Disappointed but optimistic: Measuring the mindset of investors

Global Atlantic survey sheds light on investor concerns, priorities, and behaviors

After a tumultuous 2022 that saw record inflation and considerable market volatility, investors have a lot on their minds, according to the recent Global Atlantic 2023 Retirement Insights Survey, which surveyed 1,001 retirement aged (55-75) investors. Concerns about portfolio performance, protection from risk, and lifetime income are shaping the way many people are approaching retirement planning.

In the shadow of such uncertainty, nearly half of investors felt dismayed or disappointed in 2022, and their outlook for 2023 reflects those feelings. Approximately 90% of investors are concerned about inflation, while eight in 10 are troubled by stock market volatility and recession, according to a Global Atlantic-ICR survey.

This eye-opening glimpse into the concerns of investors provides a roadmap to financial professionals on how to allay their clients’ fears. Let’s take a closer look at the findings to illustrate what investors value most, their behavior throughout 2022 and parts of 2023, and their goals and priorities moving forward.

Looking back, looking forward

The nationwide online survey of 1,001 people, which was conducted via interview with investors who have between $250,000 and $1 million in investible assets and are working with a financial professional, revealed how they viewed 2022 and how they anticipate the remainder of 2023 to play out.

The top emotion for investors in 2022 was “disappointment,” with 37% of respondents saying it best demonstrates how they felt about their portfolio performance. An additional 11% said they were dismayed, while 34% said they were satisfied.

When researchers drilled down into portfolio performance, it’s no surprise that disappointment and dismay accounted for nearly half of responses. They found that 59% of respondents experienced a decrease in value — 34% of whom saw a dip of between 6-10%, and more than a quarter of that segment (27%) saw a decrease of between 11-15%.

"Approximately 90% of investors are concerned about inflation, while eight in 10 are troubled by stock market volatility and recession, according to a Global Atlantic-ICR survey".

Despite their experience during 2022, respondents retained some optimism about 2023. In fact, 55% of respondents considered themselves either very optimistic (44%) or somewhat optimistic (11%) about the performance of investments throughout the remainder of the year. Only 21% were pessimistic, with 25% of respondents saying they were neutral on the topic.

Inflation concerns remain

Inflation is by far the biggest concern among investors. Almost nine in 10 investors are concerned about inflation, and eight in 10 are concerned about stock market volatility and a recession. When you narrow the focus a bit to investors with a pension, 43% said they were extremely or very concerned about inflation chipping away at the value of their pension.

Their priority is protection

Given the upheaval of 2022, what are investors prioritizing going forward? It likely comes as no surprise that many of them are placing a heavy emphasis on protection of their assets heading into 2023. In fact, more than half (52%) said that protection was the most important investment priority, and when put head-to-head, 64% said protecting assets was more critical than growing assets.

And when it comes to what they value most in their financial plans? More than one-third of interviewees (34%) said that creating or utilizing a retirement plan that provides lifetime income is most important. Accumulating assets (30%), protecting assets (21%) and paying off debt (7%) were also identified as top financial priorities.

In terms of investments, consistency tops the list of priorities, with 90% of respondents citing a stable rate of return as the most important part of a financial product. Only 32% of those surveyed said they would consider an investment that can make money but has a higher risk.

Having the allocation conversation

Taking these findings — investors feeling the effects of 2022, harboring concerns about inflation and volatility, and prioritizing protection and lifetime income — into consideration, it should come as no surprise that 90% of respondents want to protect their investments while they grow by limiting downside risk.

Less than three quarters of investors have considered or already have annuities, and even fewer have considered real estate as an investment or real estate investment trusts (REITs). Additionally, fewer than half (49%) of investors said they have a good handle on how their investments are allocated.

Respondents also revealed some of the best things their financial professionals said or did in 2022. Many pointed to the fact they helped alleviate some concerns during volatility, while others highlighted the important allocation decisions they made.

“[They] helped me to allocate more fixed income equity and less to a high-risk portfolio in order to balance what I have set aside for living expenses and what I wish to leave for an inheritance,” one respondent said.

Another said their financial professional “switched my asset to fixed annuity. Since the interest has risen, I am making more than I had before.”

The desire for protection and lifetime income, especially in an unpredictable and volatile economic landscape, provides an opening for financial professionals to talk to their clients about how they are allocating their portfolio given the current environment and explore how annuities, alternatives, and other products may help them best reach their goals.