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.
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.
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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)
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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.
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