Insights into Investor Behavior During Market Crises by IWI

Denver, CO — June 3, 2020 — Investments & Wealth Institute released a new special report on behavioral finance, Investor Behavior in a Market Crisis in partnership with Toews Asset Management. The new investor report is part of the omnibus research 2020 Investor Research. Fielded against a looming economic recession and a global pandemic in March 2020, the research took a close look at investor behavior in prior market turmoil, investor confidence, their view of their advisor relationship, and actions they took or might take with their portfolios.

The research, conducted by Absolute Engagement, gathered input from 751 investors in the United States between March 10 and March 26, 2020. All respondents worked with a financial advisor, made, or contributed to the financial decisions in their household, and met specific requirements regarding household investable assets.

Overall, investors were extremely optimistic towards the future despite the market decline. Looking ahead for the next 12 months, half of investors expect to see positive rates of return in their portfolios while only one-third expect to see declines. Except where there may be extreme market declines of 50% or more, investors seem secure about their future, their retirement, and their advisors.

The research also highlighted where investors need additional support. The data indicated that advisors could do a better job providing more clarity on their advisory and investment plans. With only two-thirds of investors feeling like they have a clear plan of action for their portfolios in periods of severe market declines. There is value and peace of mind in having strong plans, but many investors did not find these plans to be clear. Investors are more confident when the relationship with their advisor is strong and communication is clear.

“The fortuitous timing of the 2020 Investor Research survey provides a unique look at investors’ behavior under extraordinary conditions. Advisors need to understand how to better manage investor behavior in stressful times, or these behavioral biases can have a disastrous impact on client outcomes, particularly in a recessionary climate,” said Sean R. Walters, CAE, chief executive officer, Investments & Wealth Institute. “Our annual Investor Research includes a special report this year that informs advisors on the behavioral biases and influences affecting clients, and how advisors can help minimize investors’ bad decisions.”

“These findings of our study show that incorporating behavioral finance into your practice is incredibly important, now more than ever,” remarked Felipe (Phil) Toews, chief executive officer of Toews Asset Management. “It’s not enough to use “set it and forget it” plans with clients anymore. We want advisors to understand the intricacies of communication and behavior. This allows them to foster better relationships with clients, especially during challenging times. We are helping advisors create dynamic frameworks around the financial planning and guidance processes so their clients can know they have a plan in place before negative events occur, which is what these findings show clients want.”

Read the full report.

For a more in-depth exploration of the results attend part one of the upcoming Exceptional Advisor webinar series, Practical Strategies for Managing Investor Behavior June 4, 2020 at 4:30-5:30 pm ET. The series will include a discussion of the research results by Julie Littlechild of Absolute Engagement, with implications on portfolio and behavioral guidance examined by Phil “Felipe” Toews, Eben Burr, and Dan Kullman of Toews’ Behavioral Investing Institute.