When Volatility Is Positive

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Sentiment toward the Investment Environment Is More Volatile among Ready-to-act Investors … and That Is Good News for the Financial Services Industry

While volatility is generally not well received in the money management industry, in the case of investor sentiment, volatility signals a level of engagement from investors who are likely to make an investment move in the near future. This increase in engagement makes it easier for asset managers and distributors to connect with these ready-to-act investors, who are closely monitoring the impact of both political and financial market events.

Volatile investor sentiment also represents an opportunity for asset managers and distributors to reach an already engaged audience at a time when many firms are facing the challenges of record-low trust levels, decreasing brand awareness and low brand differentiation among affluent investors. Put simply, conducting any type of outreach with an engaged client or prospect is comparatively easier than getting the attention of someone who is focused elsewhere. The key lies in knowing how to harness the power of investor engagement to bring in new business.

In order to gauge investor sentiment and monitor important changes over time, Cogent includes a series of questions in our monthly Cogent Beat Investor survey. Respondents are asked to identify how they feel “right now” about the current investment environment. Later in that same survey, we identify the investors who are planning to open an investment account in the next three months, letting us isolate investors who are “ready to act.” When comparing investor sentiment during the 2016 presidential election cycle—perhaps one of the most unpredictable periods in recent US history—among ready-to-act investors and investors who don’t plan to open an investment account in the near future, some interesting findings popped.

In general, ready-to-act investors express far more varied feelings about the investing environment from June 2016 to January 2017 compared with those who are content with the status quo in their portfolios. Ready-to-act investors are seemingly more likely to react to key political and market events in the US and abroad, starting with the Brexit vote, as hope dips below optimism during the month following the UK’s decision to exit the EU. By September, ready-to-act investors’ uncertainty almost doubles, confidence drops and anxiety increases ahead of the US presidential election. By the 2017 presidential inauguration, hope and uncertainty almost tie as the top-cited emotions among investors in this cohort.

Investor Sentiment Ready-to-Act Investors

However, the low level of engagement observed among investors who are not ready-to-act is evident, as uncertainty, regardless of political or market events, is the top-reported emotion through the November election. Post-election, uncertainty is narrowly displaced by hope among investors in this cohort. The remaining top-cited emotions are relatively consistent month-over-month, indicating less of a reaction to political and market events, likely due to lower engagement overall.

Investor Sentiment Not Ready-to-Act Investors

Successful outreach with investors is often an uphill battle, but self-selected engagement offers a lift line that asset managers and distributors can leverage in prospecting efforts. Given the sensitivity ready-to-act investors express during political and market events, distributors and asset managers should adjust frequency and weighting of messaging to the market according to actions unfolding on the world and US stages. Finally, financial services firms can leverage engagement from investors with purchase intent not only to increase wallet share but also to start to build or rebuild trust in the relationship, an aspect that is sorely needed.

 

Read more on ready-to-act investors:
Read Go Where the Fish Are Biting: Targeting Investors Who Are Ready to Act

This entry was posted in Brand and Messaging, Financial Services and tagged by Julia Johnston-Ketterer. Bookmark the permalink.
Julia Johnston-Ketterer

About Julia Johnston-Ketterer

Julia Johnston-Ketterer is a senior director in the Syndicated division. She has more than 15 years of experience leading research initiatives on the client- and supply-sides of the financial services industry focusing on investors, advisors and broker-dealers. Prior to joining Market Strategies, Julia was vice president of business development for Market Probe, Inc. and research associate for Richard Day Research, where she managed financial services clients and conducted client satisfaction studies and PR research programs. Julia also spent ten years at Fidelity Investments. While there, she built a research team that provided primary and secondary research to internal marketing and communications partners. Julia earned an MBA in finance and communications from Simmons School of Management and a bachelor’s degree in French and international relations from the University of Wisconsin-Madison. While she can claim having twice bungee-jumped in New Zealand, Julia’s current adventures outside of work include being a hockey mom, taking hikes with her dog and planning her next family beach vacation.

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