Advisor Insights: Assessing Equities, Recession, and AI Impact

This year’s landscape has been dominated by concerns over how inflation and interest rate hikes could impact the likelihood of a U.S. recession, the rise and influence of artificial intelligence and regulatory pressures.

Against this backdrop, we recently checked in with our financial advisor members to assess their outlook on these issues. Between August 21-31, we collected responses from over 330 survey participants. The responses suggest an industry that expects some headwinds to recede even as others hold steady or increase. Here’s a closer look: 

Equities Outlook

This year’s landscape has been dominated by concerns over how inflation and interest rate hikes could impact the likelihood of a U.S. recession, the rise and influence of artificial intelligence and regulatory pressures.

Against this backdrop, we recently checked in with our financial advisor members to assess their outlook on these issues. Between August 21-31, we collected responses from over 330 survey participants. The responses suggest an industry that expects some headwinds to recede even as others hold steady or increase. Here’s a closer look: 

Recession Likelihood

Market participants have worried about the risk of a recession since the Federal Reserve began hiking interest rates in March 2022. However, the U.S. economy has been surprisingly resilient during that time. Even so, survey respondents had reservations about the future, with nearly 56% of respondents saying a recession was likely over the next 12 months. 

Inflation Expectations

Although inflation has declined, prices remain above the Fed’s 2% goal. Yet almost 44% expect inflation to remain at current levels in the months ahead. Over 35% of respondents think inflation will continue to recede, while nearly 21% believe it will begin to go back up.

AI Impact

Earlier this year, the artificial intelligence platform ChatGPT captivated the public’s attention. Various wealth management applications for AI have emerged since, from automated social media posts and email builders to digital personas capable of answering basic financial questions with human-like responses.

Many of our members plan to leverage AI. Over 29% of survey respondents said the biggest impact would be the ability to automate basic tasks, while another 19% said they would use it to manage risk and select investments. Only a fifth said they wouldn’t use it at all. 

Client Concerns

Regardless of economic conditions or the stock market’s health, investors will also look to their advisors to navigate their most significant financial concerns. Of course, depending on the macro events at play, certain issues are bound to take precedence over others for most clients.

According to survey respondents, the most common one today was the prospect of a recession (23%). That was followed closely by new government policies and regulations (20%). Other responses included high interest rates, global political strife, taxes and stock valuations becoming too stretched.

Business Threats

Much like clients have concerns about their financial situation, advisors often worry about threats to their business. Nearly 60% of respondents said shifting regulations and rules was the biggest one – gets to the heart of FSI’s mission.

Aging client demographics ranked a distant second, at almost 15% of respondents. Other threats included the inability to find a successor or junior partner, rising costs, and robo-advisors and other consumer-facing tech.

Legislation & Regulation

Legislation and regulation can present significant obstacles for advisors as they seek to run their businesses to serve their clients. Therefore, it’s no surprise that most survey respondents said losing their independent contractor status was the single most significant legislative or regulatory concern. 

Excessive amounts of paperwork also ranked high, closely followed by regulation by enforcement. Other legislative or regulatory concerns included cybersecurity risks and financial transaction taxes.

Independent Status

Legislation and regulation can present significant obstacles for advisors as they seek to run their businesses to serve their clients. Therefore, it’s no surprise that most survey respondents said losing their independent contractor status was the single most significant legislative or regulatory concern. 

Excessive amounts of paperwork also ranked high, closely followed by regulation by enforcement. Other legislative or regulatory concerns included cybersecurity risks and financial transaction taxes.