Mike Carlone

Let’s face it, as a financial advisor, managing client assets is not usually the hardest part. Rather, the bigger challenge can be managing client expectations.

I think this data from Natixis Investment Managers starkly illustrates the point about expectations:

When asked in 2023, investors said they expect their investments to earn 12.8% above inflation over the long-term. In 2024, advisors said it’s more realistic to expect 8.3% above inflation, leaving a 54% expectations gap between the two.

As individual investors attempt to achieve their expectations, research shows they tend to both over- and under-react to news and information, which can cause them to underperform the stock market. As an example, last year the average equity investor earned 5.5% less than the S&P 500, which is the third largest gap in the last 10 years. Multiply underperformance like that over many years, and it’s a big number.