Investors Expect Investment Returns Twice as High as FAs: Survey

Financial advisors looking to bring on new clients have a receptive audience following the recent economic turmoil — but they may need to temper some expectations, according to a recent survey.

Having to face inflation has made 64% of investors see the importance of professional financial advice, Natixis Investment Managers says it found in a survey of 750 U.S. investors conducted this year.

Millennials in particular want professional help: 64% say they need professional advice, compared to 34% of Gen X and 26% of Baby Boomers, according to the survey.

Among investors concerns are fear of not being able to cope with rising costs, cited by 70% of respondents, and the effect of inflation on their savings and investments, cited by 65%, Natixis says it found.

At the same time, however, the “outsized returns” over more than a decade has investors “conditioned to expect high returns, despite the harrowing experience of 2022,” and despite 86% of respondents saying last year was a wake-up call, according to the survey.

Investors still expect 15.6% in average annual returns above inflation, which is 123% higher than what advisors in the U.S. see as realistic, although the difference has narrowed slightly during the past two years, Natixis says it found.

“Fear and flawed assumptions are a combustible combination that can lead to irrational behavior and costly mistakes,” Dave Goodsell, head of the Natixis Center for Investor Insights, said in a statement. “In the decade between 2012 and 2021, even the least experienced investors looked smart in a market that delivered high returns with low risk and relatively little effort.”

Moreover, while expecting such high returns, 52% of investors say they’re comfortable taking on risk, which is down from 60% in 2021, according to the survey.

Advisors may need to confront other potentially erroneous assumptions: only 9% of respondents define risk as not meeting their financial goals, while financial advisors are three times more likely to define risk that way, Natixis says it found.