Natixis uncovers unrealistic expectations News added by Benefits Pro on May 13, 2014
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By Nick Thornton

Americans expect ambitious returns – unrealistically ambitious – on their investments in order to comfortably fund retirement, according to a survey from Natixis Global Asset Management released today.

Specifically, respondents said an average annual return of 9.8 percent above inflation will be needed to account for income, housing and health care expenses throughout retirement.

With inflation averaging 4.2 percent since 1964, that would mean annual returns of 14 percent. Annual gains in the S&P 500 have averaged 10 percent over the past 50 years.

“Many investors have set aggressive investment targets, but don’t have a realistic way of reaching them,” said John Hailer, CEO of Natixis Global Management in the Americas and Asia. “Something has to change. The markets have reached new heights and investors feel generally comfortable about portfolio performance. But without a plan that incorporates individual risk and personal benchmarks, the odds are diminished that investors will meet their goals.”

Natixis’ survey shows a dissonance between investors’ expectations and their risk appetite. Asset growth is a priority over principal protection for seven out of 10 surveyed, but only a little over half of respondents (56 percent) are willing to take minimal risk to achieve higher returns.

On the other hand, the need for higher returns could push investors into riskier assets, assuming more risk “than they can handle,” according to Hailer.

Investors’ imbalance between expectations and risk appetite may further prove the need for and value of financial advisory services. Three-quarters (76 percent) of those surveyed say they only own investments they understand well, but only one quarter feel their investment knowledge is strong. Only 12 percent have a strong knowledge of investments not correlated to the broader marker.

The survey “demonstrates a great opportunity for financial advisors and the industry to help educate investors on realistic expectations and strategies to reach their goals,” said Hailer.

Natixis manages more than $899 billion in global assets. The survey questioned 1,050 investors across the U.S. as part of a global survey in 14 countries around the world.

Originally published on BenefitsPro.com
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