Investment Advisor Use and Stock Market Return Expectations

Miranda Reiter, Ph.D., CFP®6

Martin C. Seay, Ph.D., CFP®7

Abstract

This study explored the association between receiving investment advice from a financial professional and investors’ sentiment about expected stock market outlook. Using data from the 2015 National Financial Capability Study, respondents were identified as either being pessimistic, realistic-cautious, realistic-optimistic, or highly optimistic about future stock market performance. Data were provided relative to an investors’ use of financial professionals: being self-directed, using some investment advisor help, or relying upon an investment advisor’s help. Results show that investors using full or some investment advisor help were more likely to expect future stock market returns to align with historical averages. The key implication is that working with an investment advisor is associated with clients having a more realistic view of future stock market returns.

Key Words: Investor sentiment, investor optimism, investment advice seeking, overconfidence

6. Assistant Professor, Texas Tech University, School of Personal Financial Planning, mreiter@ttu.edu

7. Department Head and Professor, Kansas State University, Personal Financial Planning, mseay@ksu.edu