What are your return expectations for 2012?
When we conducted our first quarter Financial Professional Outlook survey between January 19 and February 3, 2012, we asked advisors what return assumptions they were building into their client portfolios for the year. We also asked what kind of returns they thought their clients were expecting.
We were surprised to hear that advisors and investors had very similar expectations overall. And although we believe the return expectations may have been a bit high for a long-term average, they were certainly not unreasonable in a given year.
Performance expectations
On average, advisors are building the following portfolio return expectations into their conversations with clients: 3.9% conservative, 5.9% balanced and 8.3% aggressive. Advisors say their clients’ expectations are 4.3% conservative, 6.5% balanced and 9.3% aggressive.1
Responses from Russell
As of April 11, 2012, the broad equity markets have already met these expectations year-to-date (Russell 3000® Index up 9.61%, Russell Global ex-U.S. Index up 7.9%, and Barclays Capital U.S. Aggregate Bond Index up 0.92%). But we still have 8 months left in 2012 and anything could happen. We’ve also gotten here with very little volatility, so far.
One last observation to leave you with: Advisors told us that they’re far more optimistic than their clients (78% versus 18%) about the capital markets by a wide margin. Yet clients have slightly higher return expectations. We’re not sure what—if any—conclusions can be drawn from that tidbit, but it might indicate that clients could require a reality check at some point during the year. Especially when volatility returns.
Of course, we can’t help but wonder how these numbers compare to your own expectations? If you have the time, post a comment. We’d like to hear your point of view.
1 Portfolio categories were not defined by the questionnaire, but advisors applied their own definitions.
The Russell 3000® Index measures the performance of the largest 3000 U.S. companies representing approximately 98% of the investable U.S. equity market.
The Russell Global ex-U.S. Index measures the performance of the global equity market based on all investable equity securities, excluding companies assigned to the United States. The Russell Global ex-U.S. Index is constructed to provide a comprehensive and unbiased barometer for the global segment and is completely reconstituted annually to accurately reflect the changes in the market over time.
The Barclays Capital U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment grade, U.S dollar-denominated, fixed-rate taxable bond market, including Treasuries, government-related and corporate securities, MBS, ABS and CMBS.
Indexes are unmanaged and cannot be invested in directly. Returns represent past performance, are not a guarantee of future performance, and are not indicative of any specific investment.
RFS 8093-a
