More than three-fourths (78%) of surveyed advisers said that more of their retired clients are considering short-term expense reductions, according to a release of the survey results. Nearly half of advisers (49%) said more retirees are changing their investment strategies, and an equal number say retirees are reducing the amount of their retirement distributions.
When Will It End?
Forty-four percent of surveyed advisers expect the current recession to end in 2009, while 41% believe the recession will extend into 2010, according to the results. More than half (53%) think the S&P will rise during the first half of 2009.
A clear majority (84%) of those surveyed saying that achieving investment goals in the current environment is difficult. Compared with portfolio values as of September 1, 55% of advisers say portfolios will take as long as three years to recover, and 35% think it will take somewhere between three to five years to recoup losses, the release said.
Charles Schwab said the majority of surveyed advisers (67%) are hopeful that the country will become more united during the next six months (nearly tripling from 23% in July). More than two-thirds of advisers also approve of Federal Reserve Chairman Ben Bernanke’s leadership.
During the first half of 2009, the majority of surveyed advisers believe consumer savings will continue to increase (68%), as will unemployment (92%). They also predict that the housing market will continue to soften (69%).
A slimmer percentage of respondents expect the Federal Reserve to raise rates (10%). About one-fifth believe energy prices will go down, down from 57% in July (see “Advisers See Light at End of Tunnel“).
While advisers might not be thrilled at the plummeting portfolios of clients, they are continuing to gain clients. More than 90% of advisers won new clients in the last six months, with a good number (45%) of new clients being snapped up from the full-service brokerage industry. One-fourth of new clients previously did not have an adviser.
The number one reason clients from full-service brokerage firms give for switching to independent advisers is a loss of trust in their previous firm (69%), the release said. Their desire for more personal advice ranks a close second at 64%. Also of note is that 12% of independent advisors say new clients came through their doors in the last six months because of concern over their previous firm’s sub-prime mortgage exposure, a doubling from 6% in July.
“Now more than ever, advisers tell us that their new clients’ portfolios are in need of an overhaul,” Bernie Clark, senior vice president for Charles Schwab Advisor Services. The most common offense, cited by 74% of advisers, is an asset allocation mix inappropriate for a client’s risk tolerance level. More than half of advisers (53%) say new clients are typically in a large number of high-cost products. And almost half (49%) say they’re also seeing too many proprietary products in new client portfolios.
Most surveyed advisers (78%) say they have increased the amount of proactive contact they have with their clients, and more than 70% are providing more education about the market.
The semi-annual Independent Advisor Outlook Study commissioned by Charles Schwab was conducted by Koski Research. More than 1,200 independent investment advisors with more than $300 billion in total assets under management participated in the study between January 20 and 30, 2009. Detailed findings are available at www.aboutschwab.com/advisors.