Financial Plan

Eaton Vance's 2008 Investor Survey Shows Rising Investor Concern About Personal Finances and Taxes Prior to Market Meltdown
Business Wire , Nov 20, 2008


Access to Sound Advice is Critical During Troubled Times

BOSTON -- According to the results of Eaton Vance's 10th annual investor survey, one of the most recent national examinations of investor attitudes, American investors were showing signs of increased pessimism as early as August, foreshadowing the market meltdown that began in September.

Investors were twice as pessimistic about the status of their personal finances in August 2008 as they were two years earlier. The survey found that nearly three in ten investors (27%) said they are in a worse financial position than they expected to be at this point in their lives, as compared with only 13% in 2006. Only 4 in 10 (38%) felt they are in a better financial position than expected, as compared to 58% in 2006.
Related Results



Other evidence gathered more recently shows that investor pessimism has continued to deepen. During the month of October, according to Strategic Insight, a New York-based research organization, inflows into money market funds totaled $185 billion. For the same time period, outflows from stock and bond long term mutual funds totaled $109 billion.

Advisors Provide Valuable Guidance in a Tough Economy, Volatile Markets

Over half (51%) of investors surveyed said they use a financial advisor to help manage their investments. Nearly half (48%) of the remaining investors who do not currently have a financial advisor said the current economic environment makes them more inclined to seek financial advice.

"Never has the role of good financial advice been more important," said Matthew J. Witkos, President of Eaton Vance Distributors, Inc. "Financial advisors earn their keep during turbulent times by helping clients remain calm and focused on their long-term financial plan."

Long-term Investing Sidelined as Asset Allocations Fluctuate and Cash Piles Up

One area where financial advisors can add value is in ensuring that client asset allocations are not pushed out of balance by market shifts. Without rebalancing, a portfolio that was 60% invested in U.S. equities and 40% in fixed income on October 31, 2007 would have migrated to approximately a 50:50 mix one year later1.

"The dramatic swings in asset performance this year offer an opportunity to rebalance portfolios for risk and tax purposes," says Duncan W. Richardson, chief equity investment officer at Eaton Vance. "Waiting out the downturn by going to cash, or conservative income investments is not likely to be a winning strategy for most investors because timing the market is so difficult. Research of past market cycles has shown how important it is for investors to participate in the initial stages of recovery and not wait for conditions to stabilize before jumping back into stocks."

As of early August, pessimism among baby boomers had more than doubled to 36% in 2008 from 17% in 2006. The number of boomers expressing an optimistic view shrank nearly as much (from 51% in 2006 to 32% in 2008).

"Baby boomers nearing retirement are understandably experiencing great anxiety and our survey shows many are cutting spending and reconsidering retirement plans," said Richardson. "While these are important steps, they should also be engaged in a careful evaluation of their portfolio positions, for most an exercise best undertaken in conjunction with a trusted financial advisor."

Eaton Vance Tax Center

The Eaton Vance 2008 Investor Survey also indicated strong concern among investors about investment taxes. As described in a release dated Oct. 15, investor interest in tax-management strategies, which can help avoid the loss of returns to taxes, is on the rise. Investors who utilize financial advisors are twice as likely to invest in mutual funds that are specifically designed to minimize the effects of taxes.

"As a new President prepares to take office, potential future tax changes are being discussed," said Witkos. "Advisors can help clients better navigate the evolving tax landscape, by anticipating these changes and modifying financial plans accordingly."

Eaton Vance Corp. recently expanded its website to help educate financial advisors about investment taxes. The new Eaton Vance Tax Center offers solutions to common investor tax challenges, along with links to educational information about the impact of taxes on investment returns from prominent industry sources. The password-protected site also includes a tax equivalent yield calculator. It can be accessed at www.evtaxcenter.com or by calling 800-836-2414.

Eaton Vance Investor Survey Methodology

The survey was conducted by Penn, Schoen & Berland Associates, Inc. via telephone using a random digit dial methodology from July 30-August 26, 2008. U.S. residents age 21 and older who are invested in stocks, bonds, money market funds, and annuities were surveyed with a margin of error of +/- 2.82% at the 95% confidence level and larger for subgroups. Penn, Schoen & Berland Associates, Inc. is a Washington, D.C.-based strategic polling and market research firm. Other surveys may produce different results.

Featured Articles

Financial Planning and Investment Services

Atlantic Financial has been serving clients since 1994.  Atlantic Financial enjoys a solid reputation for service, selection and value. We can review your wealth management plan, assist with your or 401k / IRA Rollover and assist you with global wealth management.