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October 26, 2011 at 06:48 AM
As investors show more interest in fixed-income products, advisors are seeking more access to the often byzantine world of bond buying—but a Charles Schwab study released Wednesday shows that brokerages aren’t sharing enough information about how individual bonds are priced.
While 73% of bond investors want pricing details, 44% can’t figure out how much their bonds cost and 24% don’t understand how their bond firm gets paid, according to Schwab’s online bond investor study, conducted by Koski Research in September.
At the same time, two-thirds of the study’s 510 respondents said it’s “extremely important” that they receive competitive pricing, but they’re resigned to the status quo in accepting the bond prices that firms quote to them.
“Many advisors have grown up in an equities-oriented world,” said Peter Crawford (left), senior vice president of Charles Schwab, in an interview on Tuesday in New York with AdvisorOne. “Now they have more clients who want fixed-income help.”
Baby boomers reaching retirement age represent a large number of investors turning to fixed-income products, of course. At the same time, investors in every demographic are expressing more interest in bonds as a safe haven during this period of market turmoil and uncertainty. The trouble is that the fixed-income segment is notoriously huge, opaque and fragmented, which explains why financial services firms such as Schwab are looking to make bond investing a more efficient and transparent marketplace.
They’re doing it primarily online. Schwab’s offers more than 36,000 new and secondary bond issues from more than 200 dealers on its BondSource platform. The platform includes online resources for registered investment advisors as well as individuals. Much like browsing for merchandise available on Amazon.com, bond-shopping RIAs can compare prices and broker fees by going to www.SchwabAdvisorCenter.com and clicking on a CUSIP.
