Economic Sentiment Shifts: How Advisors View the Future
Registered Investment Advisors Gain Optimism Post-Election
The recent U.S. election results have sparked renewed optimism among Registered Investment Advisors (RIAs), as reflected in the RIA Economic Outlook Index from Security Benefit, conducted with Greenwald Research. According to the index, RIA sentiment surrounding economic conditions showed an upward shift, moving from a score of 53 to 56. Although this positive change indicates an improving perspective on the market, it still remains shy of the Q1 score of 58.
Market Outlook and Inflation Concerns
Mike Reidy, National Sales Manager, RIA Channel at Security Benefit, mentioned that while optimism about the 2025 market direction is present, concerns about inflation persist. Approximately 40% of RIAs anticipate inflation will remain above 3% in the coming year. This sentiment represents a 7% increase since early 2024, and the acknowledgment of a potential recession looms large, with 48% of advisors indicating a moderate to high likelihood of this outcome.
Volatility and Market Stability
Despite the lingering concerns about economic instability, 32% of RIAs express little to no worry about a major equity decline in the upcoming year. Interestingly, 20% believe the S&P 500 could achieve gains exceeding 10% in the same timeframe. However, over half of the advisors (54%) foresee an increase in market volatility compared to 2023, and about one-sixth of them are quite concerned about significant downturn risks.
Investment Strategies Post-Election
In light of the election's outcome, a significant majority (72%) of RIAs have opted to maintain their current investment strategies without making any changes. However, an intriguing quarter of the RIAs have decided to adopt a more aggressive approach to client asset allocations, indicating a calculated confidence in the market's direction.
Tax Cuts and Jobs Act Renewal Expectations
One of the key topics among RIAs is the potential renewal of the Tax Cuts and Jobs Act (TCJA), with 75% of advisors reporting client inquiries about it. A notable consensus is forming, as eight out of ten advisors believe that the TCJA will likely be renewed before 2025 concludes. Should this renewal not occur, 75% of RIAs feel it would result in economic slowdown, while nearly half (47%) do not expect that it would influence interest rates directly.
Strategies to Mitigate Nonrenewal Impacts
To counter potential changes stemming from the nonrenewal of tax reforms, 65% of RIAs indicated they would seek to increase their use of tax-preferred investments to safeguard client assets effectively. This proactive approach reflects their commitment to managing risks and adapting to ever-evolving economic conditions.
Methodology of the Survey
Conducted in November 2024, the survey included responses from 100 registered investment advisors across the United States. These advisors manage substantial assets while directly interacting with their clients. The online questionnaire combined quantitative data and qualitative insights, illuminating key trends within the advisory industry regarding business practices, economic forecasts, and client demographics.
About Security Benefit
Security Benefit Life Holdings, Inc. (“Security Benefit”) operates through its subsidiary, Security Benefit Life Insurance Company (SBLIC), an insurance provider based in Kansas with a rich history of nearly 133 years. Recognized as a leader within the U.S. retirement market, Security Benefit, together with its affiliates, delivers an extensive range of products designed for various retirement market segments and wealth situations, managing $53.5 billion in assets as of late September 2024. As part of Eldridge Industries, the organization is devoted to guiding Americans to and through retirement.
About Greenwald Research
Greenwald Research is a prominent independent research and consulting partner serving the health and wealth sectors since 1985. This firm utilizes a blend of quantitative and qualitative research methodologies, delivering insights that aid industries in navigating changes and maintaining competitiveness in an ever-evolving landscape.
Frequently Asked Questions
What is the RIA Economic Outlook Index?
The RIA Economic Outlook Index measures the sentiment of Registered Investment Advisors regarding economic conditions, helping to forecast trends in the advisory industry.
How did the election impact RIA sentiment?
Following the U.S. election, RIAs reported increased optimism, with the index rising to 56, indicating a better outlook compared to previous quarters.
What concerns do RIAs have about inflation?
Many RIAs, about 40%, expect inflation to remain above 3% in the coming year, reflecting a notable concern about its potential impact on the economy.
How are RIAs adjusting their investment strategies?
A significant number of RIAs are maintaining their investment strategies without changes, while a portion plans to take a more aggressive stance with client allocations.
What do RIAs predict about the TCJA?
Most RIAs believe the Tax Cuts and Jobs Act will be renewed by the end of 2025, and many have prepared strategies to counteract the impacts if it is not.
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