. Two hundred fifty-four financial advisors participated in the study between January and February, providing insights on current market sentiment, investor preferences, and advisors’ business needs.

Following are some key findings of the 2022 study:

Market volatility and inflation are advisors’ greatest concerns for investors in 2022

When asked what their top concerns are for their clients in 2022, advisors responded they were most concerned about market volatility (79%) and inflation (61%).

“Our survey found that market volatility and inflation are advisors’ primary concerns for investors, which is exactly what we’re experiencing so far in 2022. What’s important to note is that investors in general are currently vulnerable to market volatility with ownership of risk assets appearing to be near an apex,” says Geremy van Arkel, CFA, Director of Strategies at Frontier Asset Management. Frontier’s CEO, Robert Miller, CFA adds, “We believe the volatility in financial markets is unlikely to abate soon. A risk-managed investment approach – and one with a focus on downside risk—is becoming more important as inflation fears disturb markets.”

Investors prefer to minimize risk of loss, while achieving the best possible return for a given level of risk

Surveyed advisors were asked what their typical client would prefer:

  • Access to market returns with as little cost as possible
  • To outperform the market, even if it means increased volatility for the extra returns
  • To minimize risk of loss, while achieving the best possible return for a given level of risk

79% of advisors said clients prefer to minimize risk of loss and to achieve the best possible return for a given level of risk.

“A common pitfall in the asset management industry is equating risk with the percentage of equities vs. bonds in a portfolio. At Frontier, we encourage advisors to change up the conversation and ask their clients, “How much are you willing to lose in a one-year period?” Being mindful of loss when helping investors choose investments can lead to a better experience and help keep them on track toward their goals,” says Miller.

Tax-managed strategies expected to play an increasing role

When asked which products are expected to play an increasing role in their clients’ portfolios, tax-managed strategies topped the list at 71%. However, only 6% of advisors said 80 to 100% of their clients’ taxable accounts were tax managed, with 61% of advisors stating they manage for taxes in less than 40% of clients’ taxable accounts.

“With tax increases being very possible in the future, advisors who focus on how to maximize after-tax returns we believe will likely have an advantage. However, because not all tax-managed investment approaches are the same, advisors should educate themselves on the various tax-managed strategies available to them. Many common tax managed investment approaches focus on minimizing taxes. But there are many other factors to consider beyond just trying to make taxes zero— including risk and return. We encourage advisors to do their research,” states Miller.

Growth and retention are advisors’ biggest concerns for their business

Survey advisors were asked what their greatest concerns are for their business in 2022. Adding new clients (60%), providing better client service (52%), and marketing and differentiation from competition (43%) were the top three worries.

Says Miller, “We’re often asked by advisors, “How can I differentiate myself for growth and to retain clients?” The answer is quite simple: do things differently than the rest by defining risk in terms investors can feel and relate to—how much they might lose. And to be a tax-smart advisor.”

Advisors prefer independence

When asked what they’d prefer between:

  • An asset manager who has no proprietary funds in their models but has a management fee
  • An asset manager that uses only proprietary funds in their models and has no visible management fee

93% of advisors said they prefer an asset manager without proprietary funds.

Miller says, “Advisors value independence. And that’s what we value at Frontier too. Being independent allow us to make unbiased, objective decisions when selecting money managers – and to put our clients’ needs first. Acting independently means we’re focused on producing the best outcome for the advisors and investors we serve.”

For full survey results, click here.

Levels of risk are estimates only and no guarantee of actual performance. Investors may experience greater loss than the target level of risk. Frontier does not provide tax advice. The survey cited is the Frontier Asset Management “2022 Advisor Survey” Questionnaire. It was administered via Survey Planet during January and February 2022. It was sent to a large group of advisors and had 254 respondents. Several of the questions allowed multiple answers. Full details are available upon request at no cost per the information provided within. Frontier has a reasonable belief that the responses are accurate. Each participant was offered the opportunity to be entered to win a $100 gift card.

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Information provided herein reflects the author’s views as of the date of this material and can change at any time without notice. Exclusive reliance on the information herein is not advised. This material has been prepared for information purposes only and is not intended to provide, and should not be relied on for, accounting, legal, investment or tax advice.
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