financial planning Effects of the Great Recession

Most study respondents said the financial crisis had no impact on their lives, though many are avoiding the market and have changed their spending and savings habits.

DENISE TORRES/SHUTTERSTOCK

By Ayo Mseka

Data released late last year by Hartford Funds reveal that a decade after the Great Recession, Americans are unclear how the economic event impacted their lives and financial behavior.

Although the majority (40 percent) of survey respondents said that the financial crisis had no impact on their lives, large numbers reported that they avoid the market (42 percent) and have altered their spending and savings habits (46 percent). Others (26 percent) have shifted their retirement timeline and plan to work longer then they’d hoped. In all, 25 percent had to change jobs or take on additional jobs.

“Americans are forgetting what it felt like during those challenging times of 2008-2011,” said John Diehl, Senior Vice President of Strategic Markets at Hartford Funds. “These results signify that advisors should continue to remind clients that markets can get turbulent, so they should steer clear of emotional investments and kneejerk reactions by maintaining a fundamentally diversified portfolio to help them achieve their long-term financial goals.”

When asked about preparation for the next recession or market downturn, almost half (43 percent) of respondents said they are taking a wait-and-see approach to the markets. Nearly a fifth of Americans (17 percent) are confident in their investments and aren’t touching their portfolios to prepare for the next recession or market downturn, while a mere 21 percent are increasing their investments to take advantage of the upside.

“When most investors say they’re taking a wait-and-see approach, that usually means that things have been so good for so long that there is no need to review where their investments stand, other than to open statements and be happy that values are up,” said Bill McManus, Director of Strategic Markets at Hartford Funds. “We see an opportunity to educate investors who may be at a standstill about the benefits of perspective and direction from a financial advisor.”

Millennials’ lack of trust

There is a clear demographic divide across market perspectives and actions. One quarter (23 percent) of Americans are withdrawing cash from their investments to prepare for the next recession or market downturn. Results indicate that those who make more money (household income of over $75,000) are more likely to liquidate and stockpile their cash than those who make less than $75,000. Millennials are hoarding more cash than any other generation, with more than a quarter (26 percent) taking money out of the market for cash savings.

Millennials, for whom the financial crisis took place during their formative job-seeking years, also have the least amount of trust in the market today, with almost half (48 percent) avoiding the market altogether. This generation continues to prepare for the worst, as nearly a quarter of them (24 percent) have already shifted their retirement timeline and plan to work longer than originally anticipated. Thirty-eight percent are also trying to compensate for this delay by increasing their retirement savings in traditional retirement vehicles.

Millennials, for whom the financial crisis took place during their formative job-seeking years, also have the least amount of trust in the market today, with almost half avoiding the market altogether.

“Outside of Millennials, Americans are overconfident. Index investing has been wonderful because all of the indexes have been up since March 2009, but when the market turns, investors need to be intentional about what they own and why,” Diehl added.

Additional information on navigating client discussions and the future of financial advice can be found on Hartford Funds’ website.

The following describes the methodology used for the ORC International Telephone CARAVAN® survey, conducted from Oct. 12-15, 2017: The study was conducted using two probability samples: randomly selected landline telephone numbers and randomly selected mobile (cell) telephone numbers. The combined sample consists of 1,006 adults (18 years old and older) living in the continental United States. Of the 1,006 interviews, 506 were from the landline sample and 500 from the cell phone sample.