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Portfolio > ETFs > Broad Market

Happier Days

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It’s good again. Advisors are getting more clients, they report getting good returns, and they believe we are in a bull market, according to our survey of Investment Advisor readers conducted in early September.

The survey of advisor sentiment–our second this year–was conducted by e-mail the two days before and the two days after the Labor Day weekend. The first survey was last April, right around the terrible bear-market bottom, and it probed the financial pain suffered by our readers. The new survey, quite happily, paints a brighter picture of a strong market rebound, and this seemed a good time to assess how the rebound is affecting advisors.

A word about the survey itself. Despite a software glitch that deleted some submissions, the distraction caused by the holiday, and the e-mail virus plague that struck the Internet during the days we conducted our e-mail poll, we received more than 525 responses–a valid sample of what’s happening in advisor practices.

What’s the context for our survey? The Russell 3000, an index covering 98% of the total capitalization of all domestic stocks, hit an all-time high on March 23, 2000, and began a three-year descent. On March 11, 2003, it hit a low, collapsing 47% from its high and vaporizing $5.4 trillion of wealth. It’s since staged a comeback. By mid-September, a summer rally from last spring’s trough fueled a 31% gain.

Advisors are happy again. About 90% of those surveyed said their average portfolio showed a gain this year, with about two-thirds of the respondents reporting gains in their average portfolio of more than 10%. Considering that many, if not most, advisor-managed portfolios contain some fixed-income securities, and that the Russell 3000 is up about 18%, advisors are turning in respectable investment results for clients.

In the April survey, a majority of advisors reported lightening up on stocks during the previous 12 months, as the bear market had deepened. It stands to reason then that advisors would not be rebounding as much as the market because many went into the summer rally with a lighter load of equities.

The summer rally has renewed optimism, with about 90% of advisors saying the recent upswing ended the bear market. Just 10% of those surveyed said the summer burst was a “sucker’s rally.” Along those lines, about 90% of those polled said they believed the economy and stock market would strengthen in the next 12 months.

Only about 12% of those polled said they reduced allocations to stocks since the start of 2003. Almost half said they had been maintaining equity allocations, while 44% said they had increased their commitment to stocks.

Nearly half of those polled said they had reduced their allocations to fixed income. About 40% said they were holding steady on their fixed-income allocations, and 10% had increased fixed-income holdings.

Perhaps the most significant finding suggests a fundamental shift in strategy by many advisors. We asked advisors, “Which statement best describes your investment strategy?” and gave them three choices: (a) my firm used a static asset allocation strategy before the bear market and still does, (b) my firm used a tactical asset allocation strategy before the bear market and still does, or (c) my firm used a static asset allocation strategy before the bear market but now uses more of a tactical approach.

Half of those polled reported they were static asset allocators before the bear attack and had remained faithful to that approach, and almost 30% said they were tactical before and remained so. But more than 20% of the respondents said they had switched from static asset allocation to a tactical approach–trying to pick the asset classes that are in and out of favor. The bear market, then, may have changed the way many advisors manage money.

Nearly 30% of responding advisors said the greatest challenge in running their business is personnel management. Only about 15% said mastering financial planning strategies was their greatest challenge and 14% said technology was their greatest challenge. More than 40% reported that marketing their services was their top challenge.

I’ve avoided covering marketing in this space over the years because I own a company that helps advisors with marketing and have no need or desire to make this column self-serving. However, since advisors need help with marketing, I’ll do my best to report ideas you can implement.

Since in our previous survey, advisors also cited marketing as their biggest challenge, we asked a number of questions about marketing in the latest poll. For instance, when presented with the statement, “Our firm’s staff wrote the copy for our marketing brochure with no professional help,” 60% said it was true.

Harry Beckwith, the marketing expert interviewed in part one of this column, reacted to this finding by asking if advisors would try to paint a portrait of themselves instead of going to an artist to get it done. Beckwith did not say it was analogous to performing a medical procedure on yourself, but that was the force of his reaction. Personally, I think it makes sense for advisors to write their own marketing copy, and then seek a professional writer to edit it.

Respondents said that referrals are their most potent source for getting new clients. This was in response to the statement: “The three marketing tools that help bring the most new clients to my firm are: referrals, seminars, client newsletters, brochures, being quoted in the media, direct mail or Web sites.”

It’s not surprising that referrals would be the most often cited marketing tool. Many advisors don’t have a Web site, mail clients a newsletter, or conduct seminars, but they almost all get referrals. What is surprising is that seminars (40%) were ranked as the number-two marketing aide followed by newsletters (20%) and brochures (17%).

The least effective marketing tool of those we asked about was Web sites (14%). To me, this is more because the great majority of advisors have put up template Web sites without giving them much thought. (I do sell Web sites, however.)

Other tidbits gleaned from the survey: Nearly a third of the advisors said they regarded their broker/dealer or custodian as a necessary evil, while two-thirds said they regarded their B/D or custodian as a partner helping them succeed.

Of advisors who said they are Financial Planning Association members, about 45% said the FPA is doing a good job and 10% said the FPA is doing a great job. Only 10% said the FPA was doing a poor job.

Finally, we asked advisors to tell us their plans for growing their businesses over the next 12 months. Of the more than 300 responses to that question here are a few of my favorites:

“Establish a marketing plan.”

“Great ongoing client communication and service. Most of our competitors are lousy at this and we’re getting their clients referred to us regularly. They can’t wait to change because they feel neglected. We’re also exploring the Steve Moeller (consultant and IA columnist) research interview strategy as a marketing strategy to get more referrals. I’ve been in the business 20 years and I’ve never seen a better time to be doing what we do.”

“Introductions from clients and other advisors (CPAs and attorneys) as well as continued public speaking engagements and natural marketing efforts within professional and social organizations.”

To read all the responses, visit


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