Insight Into The Mind Of The Risk-Averse Investor

Monday, December 20, 2010 00:23
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Insight Into The Mind Of The Risk-Averse Investor

Advisors are trained to pick up on a client or prospect's risk tolerance, but the specific emotional factors that go into that tolerance rarely get analyzed. MFS recently polled investors to find out what "fearful" clients are really thinking.

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It turns out that 12% of all investors that MFS talked to identify themselves as being "fearful." They are quite a pessimistic bunch: 89% are worried about the stock market taking another big dip and 71% think the economy will be lousy through at least 2015. A full 54% say they'll never feel comfortable investing in stocks again.

These people are hungry for investment advice -- about half say they're overwhelmed by the choice of products out there and another 48% are more eager to work with an advisor than ever -- but advisors need to know how to work with them.

The fearful consider themselves savers and not investors. Many (39%) have decreased their retirement contributions. And most (62%) would rather accept low returns if it meant minimizing their risk -- 37% of their assets are currently in cash right now.

They don't need constant hand-holding. At most, they say they'd be happy with an email a week, a monthly call and a quarterly office visit. An advisor who can give them that in a tone that acknowledges their fears may be able to help them out and maybe down the road rebuild their confidence in the markets. 

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