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Schwab RIA Survey Shows Increasingly Optimistic Advisor Outlook

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Advisors’ optimism rose sharply in the last six months, reflecting their increasingly positive outlook on the economy, investing and client attitudes, according to a Charles Schwab survey of independent registered investment advisors (RIAs) released Monday.

The ninth semi-annual Schwab Independent Advisor Outlook Study reported that 77% of advisors surveyed expected the S&P 500 to rise in the next six months, up from 63% in the previous survey in July 2010.

Schwab’s survey of more than 1,300 RIAs representing $284 billion in assets under management also showed that more than half of advisors, or 56%, classified themselves as stock market “bulls,” while only 10% saw themselves as “bears” over the next six months.

“While there is still uncertainty in the markets and in various parts of the world, independent investment advisors clearly think we are turning the corner economically,” said Bernie Clark (left), executive vice president and head of Schwab Advisor Services, in a statement.

Themes from the survey showed that advisors continued to embrace exchange-traded funds (ETFs) and to focus on large-cap stocks, and their clients also were more upbeat about investing.

ETFs continue to be the investment vehicle of choice for RIAs, with 84% of those surveyed saying they currently use ETFs. Alternative investments ranked second among advisors as the investment vehicle in which they expect to invest more, followed by actively managed mutual funds.

RIAs said they planned to invest more in equities over the next six months, with 39% of advisors likely to invest more in domestic large-cap stocks compared to 27% in July 2010. Twenty-eight percent plan to invest more of their portfolio in

international large cap in emerging markets. More than half, or 56%, of advisors plan to maintain their current investment exposure in China. And as the European debt crisis continues to make headlines, 47% will maintain their current investment exposure to Europe.

Advisors expect the energy sector to perform best over the next six months, followed by information technology and financials. Enthusiasm for the consumer staples and utilities sectors has diminished significantly with only 15% ranking consumer staples and 9% ranking utilities in their top three sectors.

Municipal bonds and actively managed mutual funds also rank high among the majority of RIAs surveyed, with roughly 80% of advisors indicating they now use these investment vehicles for clients.

According to the advisors surveyed, clients are more upbeat entering 2011 as well. Over the past six months, the number of advisors’ clients that needed reassurance that they will achieve their investment goals declined, falling to 23%, down from 30 percent in July 2010 and down from a high of 49 percent in January 2009.

Koski Research conducted the survey for Schwab Advisor Services between January 18 and January 28, 2011. Charles Schwab provides custodial, operational and trading support to more than 6,000 independent RIAs.

In other survey highlights, RIAs had the following outlooks on the economy:

U.S. Treasury yields: 64% think U.S. Treasury yields will increase in the next six months, while only 8% think they will go down.

Bush tax cuts: 85% believe the extension of the Bush tax cuts will have a favorable impact on the stock market and economy overall.

Quantitative easing: 55% say the quantitative easing activities being conducted by the Federal Reserve will have a favorable impact on the stock market and economy overall.

Inflation: 64% think inflation will increase over the next six months, up significantly from just 28% six months ago.

Cost basis reporting changes: Nearly half of RIAs’ clients, or 48%, are unaware of the impact the recent changes to cost basis reporting will have on their tax situation.

Read about the "Anatomy of the Referral,” sponsored by Schwab Advisor Services, at


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