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Advisors are cool on diversification: Study

  • The FPA study tackled question of diversification for first time.
  • Just under half of advisors surveyed are pursuing more diversification of client investments.
  • Nearly a third say current market conditions make diversifying more tricky.

Released today by the Financial Planning Association, the 2017 Trends in Investing Survey tackled the issue of investor portfolio diversification for the first time and it showed a distinct lack of appetite for even more diversification.

The survey shows that only 47 percent of the 302 financial advisors the FPA polled in March and April are looking for new ways to diversify client investments (see chart below). Additionally, 27 percent say today's market conditions make diversification difficult.

Certified financial planner David Yeske, managing director of Yeske Buie and co-participant in the report as editor of the Journal of Financial Planning, said that, in any event, it's difficult — in the short-term — to prevent portfolio volatility through diversification.

"No matter how you diversify, everything will move [up or down] together in the short run," Yeske said. "But clients have to understand that diversity is more about achieving a certain amount of investment security and safety over the long-term."

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