Generating income is advisors’ top priority


In anticipation of widely expected rate increases by the Fed, financial advisors in the U.S. are increasingly focused on generating income for their clients, according to the Q2 2017 Eaton Vance Advisor Top-of-Mind Index (ATOMIX) survey of 1,001 financial advisors across North America. Income ranked 125.8, the highest ranking since the index inception and a 16% increase since Q1.

U.S. advisor concerns about managing volatility marginally decreased to 111.5 on the index, after reaching a peak of 129.7 in Q3 2016. The ATOMIX survey indicated advisors continue to expect the U.S. political environment to be the top driver of market volatility in 2017. Advisors reported their clients remain more motivated by fear (55%) than greed, a significant decline from a high fear motivation of 82% in Q3 2016. Over half (53%) of advisors reported being bullish on U.S. equities over the next year, while 20% were bearish.

“The political environment initially buoyed markets in early 2017, but the continued low rate environment combined with a longer term bearishness on the bond market has pushed advisors to more closely examine client income opportunities,” said John Moninger, managing director of retail sales. “While current equity market sentiment is generally positive, advisors have trepidations about what lies ahead, including the potential for rising rates and policy changes and the resulting impact on the equity and bond market.”

Despite the equity market optimism, advisors’ reservations about current market valuations are evident, as nearly two in five (39%) believe that markets are overvalued, while only 7% believe the market is undervalued.

Responsible investing on the rise

The appetite for responsible investing solutions increased dramatically quarter over quarter among advisors and their clients, with 40% of advisors reporting that it is an important part of their practice — a 90% increase from Q1 2017 when 21% considered the strategy an important part of their practice.

“The rise in popularity of responsible investing is something we are watching closely,” said Mr. Moninger. “Advisors are telling us they are hearing more about it from their peers, their clients and in the media. We are developing educational materials and solutions to address these needs in ways that meet investor objectives.”

The increased focus on responsible investing coincides with the outcome of the U.S. presidential election and ongoing concerns over U.S. regulatory policy changes. Forty percent of advisors have seen client interest in responsible investing strategies spike since the election, and roughly the same number (37%) expect to increase their responsible investing recommendations in 2017.

“Delivering solutions that reinforce investors’ personal values while generating comparable or better returns is a priority,” said Moninger.

Navigating challenges ahead

The majority of advisors believe the Trump administration will have a positive impact on the stock market (76%), U.S. Dollar (62%) and their businesses (80%), despite nearly half (49%) believing it will be the primary driver of market volatility in 2017.

Overall sentiment for bonds continues to decline, with 52% of advisors claiming to be bearish and only 18% bullish on the U.S. bond market over the next year. They are relatively more optimistic about municipal bonds, with 32% bullish and 23% bearish on the muni market.

“Advisors are looking to policy-makers to guide investment allocation with a keen eye on potential Fed action and tax reform,” said Mr. Moninger.
An overwhelming majority of advisors (95%) believe the Fed will raise interest rates at least once more in 2017, with over half (56%) predict two or more additional rate hikes this year. Advisors are adjusting client portfolios to prepare.

  • 55% of advisors believe floating rate loan funds are the most attractive option in a rising rate environment and incorporate them into client portfolios
  • 53% of advisors opt for dividend-paying stocks to combat rising rates
  • High yield bond funds (38%) and multi-sector bond funds (29%) are also favored strategies for a rising rate environment

Tax concerns, while rating lowest on the ATOMIX at 86.4, saw a 20% increase over Q1 2017.

  • Nearly two thirds (64%) believe the Trump administration will have a positive effect on taxes over the next four years
  • 54% are likely to modify their clients’ investment strategies as a result of expected tax policy changes.

“Effective tax-management is the cornerstone of the advisor-client relationship,” said Mr. Moninger. “The best advisors actively work with clients throughout the full year to ensure client assets are managed in the most tax-efficient way.”

Eaton Vance ATOMIX Methodology

ATOMIX is calculated based on the findings of a survey of 1,001 financial advisors from a diverse group of companies. Eaton Vance contracted with a third party to conduct the online survey from March 29, 2017 – April 20, 2017. ATOMIX uses a similar methodology as the U.S. Consumer Confidence Index* (which has no affiliation with Eaton Vance) in that it calculates a weighted average of current perceptions (40% of the Index) and what advisors think about the trends (60% of the Index). The Index set a baseline average of 100 for April 2014. Each component measured is tracked quarterly to illustrate changes in advisor perceptions and changes in trends over time. Future surveys will sample different financial advisors and may produce different results.

Eaton Vance (NYSE: EV) is a leading global asset manager whose history dates to 1924. With offices in North America, Europe, Asia and Australia, Eaton Vance and its affiliates managed $380.9 billion in assets as of March 31, 2017, offering individuals and institutions a broad array of investment strategies and wealth management solutions. The Company’s long record of providing exemplary service, timely innovation and attractive returns through a variety of market conditions has made Eaton Vance the investment manager of choice for many of today’s most discerning investors. For more information, visit

* The monthly Consumer Confidence Survey®, based on a probability-design random sample, is conducted for The Conference Board by Nielsen, a leading global provider of information and analytics around what consumers buy and watch. The Consumer Confidence Index was started in 1967 and is benchmarked to 1985=100. The Index is calculated each month based on a household survey of consumers’ opinions on current conditions and future expectations of the economy. Opinions on current conditions make up 40% of the index, with expectations of future conditions comprising the remaining 60%.

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