Independent Investment Advisors Warm Up Their Outlook, Says Schwab Study

Monday, September 14, 2009 7:30 am PDT



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SAN DIEGO--(BUSINESS WIRE)--Independent investment advisors say the economy is turning a corner, according to the latest results of a semi-annual study released at Charles Schwab’s IMPACT® 2009 conference, one of the country’s largest annual gatherings of independent investment advisors. The majority (72%) of independent advisors surveyed by Schwab in late summer believe the recession will end in less than 12 months, and more than one-third (36%) said the end is not only in sight, but will come before the end of this year.

Charles Schwab is a leading provider of custodial, operational and trading support for approximately 6,000 independent registered investment advisors (RIAs). The semi-annual Independent Advisor Outlook Study (“study”) measures the views of independent RIAs on a variety of topics. Nearly 1,200 independent investment advisors with more than $280 billion in total assets under management participated in the study between July 28 and August 7, 2009.

The study reveals additional signs of optimism: more than two-thirds of participating advisors (72 percent) say the S&P 500 Index will continue its upward climb in the next six months – the greatest level of optimism measured by the study in two years. And nearly eight in 10 (79%) of advisors approve of Federal Reserve Chairman Bernanke’s leadership, also the highest since July 2007.

Many advisors continue to have concerns about their own markets, however. While 59 percent say that their local economy has improved or remained static in the last six months, 39 percent say their region’s economic prospects continue to decline. Considered regionally, advisors in the Northeast are the most upbeat, with 32 percent saying their economy has improved. At the other end of the spectrum, just 18 percent of advisors in the West say they feel this way.

Other economic sentiments expressed by advisors participating in the study:

  • Just 35 percent of all advisors now expect the housing market will continue to soften, a dramatic reversal from July 2007, when 80 percent of advisors anticipated continuing decline. As recently as January 2009, more than two-thirds (69%) of advisors said housing was still on the decline.
  • More than one-quarter (26%) expect the Fed to raise interest rates in the next six months, well up from the 10% who held this view in January.
  • Close to half of advisors (46%) say they expect inflation to increase in the next six months.
  • Eighty-one percent say that unemployment numbers will rise in the next six months, a slight dip from the 92% who thought this in January.
  • In a dramatic increase, 43 percent of advisors say consumer spending will be on the rise during the next six months, up from 14 percent in January.
  • A majority of advisors (69%) also expect consumer savings to increase between now and the end of the year, nearly identical to January’s finding (68%).

After expressing an extraordinarily high level of optimism about the unity of the nation in January – just days after President Obama’s inauguration, 67 percent of advisors surveyed said the country would become more politically united – now just eight percent say they think the country will become more united during the next six months.

Investors Seek Out Independent Investment Advisors

In these tough times, investors are continuing to seek out the trusted counsel of independent RIAs: questions about their firm’s integrity are a non-issue for 95 percent of advisors surveyed. With numbers that are largely unchanged from January, nearly nine in ten (89%) of advisors won new clients in the last six months: 45 percent of new clients left full service wirehouse advisors, while 23 percent were former do-it-yourself investors. The top explanation clients from full service wirehouse firms give advisors for switching is a loss of trust in their previous firms (68%). A desire for more personal advice again ranks a close second, at 59 percent.

“Investors continue to feel uncertain about their nest-eggs,” says Bernie Clark, senior vice president, Schwab Advisor Services. In fact, says Clark, “Forty-three percent of advisors told us that their clients needed reassurance about the markets and their investments – just a slight drop from the 49 percent who said this in January.”

Clark pointed out that while managing client expectations has been their greatest challenge over the past six months, advisors are signaling that things are changing, slowly. Fifty-nine percent of advisors surveyed say achieving client investment goals in this market will be difficult, a sharp decrease from the 84 percent who said this when surveyed in January.

Top Investment Strategies Revealed

According to the study, advisors are seeing more opportunities in equities, and are signaling moves away from cash and fixed income. Nearly one-third (31%) say they plan to invest more in US small cap equities over the next six months, on par with advisors’ plans for investing more in US large cap equities (30%). Only 25 percent plan to invest more in fixed income, down from January’s high of 42 percent, and just 8 percent plan to hold more cash in client portfolios.

Interest in international equities is on the rise as well, particularly in emerging markets. Thirty-seven percent of advisors say they plan to invest more in large cap emerging markets over the next six months – an all time high for the study and up dramatically from 14 percent who said this in January 2009. Just over one-quarter (27%) are interested in small cap equities in these regions as well, which is considerably more than the nine percent who expressed renewed interest in them in January.

ETFs remain the preferred investment vehicles for independent advisors, with 39 percent planning to invest more there during the next six months. Commodities rank second and REITs/high-yield bonds tie for third among advisors for investment vehicles of choice.

The Independent Advisor Outlook Study, conducted for Schwab Institutional by Koski Research in July and August 2009, has a 2.89% margin of error. Koski Research is not affiliated with nor employed by Charles Schwab & Co. Inc. Detailed findings can be found at

About Charles Schwab

The Charles Schwab Corporation (Nasdaq:SCHW) is a leading provider of financial services, with more than 300 offices and 7.6 million client brokerage accounts, 1.5 million corporate retirement plan participants, 619,000 banking accounts, and $1.3 trillion in client assets. Through its operating subsidiaries, the company provides a full range of securities brokerage, banking, money management and financial advisory services to individual investors and independent investment advisors. Its broker-dealer subsidiary, Charles Schwab & Co., Inc. (member SIPC,, and affiliates offer a complete range of investment services and products including an extensive selection of mutual funds; financial planning and investment advice; retirement plan and equity compensation plan services; referrals to independent fee-based investment advisors; and custodial, operational and trading support for independent, fee-based investment advisors through its Advisor Services business segment. The Charles Schwab Bank (member FDIC) provides banking and mortgage services and products. More information is available at (0909-10853)

For educational purposes only. The information presented does not constitute, and should not be construed as, investment advice or recommendations with respect to the securities or investments mentioned. Moreover, neither the information nor any opinion expressed constitutes a solicitation for the purchase or sale of any investment or security.


Charles Schwab
Alison Wertheim, 415-596-2599 (cell)
Makovsky + Co.
Janet Yoo, 212-508-9606

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