Markets in a Minute
Visualizing Portfolio Return Expectations, by Country
Visualizing Portfolio Return Expectations, by Country
How do investors’ return expectations differ from those of advisors? How does this expectation gap shift across countries?
Despite 2022 being the worst year for stock markets in over a decade, investors around the world appear confident about the long-term performance of their portfolios. These convictions point towards resilience across global economies, driven by strong labor markets and moderating inflation.
While advisors are optimistic, their expectations are more conservative overall.
This graphic shows the return expectation gap by country between investors and financial professionals in 2023, based on data from Natixis.
Expectation Gap by Country
Below, we show the return expectation gap by country, based on a survey of 8,550 investors and 2,700 financial professionals:
| Long-Term Annual Return Expectations | Investors | Financial Professionals | Expectations Gap |
|---|---|---|---|
| 🇺🇸 U.S. | 15.6% | 7.0% | 2.2X |
| 🇨🇱 Chile | 15.1% | 14.5% | 1.0X |
| 🇲🇽 Mexico | 14.7% | 14.0% | 1.1X |
| 🇸🇬 Singapore | 14.5% | 14.2% | 1.0X |
| 🇯🇵 Japan | 13.6% | 8.7% | 1.6X |
| 🇦🇺 Australia | 12.5% | 6.9% | 1.8X |
| 🇭🇰 Hong Kong SAR | 12.4% | 7.6% | 1.6X |
| 🇨🇦 Canada | 10.6% | 6.5% | 1.6X |
| 🇪🇸 Spain | 10.6% | 7.6% | 1.4X |
| 🇩🇪 Germany | 10.1% | 7.0% | 1.4X |
| 🇮🇹 Italy | 9.6% | 6.3% | 1.5X |
| 🇨🇭 Switzerland | 9.6% | 6.9% | 1.4X |
| 🇫🇷 France | 8.9% | 6.6% | 1.3X |
| 🇬🇧 UK | 8.1% | 6.2% | 1.3X |
| 🌐 Global | 12.8% | 9.0% | 1.4X |
Investors in the U.S. have the highest long-term annual return expectations, at 15.6%. The U.S. also has the highest expectations gap across countries, with investors’ expectations more than double that of advisors.
Likely influencing investor convictions are the outsized returns seen in the last decade, led by big tech. This year is no exception, as a handful of tech giants are seeing soaring returns, lifting the overall market.
From a broader perspective, the S&P 500 has returned 11.5% on average annually since 1928.
Following next in line were investors in Chile and Mexico with return expectations of 15.1% and 14.7%, respectively. Unlike many global markets, the MSCI Chile Index posted double-digit returns in 2022.
Global financial hub, Singapore, has the lowest expectations gap across countries.
Investors in the UK and Europe, have the most moderate return expectations overall. Confidence has been weighed down by geopolitical tensions, high interest rates, and dismal economic data.
Return Expectations Across Asset Classes
What are the expected returns for different asset classes over the next decade?
A separate report by Vanguard used a quantitative model to forecast returns through to 2033. For U.S. equities, it projects 4.1-6.1% in annualized returns. Global equities are forecast to have 6.4-8.4% returns, outperforming U.S. stocks over the next decade.
Bonds, meanwhile, are forecast to see 3.6-4.6% annualized returns for the U.S. aggregate market, while U.S. Treasuries are projected to average 3.3-4.3% annually.
While it’s impossible to predict the future, we can see a clear expectation gap not only between countries, but between advisors, clients, and other models. Factors such as inflation, interest rates, and the ability for countries to weather economic headwinds will likely have a significant influence on future portfolio returns.
Markets in a Minute
The Top 5 Reasons Clients Fire a Financial Advisor
Firing an advisor is often driven by more than cost and performance factors. Here are the top reasons clients ‘break up’ with their advisors.
The Top 5 Reasons Clients Fire a Financial Advisor
What drives investors to fire a financial advisor?
From saving for a down payment to planning for retirement, clients turn to advisors to guide them through life’s complex financial decisions. However, many of the key reasons for firing a financial advisor stem from emotional factors, and go beyond purely financial motivations.
We partnered with Morningstar to show the top reasons clients fire an advisor to provide insight on what’s driving investor behavior.
What Drives Firing Decisions?
Here are the top reasons clients terminated their advisor, based on a survey of 184 respondents:
| Reason for Firing | % of Respondents Citing This Reason | Type of Motivation |
|---|---|---|
| Quality of financial advice and services | 32% | Emotion-based reason |
| Quality of relationship | 21% | Emotion-based reason |
| Cost of services | 17% | Financial-based reason |
| Return performance | 11% | Financial-based reason |
| Comfort handling financial issues on their own | 10% | Emotion-based reason |
Numbers may not total 100 due to rounding. Respondents could select more than one answer.
Numbers may not total 100 due to rounding. Respondents could select more than one answer.
While firing an advisor is rare, many of the primary drivers behind firing decisions are also emotionally driven.
Often, advisors were fired due to the quality of the relationship. In many cases, this was due to an advisor not dedicating enough time to fully grasp their personal financial goals. Additionally, wealthier, and more financially literate clients are more likely to fire their advisors—highlighting the importance of understanding the client.
Key Takeaways
Given these driving factors, here are five ways that advisors can build a lasting relationship through recognizing their clients’ emotional needs:
- Understand your clients’ deeper goals
- Reach out proactively
- Act as a financial coach
- Keep clients updated
- Conduct goal-setting exercises on a regular basis
By communicating their value and setting expectations early, advisors can help prevent setbacks in their practice by adeptly recognizing the emotional motivators of their clients.
Markets in a Minute
The Top 5 Reasons Clients Hire a Financial Advisor
Here are the most common drivers for hiring a financial advisor, revealing that investor motivations go beyond just financial factors.
The Top 5 Reasons Clients Hire a Financial Advisor
What drives investors to hire a financial advisor?
From saving for a down payment to planning for retirement, clients turn to advisors to guide them through life’s complex financial decisions. However, many of the key reasons for hiring a financial advisor stem from emotional factors, and go beyond purely financial motivations.
We partnered with Morningstar to show the top reasons clients hire a financial advisor to provide insight on what’s driving investor behavior.
What Drives Hiring Decisions?
Here are the most common reasons for hiring an advisor, based on a survey of 312 respondents.
| Reason for Hiring | % of Respondents Citing This Reason | Type of Motivation |
|---|---|---|
| Specific goals or needs | 32% | Financial-based reason |
| Discomfort handling finances | 32% | Emotion-based reason |
| Behavioral coaching | 17% | Emotion-based reason |
| Recommended by family or friends | 12% | Emotion-based reason |
| Quality of relationship | 10% | Emotion-based reason |
Numbers may not total 100 due to rounding. Respondents could select more than one answer.
While financial factors played an important role in hiring decisions, emotional reasons made up the largest share of total responses.
This illustrates that clients place a high degree of importance on reaching specific goals or needs, and how an advisor communicates with them. Furthermore, clients seek out advisors for behavioral coaching to help them make informed decisions while staying the course.
Key Takeaways
With this in mind, here are five ways advisors can provide value to their clients and grow their practice:
- Address clients’ emotional needs early on
- Demonstrate how you can offer support
- Use ordinary language
- Provide education to help clients stay on track
- Acknowledge that these are issues we all face
By addressing emotional factors, advisors can more effectively help clients’ navigate intricate financial decisions and avoid common behavioral mistakes.
The Top 5 Reasons Clients Fire a Financial Advisor
The Top 5 Reasons Clients Hire a Financial Advisor
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