Financial Advisors Growing More Pessimistic About U.S. Economy

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MFS Investing Sentiment Survey Shows Advisors Closing Pessimism Gap with Investors

Investors Want More Advice, Communication and Customized Solutions from Advisors

BOSTON--(BUSINESS WIRE)-- Financial advisors have grown decidedly more pessimistic during 2011, according to the MFS® Investing Sentiment Survey, moving more in line with the declining sentiment of investors.

27% of advisors said they were pessimistic about the U.S. economy over the next five years, up from only 7% back in February 2011.
Only 45% of advisors surveyed believe U.S. equities are an excellent or very good place to invest over the next 12 months, down from 72% in February. Similarly, advisors dropped from 60% to 29% when asked about international equities.
53% of investors are pessimistic about the U.S. economy, up from 37% in February.
Overall, investors say 27% of their investable assets are in cash. And younger investors lead the pack, with Generation Y indicating a 33% allocation to cash, up from 30% in February.

But advisors have to find a way to cut through this wave of pessimism and meet investors' ever rising need for advice.

27% of surveyed investors say their need for professional financial advice has increased over the past 12 months, up from 21% in February. Again, younger investors lead the pack, with 45% of Generation Y and 36% of Generation X indicating an increased need for advice.

"It should come as no surprise that advisors, like investors, have grown more pessimistic throughout 2011, a year wrought with shock waves from natural disasters, market volatility, persistent high unemployment and political infighting," said William Finnegan, senior managing director and head of U.S. marketing for MFS. "But advisors need to laser focus on their clients' life experiences today, both from an investment standpoint as well as from a personal and emotional perspective. Investors are burdened by a mounting weight of socioeconomic concerns and their increased need for advice reflects a growing uncertainty about their future."

In the survey, investors spoke loud and clear about what they want from their advisors today: proactive contact, timely information and customized support.

Proactive contact:

69% of investors expect their financial advisor to contact them regularly during times of market volatility.

Timely information:

52% of investors indicated that advisors should ideally support them by "keeping them informed" of investment opportunities or recommended changes to their portfolios.
44% of investors indicated that advisors should ideally support them by "keeping them informed of where they stand financially relative to their goals.
40% of investors indicated that advisors should ideally support them by "keeping them informed" of market changes and how they impact them.

Customized support:

80% of investors indicate that the willingness of an advisor to customize support for their specific needs is a key consideration when evaluating advisors.
But one-third of investors believe most advisors tend to recommend generic portfolios instead of customized plans.

"Investors are providing clear direction and it does not match conventional wisdom," added Finnegan. "What matters is providing solutions that address not just goals, but fears. Investors, many with a defensive mindset, will likely continue to reject traditional investment recommendations from their advisors. They expect a plan that is specific to them, customized not only to their goals, but one that also addresses their broader economic concerns along with their individual market experience"

The preceding survey results are from the third series of the MFS Investing Sentiment Survey. Previously, MFS conducted its second survey in June 2011 and reported its findings in September regarding Generation Y's investing sentiment and perceptions and in August about investors' perceptions and use of cash as part of their investment process. MFS conducted its first survey in February and issued three reports earlier this year based on those results, detailing the disconnects between financial advisors and their clients in March, the challenges facing Generation X/Y and Baby Boomers in April, and the pessimism that permeates the mass affluent investor segment in May.

About the survey

MFS, through Research Collaborative, an independent research firm, sponsored an online survey from September 28 to October 13, 2011, of 929 individual investors with $100k+ in household investable assets and 644 licensed financial advisors (either FINRA or SEC) who have been licensed for at least three years with at least $500,000 or more in annual mutual fund sales. All investor respondents make or share in making financial decisions for their households. MFS was not identified as the sponsor of the survey. Generation Y investors are those under the age of 31. Generation X is defined as investors between the ages of 31 and 45. Baby Boomer investors are those between the ages of 46-64.

About MFS Investment Management®

MFS is a premier global money management firm with investment offices in Boston, London, Mexico City, Singapore, Sydney, Tokyo, and Toronto. The firm’s history dates back to March 21, 1924, and the establishment of the first U.S. “open-end” mutual fund. MFS manages $227.3 billion in assets on behalf of individual and institutional investors worldwide, as of October 31, 2011. Please visit mfs.com for more information.

MFS Investment Management
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