Where Investors Are Turning for Recession Advice

Giving good advice sometimes feels like a fool’s errand. Often, it seems the ones who are most receptive to advice are the ones who need it the least, and the ones who need it the most are quick to dismiss it if it isn’t what they want to hear. As such, financial advisors should seize any opportunity they have to offer advice to a receptive audience.

Research suggests people can be compelled to seek advice in times of uncertainty, and with the mounting expectation of a recession, these times can indeed feel rocky. Our recent research shows that investors think a recession is coming and they’re not waiting to do something about it. Because of this, investors may be more motivated to seek out and follow the guidance of a financial advisor they feel they can trust.

In 2022, the CFA Institute found that 56% of retail investors trusted financial advisors. Though this was a marked increase from 2020, it still leaves a lot of room for improvement. Advisors may benefit in the long run if they can further build trust with investors and provide good, actionable advice during these uncertain times, as people tend to attribute their success to the person who gave them advice.

But when are investors turning to advisors? What other sources are competing for their attention? To find out, we delved into our data from a recent study examining how investors are coping with the threat of a recession.

There Is No Top Dog for Financial Advice

In our recent study, we asked 949 investors how they have been preparing for a recession; investors could select numerous investment (for example, investing/divesting in stocks) or noninvestment (for example, increasing cash savings) actions. From there, we further asked investors what sources they consulted before taking the actions they reported.

Overall, there was no dominant source of advice investors are turning to. When looking at which sources investors consulted for their investment actions, the most common source investors reported consulting was themselves—this accounted for 24.5% of the actions taken. The next three most consulted sources were websites (23.0%), family and friends (20.8%), and advisors (15.9%).

We also looked at whether those investors who have a financial advisor are actually making use of them for advice before preparing for a recession and found that such investors consulted their advisor 62.3% of the time before they took investment action.

These findings point to two things. First, there is no overwhelmingly popular source of financial advice investors are turning to as they prepare for a recession, which provides an opportunity for advisors to increase their foothold. Second, advisors have a lot of ground to gain, not just with investors in general but with their own clients: 37.7% of the time, they aren’t consulting their advisor before taking investment action.

Inspiring Investors to Take Your Advice

Fortunately for advisors, people prefer to take advice from those with relevant expertise, so here are some tips on how to get investors to come to you for advice and follow through on it:

1) Be a source before they even talk to you. Research shows before people seek out a person for advice, they start collecting information on their own. You can use this tendency to your advantage by positioning yourself as a source investors can turn to in their information-collecting stage. How you do so may look different depending on your comfort level. Some advisors might act as an information source by making relevant materials available to their clients to review in their own time. Others might look to have a more public-facing approach by providing relevant information to investors on websites, podcasts, and social media.

2) Highlight that your intentions align with what’s best for them. People who seek advice are more receptive to people they think are well-intentioned. When an investor comes to you for advice, remind them of the fiduciary standard you uphold. By reminding investors that your advice is based on what is best for them, you can assure investors your advice is not based on some ulterior motive.

3) Give actionable and justifiable advice. There is no guarantee that someone will take your advice when they walk out of your office, but there are ways to give advice that make people more likely to follow it. For one, people are more likely to follow advice when they feel that they can implement it, so ensure you provide clear steps to investors on how they can execute your advice. People are also more likely to follow advice when there is a clear justification for it, so don’t assume an investor understands why you are giving the advice; provide a clear explanation for why it is your advice.