Jobs, home prices, market volatility are client concerns, advisors say

on Oct4
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With high inflation and rising interest rates fueling speculation that a recession is on the horizon, it may come as no surprise that financial advisors are hearing these concerns from their clients.

Year-over-year inflation eased a bit in August to 8.3% from 8.5% in July, but it remains far above the Federal Reserve’s target rate of 2%. The central bank raised a key interest rate in September by 0.75 percentage points — for the third consecutive time — to combat inflation, and further hikes are expected.

We spoke with experts from CNBC’s Financial Advisor Council to see what they were discussing with their clients.

So, what is a big worry for clients in this economic environment? “What the labor environment is going to look like and what their risk is as far as unemployment goes,” said certified financial planner Douglas Boneparth, president of Bone Fide Wealth in New York, whose clients are largely between ages 28 and 42.

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“At this point it’s speculation,” Boneparth said. “It’s hard to point to data that says we need to be concerned right now.” 

The unemployment rate remains low: The most recent U.S. Bureau of Labor and Statistics data shows an unemployment rate of 3.7% for August, up slightly from 3.5% in July. 

Memories of the Great Recession linger

Yet some clients have memories of the 2008-2009 Great Recession and its accompanying broad-based job losses. In December 2007, ahead of the economic woes brought on by the financial crisis, the U.S. unemployment rate was 5%, according to the BLS. It peaked at 10% in October 2009 — several months after the official end of the recession — but it took until 2015 for it to settle at 5% again.

Boneparth said the labor market concerns come primarily from clients who work for startups that are largely tech-related. 

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“If you work for a venture-capital-backed company, and the last round of capital you raised was six months ago and you’re going into a more difficult fundraising environment, you want to think about that risk,” Boneparth said.

Same goes for someone who’s considering leaving a secure job for one that is higher-risk, he said.

High home prices also generate angst

In the Miami area, home prices in August were up 30.7% from a year earlier, compared with 15.8% for the nation as a whole, according to Zillow. The typical house in Miami sold for $560,200 last month.

“My client couldn’t believe how expensive homes are in Miami,” said Barajas, president and partner at MGO Private Wealth in Irvine, California.

The client plans to delay buying a house with the hope that prices come down.

“Some clients remember the 2008-2009 recession when property values dropped a lot,” Barajas said.

Fear of market volatility weighs on some clients

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