Inflation Conversation Looms Large for Advisors

The Consumer Price Index (CPI) rose 8.3% in April. These days, that’s considered “easing” and in the most literal sense of easing, it is. After all, the CPI checked in at a staggering 8.5% in March.

If a month-over-month drop to 8.3% from 8.5% is considered progress, the reality is there’s much more work to be done to rein in inflation and numbers such as though confirm it’s going to be awhile and not going to be easy to get consumer prices back to more manageable levels.

That’s the bad news, but there’s a silver lining because with so many investors pensive about inflation, there’s substantial opportunity for advisors to strut their stuff. Acknowledging that inflation is one of the primary wealth destroyers market participants contend with, the current environment is ideal for advisors to solidify relationships.

The recent Country Financial Security Index survey confirms as much. The survey, conducted in March, indicates more than of those queried view inflation as a “big negative impact” on financial goals, including home buying and retirement.

Widespread Inflation Impact

When inflation is discussed in the mainstream financial press or on cable news, it often feels as though the experts being interviewed talk about it terms of “pain at the pump” or higher grocery prices.

Those factors are legitimate and should not be diminished. Certainly when anecdotes abound about $7 and up per gallon gas prices and $10 for a pound of bacon in some locations. However, the Country Financial survey indicates consumers are feeling inflationary pain in myriad ways, be it at the pump, when booking a vacation, grocery shopping or when receiving their monthly utility bill.

In fact, the survey indicates two-thirds of those polled are noticing higher prices when dining out while more than half are feeling a pinch when the monthly power bill arrives. As a result, indulgences such as dining out and technology upgrades are being scrapped.

Moreover, inflation-related concerns are rising. Ninety-one percent of those surveyed are very concerned or somewhat concerned about inflation, up from 87% at the end of 2021, according to Country Financial.

Obviously, inflation is a drag and troublesome to advisors and clients alike, but there's also plenty of opportunity to bolster engagement thanks to inflationary pressure.

It's not just inflation that could cement advisor/client relationships this year. Inflation volatility, or the sheer jitteriness of inflation is an issue on which clients will require attention as 2022 moves along.

Challenges Abound

Tightening budgets and angling for added combination are workable inflation-fighting solutions for some market participants, but that advice is prosaic and advisors can prove their mettle by engaging in deeper conversations.

“If the Fed falls behind, inflation could become embedded in the financial system, which would require the central bank to take more aggressive action later on,” according to CNBC.

Unfortunately, it’s now evident that the Fed is behind the inflation curve and that means it’s on advisors to help clients catch-up. That could be the best bet skittish investors have in this environment.

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