Affluent Investors: Big Emotions and Purchase Intent

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Ready-to-act Investors Reacted to Positive Market Environment in Q3 2018

No one appreciates being told that they “are overreacting,” especially in the midst of expressing a big emotion. On the contrary, having one’s feelings heard and validated serves as a powerful response and creates opportunity for further engagement, a valuable lesson for distributors and product providers to keep in mind.

Q3 began amid ongoing trade disputes between the US and its trading partners and news of the economy having grown 4.2% during the previous quarter, fueled by a strong labor market. Economic growth helped spark investor optimism, along with hope and confidence in the investing environment. By some accounts, the current US equity bull market earned the longest tenure in history this past summer, boosting consumer confidence to an 18-year high. The third quarter finished with the large-cap S&P 500 index turning in its best quarterly performance in nearly five years. Despite a 0.25% increase in interest rates in September, affluent investor sentiment remained consistent from June through the end of the quarter.

In response to these changes, the majority of affluent investors were even-keeled in their reaction to the investing environment with the exception of ready-to-act investors, those with plans to open an investment account or purchase a mutual fund or ETF within the next three months. Affluent investors with purchase intent expressed stronger feelings about the market, both positive and negative, compared to those staying the course.

Ready-to-act investors reacted substantially to the markets in Q3. Many more were feeling hopeful in July and August compared to affluent investors without purchase plans. Likewise, in September, ready-to-act investors responded to the combination of strong market performance, an increase in interest rates, and change in trade agreements with Canada and Mexico with both optimism and anxiety, much more so than affluent investors staying the course.

Representing only 39% of the affluent market, ready-to-act investors are knowledgeable about investing and have a good grasp on fees paid for investment products. While investors without plans to make an investment decision within the next three months cited little change in their sentiments toward the investing environment month-over-month in Q3, ready-to-act investors reported greater sensitivity and shifts over the same period. Although those with purchase intent are more challenging to target given the lower incidence rate, successful distributors and product providers will leverage the higher level of engagement with the financial markets among ready-to-act investors and conduct outreach that validates their feelings, acknowledges their greater level of financial sophistication and demonstrates brand value for their investing dollars.

We’ll continue to report on investor sentiment quarterly as we’re interested to see how changing market dynamics affect affluent investors’ attitudes and investing behaviors. To get the first look at these data, subscribe to our newsletter, Cogent Thoughts.

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