The current macroeconomic environment has created a stressful situation for investors and advisors, leading to a sharp decrease in their optimism. Just 39% of investors are optimistic about their 12-month financial outlook, a 10-percentage point decrease from last year (49%). Similarly, only 48% of advisors and financial professionals are optimistic, a 15-percentage point decrease from 2021 (63%), according to Nationwide's eighth annual Advisor Authority survey, powered by the Nationwide Retirement Institute^®.

Volatility, recession fears, inflation and taxes are the top financial concerns contributing to the decline in investor optimism. More than half (54%) of investors expect increased volatility over the next 12 months, but recession fears are 20 points higher (74%) than volatility worries. This mirrors the level of concern during the height of the COVID-19 pandemic in 2020 when 75% of investors were concerned about a recession. Advisors and financial professionals are even more worried, with 82% concerned about a recession, compared to 77% in 2020.

Investors' inflation concerns in the next 12 months skyrocketed this year (46% 2022; 29% 2021) as well. Other top financial concerns include taxes (22%) and protecting assets (19%). Investors also most commonly say that inflation is the leading factor contributing to volatility over the next 12 months (40%). Although more than half of investors expect increased market volatility over the next 12 months, these expectations are at a four-year low (54% 2022; 61% 2021; 61% 2020; 66% 2019). 

"While it's surprising that expectations about volatility have dropped among investors, it may indicate that they are coming to grips with the possibility that volatility is the new normal," said Mark Hackett, Chief of Investment Research. "While investor concerns have lessened, both volatility and inflation are likely to persist in the year ahead. Financial professionals should be talking to clients about implications for their portfolio."

Retirement plans delayed

Planning helps investors feel more confident and in control, yet current events are impacting their retirement plans.

The current environment, with its rising inflation and declining investment results, has decreased confidence related to retirement. Less than half of investors (47%) plan to retire about the same time as planned and 20% plan to retire later than planned.

Contrasting investor/advisor approaches

Amidst these macroeconomic factors, advisors and investors have similar, yet contradicting, strategies.

Advisors and financial professionals are counseling clients to contribute more monthly (44%) or the maximum amount (44%) to 401(k)s or employer sponsored defined contribution plans. They are also managing investments more conservatively (43%). One-third of advisors (33%) are considering purchasing or have purchased an annuity for their clients.

However, investors' strategies for the next 12 months offer a contrast. A smaller number are contributing more monthly (20%) or the maximum amount (15%) to 401(k)s or employer sponsored defined contribution plans. They are also less likely to manage investments more conservatively (27%) and are delaying taking Social Security benefits (17%). Only 15% of investors are considering or have purchased an annuity.

"Investors who are anxious can be reactive and make unintentional poor financial decisions," said Eric Henderson, President of Nationwide Annuity. "Now, more than ever, is the time to leverage the expertise of an advisor to develop a financial plan that leads to security in retirement."

Advisors' role in today's market conditions

Overall, confidence in financial planning remains strong but seems to be waning. The majority of investors say having a plan for their investments helps them feel in control even if they can't plan for everything (86% 2022; 89% 2021; 93% 2020). Having a plan also helps them feel more confident in their investment decisions, even during an extreme financial crisis (87% 2022; 90% 2021).

As investors become increasingly concerned about market conditions and less confident in their planning strategies and ability to retire, advisors are in a prime position to help.

Compared to investors, advisors and financial professionals are more likely to develop strategies to protect their clients against outliving savings and generate guaranteed income in retirement.

• 59% of investors that do not work with an advisor or financial professional have a strategy in place to generate guaranteed income in retirement, compared to 85% of investors who do work with an advisor.
• Even fewer investors (52%) who do not work with an advisor or financial professional have a strategy to protect themselves against outliving their savings in retirement, compared to 85% of investors who do work with an advisor.

While investor volatility expectations are at a four-year low, the majority still have a strategy in place to protect their assets against market risk; however, investors with a strategy in place are also at a four-year low (60% 2022; 66% 2021; 64% 2020; 65% 2019). The number of advisors with a strategy in place to protect their clients against market risk has steadily increased year-over-year, maintaining a high of 93% this year (93% 2021; 91% 2020; 88% 2019).

Just over half (55%) of investors currently work with an advisor or financial professional, offering advisors an opportunity to reach and educate the remaining 45% of investors without a trusted partner, as well as revisit and reinforce planning strategies with their current clients.

"Investors today want to feel confident in their ability to retire, no matter what is happening in the world," said Henderson "This is where advisors and financial professionals can step in to create a sense of security and confidence in their clients' long-term plans."

For additional insights on this survey data, visit https://nationwidefinancial.com/media/pdf/NFM-22336AO.pdf

Nationwide's eighth annual Advisor Authority study powered by the Nationwide Retirement Institute® explores critical issues confronting advisors, financial professionals and individual investors—and the innovative techniques that they need to succeed in today's complex market.