Achieving clients' income needs concern for 86% of advisors

Rhea-AI Summary

Nationwide's recent survey reveals that 86% of financial advisors express concern about meeting clients' income needs over the next three years, primarily due to low interest rates and rising inflation.

Approximately 46% of advisors currently use alternative income strategies, with 35% considering them. The Nationwide Risk-Managed Income ETF (NUSI), launched in 2019, has seen growth to over $650 million in assets. Advisors exhibit concern over inflation (40%), stock valuations (21%), and potential market corrections, indicating a shift towards non-traditional income strategies as a response to market conditions.

Positive

• NUSI has grown to over $650 million in assets under management since its 2019 launch.
• 46% of advisors currently invest in alternative income strategies, highlighting strong market demand.

Negative

• 86% of advisors are concerned about meeting clients' income needs, indicating market stress.
• Only 22.5% of advisors expect high-income investments to yield over 5% in the next three years.

COLUMBUS, Ohio, Nov. 30, 2021 /PRNewswire/ -- With interest rates remaining near historic lows, supply chain and workforce challenges driving continued market uncertainty and inflation on the rise, advisors are looking for additional options to generate income for their clients, and many are turning to non-traditional income strategies.

According to a recent survey of advisors and financial professionals conducted for Nationwide by ETF Trends, nearly 9 in 10 (86%) advisors are at least somewhat concerned about achieving their clients' income needs over the next three years.

The survey additionally found that many are looking to alternative income strategies to bridge the gap for their clients. About half (46%) currently invest in alternative income strategies and 35% are considering investing in these strategies. Nearly 8 in 10 are comfortable with non-traditional income strategies for their clients.

"Income from the asset classes that investors have traditionally turned to has decreased with interest rates and the income that has been generated is likely to be impacted by inflation," said Mark Hackett, chief of investment research of Nationwide's Investment Management Group. "I think advisors recognize that some traditional strategies may not yield adequate income for clients in the year ahead, and that's why they are increasingly considering additional options to generate income while seeking downside protection to help their clients diversify their portfolio."

While advisors responded with moderate confidence in the Bloomberg U.S. Aggregate Float Adjusted Index, with 63% of them expressing expectations of annualized total return between 0-5% over the next three years, one third (34%) believe that the Agg is more likely to dip into the red instead. Advisors are not overly optimistic about how high yielding their high yield investments will be over the next three years. More than six in 10 (65%) respondents expect their high-income investments to yield a paltry 0-5%. Less than a quarter (22.5%) believe that yields will exceed 5%.

In terms of potential threats to the equity and fixed income markets, the survey found that 40% of advisors said their biggest concern in the next three years was inflation, followed by stock valuations (21%), volatility (21%) and higher interest rates (18%).

Advisors are also on the lookout for future market corrections. Only one in ten advisors (10.8%) said that they were "unconcerned" with the potential of a 20% market correction. Instead, most (55.9%) expressed that they were "somewhat concerned," while a full third considered themselves very concerned."

"With more moderate predictions for equity market growth in 2022, advisors realize non-traditional income strategies can be an option for their clients to address current and future market conditions," said Hackett.

Nationwide introduced its own alternative income strategy in late 2019, the Nationwide Risk-Managed Income ETF (trading symbol: NUSI), which has grown to more than $650 million in assets under management in less than two years. The Fund is listed on the New York Stock Exchange and has an expense ratio of 0.68%. 

Investors interested in learning more about the Nationwide Risk-Managed Income ETF should contact their financial professional or visit the website. Financial professionals interested in learning more about Nationwide ETFs can call 1-877-893-1830. To read more about the survey click here.

Methodology

The ETF Trends Investment Income Survey, sponsored by Nationwide, was conducted in the fall of 2021. The survey was conducted online, with a sample size of 574 verified financial advisors.

About Nationwide

Nationwide, a Fortune 100 company based in Columbus, Ohio, is one of the largest and strongest diversified insurance and financial services organizations in the United States. Nationwide is rated A+ by both A.M. Best and Standard & Poor's. An industry leader in driving customer-focused innovation, Nationwide provides a full range of insurance and financial services products including auto, business, homeowners, farm and life insurance; public and private sector retirement plans, annuities and mutual funds; excess & surplus, specialty and surety; pet, motorcycle and boat insurance. For more information, visit www.nationwide.com. Follow us on Facebook and Twitter.  

This material is not a recommendation to buy, sell, hold or roll over any asset, adopt an investment strategy, retain a specific investment manager or use a particular account type. It does not take into account the specific investment objectives, tax and financial condition, or particular needs of any specific person. Investors should work with their financial professional to discuss their specific situation.

Call 800-617-0004 to request a summary prospectus and/or a prospectus, or download prospectuses at etf.nationwide.com. These prospectuses outline investment objectives, risks, fees, charges and expenses, and other information that you should read and consider carefully before investing.

Investing involves risk, including the possible loss of principal. Shares of any ETF are bought and sold at market price (not NAV), may trade at a discount or premium to NAV and are not individually redeemed from the Fund. Brokerage commissions will reduce returns. The Fund's return may not match or achieve a high degree of correlation with the return of the underlying index.

Beta is a measure of price variability relative to the market.

The Bloomberg U.S. Aggregate Bond Float Adjusted Index is a broad-based benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. The Float-Adjusted version excludes US agency debentures held in the Federal Reserve SOMA account. (Future Ticker: I20984) (www.bloomberg.com)

KEY RISKS: The Fund is subject to the risks of investing in equity securities, including tracking stock (a class of common stock that "tracks" the performance of a unit or division within a larger company). A tracking stock's value may decline even if the larger company's stock increases in value. The Fund is subject to the risks of investing in foreign securities (currency fluctuations, political risks, differences in accounting and limited availability of information, all of which are magnified in emerging markets). The Fund may invest in more-aggressive investments such as derivatives (which create investment leverage and illiquidity and are highly volatile). The Fund employs a collared options strategy (using call and put options is speculative and can lead to losses because of adverse movements in the price or value of the reference asset). The success of the Fund's investment strategy may depend on the effectiveness of the subadviser's quantitative tools for screening securities and on data provided by third parties.

The Fund expects to invest a portion of its assets to replicate the holdings of an index. Correlation between Fund performance and index performance may be affected by Fund expenses and because the Fund may not be invested fully in the securities of the index or may hold securities not included in the index.

The Fund frequently may buy and sell portfolio securities and other assets to rebalance its exposure to various market sectors. Higher portfolio turnover may result in higher levels of transaction costs paid by the Fund and greater tax liabilities for shareholders. The Fund may concentrate on specific sectors or industries, subjecting it to greater volatility than that of other ETFs. The Fund may hold large positions in a small number of securities, and an increase or decrease in the value of such securities may have a disproportionate impact on the Fund's value and total return. Although the Fund intends to invest in a variety of securities and instruments, the Fund will be considered nondiversified. Additional Fund risk includes: Collared options strategy risk, correlation risk, derivatives risk, foreign investment risk, and industry concentration risk.

Nasdaq-100 Index: An unmanaged, market capitalization-weighted index of the 100 largest, most actively traded U.S companies listed on the Nasdaq stock exchange. The Index includes companies from various industries except for the financial industry, like commercial and investment banks. These non-financial sectors include retail, biotechnology, industrial, technology, health care, and others.

A call option is a financial contract that give the option buyer the right, but not the obligation, to buy a stock, bond, commodity other asset or instrument at a specified price within a specific time period.

A covered call is a financial market transaction in which the seller of call options owns the corresponding amount of the underlying instrument, such as shares of a stock or other securities.

A put option is a contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying security at a pre-determined price within a specified time frame.

Duration is a measure of the sensitivity of the price of a bond or other debt instrument to a change in interest rates.

Nationwide Fund Advisors (NFA) is the registered investment advisor to Nationwide ETFs, which are distributed by Quasar Distributors LLC. Nationwide Funds distributed by Nationwide Fund Distributors LLC (NFD), member FINRA, Columbus, OH. NFD is not affiliated with any subadviser contracted by Nationwide Fund Advisors (NFA), with the exception of Nationwide Asset Management, LLC (NWAM). Nationwide Investment Services Corporation (NISC), member FINRA.

Nationwide, the Nationwide N and Eagle and Nationwide is on your side are service marks of Nationwide Mutual Insurance Company. © 2021 Nationwide

MFN-0593AO  Q-20211122-0191

Contact:
Jeff Whetzel
(614) 249-0849
whetzej@nationwide.com 

 

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SOURCE Nationwide

FAQ

What is the significance of the recent Nationwide survey on advisors and income strategies?

The Nationwide survey indicates that 86% of advisors are concerned about clients' income needs due to low interest rates and inflation, prompting interest in alternative income strategies.

How has the Nationwide Risk-Managed Income ETF (NUSI) performed since its launch?

Since its launch in late 2019, NUSI has grown to over $650 million in assets under management, reflecting strong investor interest.

What are the primary concerns of advisors according to the Nationwide survey?

Advisors' main concerns include inflation (40%), stock valuations (21%), and potential market corrections, highlighting the cautious sentiment in the current market.

What percentage of advisors currently invest in alternative income strategies?

According to the survey, 46% of advisors currently invest in alternative income strategies, with 35% considering them.

What do advisors predict for high-income investment yields over the next three years?

More than 60% of advisors expect high-income investments to yield only 0-5%, reflecting a pessimistic outlook on income generation.