Because of the low yield environment, financial advisors are more likely to seek income for clients from emerging market bond funds and dividend-paying stocks than from traditional income-producing assets, according to a new survey from Oppenheimer Funds.
“A full 84% of advisors are more likely today to recommend dividend-paying equities and more than three-quarters (76%) of advisors cited a willingness to recommend emerging market bonds or related bond funds over other asset classes,” Oppenheimer said in a release. The survey was conducted on June 20 and 21 at the 2012 Morningstar Investment Conference in Chicago.
For emerging market exposure, half (50%) of the advisors surveyed recommended investing directly in emerging markets companies, 26% were inclined to use funds that invest in companies domiciled in developed countries outside of the U.S., and 21% preferred funds investing in large global multi-national U.S. companies. Three percent of respondents said they don’t need emerging market equities exposure.
On the other hand, 43% of respondents said they’ve reduced exposure to international bonds and 41% have reduced exposure to international equities since the Eurozone crisis began. Almost six in ten advisors (59%) said the European sovereign debt crisis was the most important issue affecting their advice to clients and 26% named the U.S. presidential election.
Compared to the spring of 2011, 59% of advisors said they are seeing clients become more risk adverse in 2012, with increased interest in fixed income investments, while 35% said risk tolerance levels are largely unchanged.
Slightly more than half (52%) of the advisors surveyed agreed that “protecting clients from downside risk resulting from continued market volatility” is their greatest challenge. Another 19% and 18%, respectively, are challenged by “managing clients’ ongoing fears of investing in equity markets” and “helping clients earn real yield on their fixed income portfolios.”
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