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. Continue reading

Investing Is Not a “One Emotion” Sport

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Pre-retirees Express Uncertainty and Hope in Q2 2018

Most parents can attest that raising children is not a “one emotion” sport. The anticipation and joy of witnessing a child reach a milestone like starting kindergarten is often combined with feelings of sadness over the completion the toddler years. The same phenomenon occurs with investing. More often than not, investors report a mix of sometimes conflicting emotions

Global consternation over trade between the US and China coupled with tensions between the US and Russia caused a bumpy start to the second quarter of 2018, instilling feelings of uncertainty and anxiety among affluent investors. Sentiment shifted more toward hope and optimism in May with positive news about the lowest unemployment rate in 18 years and strong Q1 earnings. However, news of the Federal Reserve raising rates and the pace of US GDP growth being the slowest since 2013 overshadowed a more than 3% gain from the S&P 500 for the quarter, to which investors reacted with a mix of uncertainty and hope.

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Don’t Go Changing Self-directed Investors

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DIY Investors Live in a Constant State of Uncertainty and That’s OK

A client recently commented to me that self-directed investors are more challenging to serve. Representing only one-third of all affluent investors, these do-it-yourselfers neither work with traditional financial advisors nor use advice from other sources including distributors and asset managers. A look at investor sentiment during the market volatility in Q1 2018 sheds some light on key differences in the self-directed investor’s mindset compared with the traditionally advised (those currently working with a financial advisor).

Overall, affluent investors started 2018 with optimism and hope in the current investing environment. Yet concern about inflation and the impact of trade sanctions began in late January. Financial advisors, asset managers and distributors all dusted off and updated their market volatility messaging and outreach in anticipation of negative market action. Following February’s 10% correction in the S&P 500 Index and the VIX reaching a peak of 37 for only the second time in the past five years, investors ended the first quarter with far less optimism. In fact, the top-cited emotion in March was uncertainty along with a significant increase in fear. Continue reading

Uncertain Optimism: Investors React to a “Too Good to Be True” Q4

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Investors React to a “Too Good to be True” Quarter

Measuring Investor Sentiment During a Period of Unprecedented Growth

My father-in-law had a saying, “If something is too good to be true, it is.” Yet the last quarter of 2017, which in many ways seemed unbelievable, really did occur. During this time, all-time stock market highs became commonplace and the US economy continued to pick up momentum. 637,000 jobs were added and the term “full employment” was quoted in the media with virtual champagne corks popping in the background. Consumer confidence reached a high not observed since the start of this century, and the CBOE Volatility Index, or VIX, hit an all-time low since its inception in 1993.

Throughout the fourth quarter of 2017, uncertainty levels dropped and investors became increasingly hopeful and optimistic. Confidence was highest in November while, despite political and social events, anxiety and fear remained largely at bay. As the new year approached, hope and optimism became the leading emotions expressed by investors toward the market. Continue reading

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.

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Cracking the Code on Heavy Traders

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Cracking The Code on Heavy Traders

Think you know about Heavy Traders? Think again.

While Heavy Traders, affluent investors who make 10+ trades per month, only represent about 5% of the affluent population, they are an investor segment worth the time, attention and resources of distributors and asset managers’. For years, it has been assumed that Heavy Traders:

  1. Are self-directed investors
  2. Do not use investment advice
  3. Invest only individual securities

But our research tells us otherwise. Read on to learn about key profile characteristics of Heavy Traders and why the above statements are misperceptions of this small but important segment.

Who Exactly Are Heavy Traders? 

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The Impact of Market Volatility on Investor Sentiment

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It is undeniable that emotions play a key role in the mindset of affluent investors. We track sentiment using an array of 12 emotions commonly used to describe how an investor may be feeling about the investment environment at any given time. Of the dozen emotions that respondents can choose, the top 5 most-cited sentiments for Q3 2015 were uncertainty (43%), hope (27%), optimism (24%), anxiety (18%) and confidence (14%)—a true mix of positive and negative feelings.

Investor Sentiment

Uncertainty, Anxiety and Hope: Investors React to the 2015 Downturn

To explore the impact of the market downturn in late August of last year, we reviewed results on a month-by-month basis for the top 5 selected emotions. Continue reading

Advised Investors Feeling Hopeful

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EmojisAffluent investors had an interesting start to 2015 with the S&P 500 experiencing a bumpy January, strong February and blasé March—all with only a 1% gain to show, which was better than the Dow’s 0.3% increase from the end of 2014. These investors were (and still
are) surrounded by a lot of talk about global monetary easing and uncertainty in policy direction. All the while, our $100K+ investors heard seemingly good news for consumers in the form of lower oil prices and a stronger US dollar. But as any good therapist would ask, how did all of that make affluent investors feel?

The answer is mixed. Using our Cogent Beat™ Investor portal, we examined investor sentiment and feelings about the current environment to find out how investors perceived the markets on a set of emotions ranging from ecstatic to panicked in Q1 2015. The top two-cited emotions were uncertain (35%) and hopeful (34%). Furthermore, more than one-third (38%) register at least 2 emotions, with the top combination of responses being hopeful and optimistic. Continue reading