Advisers see uptick in new assets: Survey

Though advisers’ outlook of the economy over the next six months may be bleak, there is indeed a silver lining, according to a survey from The Charles Schwab Corp. of San Francisco. Indeed, it appears that the bad economy has been good for many registered investment advisers’ businesses, as 91% of the 1,240 advisers polled by Schwab said they had brought in new assets during the previous six months. Forty-five percent of these new assets came from clients who were leaving full-service brokerage firms. Sixty-nine percent of the advisers pointed to clients’ lack of trust in their old firms as their primary reason for defecting. Sixty-four percent said they switched firms because they wanted more-personal advice. Nearly half said the main reason they left their firms was because they had lost money. The fifth annual Independent Advisor Outlook Study surveyed RIAs who were employed by independent firms with assets in custody at Schwab. This web survey was conducted between Jan. 20 and Jan. 30. Meanwhile, advisers’ forecasts on unemployment have only worsened as the financial crisis has taken its toll. For instance, in July 2008, 79% of advisers expected that unemployment would worsen; now 92% except unemployment to keep rising. Sixty nine percent also predicted that the housing market would continue to soften over the next six months, down slightly from the 71% who felt that way two years ago. Among the new clients, advisers also spotted common problems with their portfolios: 74% said that the clients had inappropriate asset allocations for their risk tolerances, while 53% said that the clients had too many expensive products. Looking ahead, more respondents expected to invest in fixed income, with 42% of the participants saying they would be more likely to do so. That’s up from 20% in July of last year. Exchange traded funds are also among the most popular investments among those polled, with 79% saying they currently employ them. Real estate investment trusts followed in second place with 63%, and high-yield bonds came in third with 62% of the advisers using these products. In terms of the overall economy, advisers remain hopeful. Fully three-quarters of those polled believed that President Barack Obama’s proposed tax incentives to help businesses create jobs would be most beneficial for the U.S. economy. Mr. Obama’s proposed funding for U.S. infrastructure improvements came in second, with 65% of the participants saying this would be most beneficial. There may also be a light at the end of the tunnel, advisers said. Forty-one percent of those polled expected the recession to last until the end of this year, while another 41% say it may end in the following December.