As several American banks collapsed, March 2023 was a month of panic for many investors — but not, apparently, for retirement savers.
Retirement confidence held steady last month, according to the latest data from Arizent's Retirement Advisor Confidence Index. Though clients became more cautious, in other ways their outlook on the economy remained consistent or even slightly improved.
"Everything is about the same," one advisor told RACI's survey.
Considering the tumult of last month, this is remarkable. On March 8, California's Silvergate Bank announced that it was liquidating its assets. Two days later,
The crisis sparked a massive sell-off of bank stocks — even for more established firms like JPMorgan and Goldman Sachs — and the stock market in general took a significant hit. By March 15, both the Dow Jones and the S&P 500 had
Through it all, retirement investors held tight. From February to March, RACI's composite score — an aggregate of various confidence indicators — rose slightly, from 48.1 to 48.6. Scores above 50 indicate rising confidence, while those below 50 indicate a decline, which means clients' attitudes toward the economy deteriorated less in March than they did in February.
By another measure, investors' faith in the economy remained exactly the same. RACI's score for total contributions to retirement plans was 57.8 in March — precisely what it had been in February.
And in one significant way, confidence significantly improved. The amount of assets clients invested in equities shot up to a score of 56.9 in March, up from 50.8 in February. Some advisors attributed this to the approaching tax season, which tends to spur last-minute investment in retirement accounts.
"Some clients made or plan to make their maximum allowable retirement contributions before the tax deadline," one wealth manager said. "Given the possibility of a recession, dollar cost averaging into the market is a useful tool to manage the volatility."
Other advisors saw an opportunity amid the banking crisis and steered their clients toward making the most of it.
"While clients were very worried about SVB bank collapse, now is a good time to invest and buy on the dips," one financial planner said. "With cooling inflation … now is a good time to get into stocks."
Though the inflation data for March has not been released yet, prices have been rising more slowly in recent months. In February, the 12-month change in the consumer price index
Amid this easing inflation and a sense that the SVB crisis was beginning to blow over, some wealth managers found their clients in bullish moods. One planner noticed "more optimism in the markets," and another observed "a measured increase in risk tolerance in the second half of the month as the bank issues appeared to stabilize."
However, this was not the case for everyone. In fact, investors' overall risk tolerance declined from 47.1 in February to 45.2 in March.
"The banking crisis lowered risk tolerance for most clients," one wealth manager said. "However, last-minute tax planning increased contributions to most retirement products."
In general, financial advisors reported a complex jumble of positive and negative emotions in their clients.
"People are confused by the amount of market volatility," one said. "Many are nervous about the future. However, a small group think we are seeing a great opportunity now. Overall, a mixed bag of emotions."
In spite of all these conflicts, many advisors found their clients doing exactly what they often urge them to do: staying the course.
"As inflationary pressures continue and bank failures are top of mind for clients, it is essential to stay focused and steady," one wealth manager said.