Charles Schwab Corp. released on March 4 its 5th semi-annual survey of its affiliated RIAs, and the results show some optimism on the part of advisors, though there are no Pollyannas in the group of 1,240 advisors, with more than $300 billion in AUM, who completed the survey in the last week of January 2009.
Bernie Clark, senior vice president for Schwab’s RIA custody unit, Charles Schwab Advisor Services, said the survey is “showing the caution and care that independent advisors tend to put into building portfolios for clients, and that’s good.”
While only 3% of the respondents expect the recession to end by June 2009, 41% expect it to end by December 2009, while another 41% expect it to end by December 2010. The concerns of advisors are quite different from January 2008, as are there expectations of what is likely to occur over the following six months. In 2009, 92% of respondents expected unemployment to increase, compared to 79% in January 2009, while only 30% of those surveyed in January 2009 expect inflation to increase; 79% expected that to happen in January 2008.
There is some difference of opinion among the RIAs on how long it will take to get their clients’ portfolios back up to the levels they stood as of September 1, 2008: 55% say it will take as long as three years, but an additional 35% expect it to take up to 5 years to recover.
Noting the “complete bifurcation” of the findings as to when the recession will end, Clark says “you have to suspect that people who think the recession is going to last until 2010 are also thinking its going to take longer for portfolios to recover.” He then points out the 35% of respondents who “are getting ready for cash to come back into the market, getting ready to reinvest, whereas 46% are going to maintain their current levels of investments, but in a mix that now includes arguably much more in CDs, T-bills, and fixed income.” There’s another investment choice that’s growing in popularity, Clark reports, “ETFs are becoming a huge vehicle of choice for this group.”
As for clients, the advisors reported that 45% of the clients they’ve gained over the prior six months came from wirehouses; those clients cited a loss of trust and a desire for more personalized advice as their primary reasons for leaving, though 12% said they moved because they were concerned over their prior advisory firm’s subprime mortgage exposure.
Clark points out one other notable survey finding on clients. The advisors, he says, are “spending 80% more time with clients, educating them, and this is a group that already spends a large amount of time with clients, so you can only imagine the total amount of contact they’re having” with clients.