Investment Advisors Feel Buoyant, but Investors Don’t Feel the Love

Oct. 11, 2012 –

How confident are investment advisors and investors about the economy?

Well, many investment advisors in Q3 2012 were cheery enough about the future to hire staff while their clients were pessimistic. Those were the salient conclusions from a study by Charles Schwab, its 12th semi-annual “Independent Advisor Outlook Study.”

Investors are faced with a complicated and uncertain economic and investment environment,” said Bernie Clark, executive vice president of Schwab Advisor Services. “It is a veritable mixed bag of risk and opportunity in which only one thing is very clear – the critical need for trusted advice.“

Gloomy investors

The study’s respondents, 830 independent registered investment advisors (RIAs), said their firms are doing well but clients are gloomy about the markets and economy.

Representing an aggregate $183 billion in assets under management, the RIAs also believe Millennials will find it challenging to enjoy the same success as their parents.

While 81 percent of the RIAs say the “American Dream” is possible, only 40 percent feel cheery about the upcoming four years.

Their opinions about impediments to the nation:

  • Client goals will be difficult to accomplish – 63 percent
  • Worries about the federal government debt – 65 percent
  • High unemployment – 61 percent
  • Cost of college education – 60 percent
  • Healthcare costs – 59 percent

“Advisors have a prism of reference that includes both the individual client’s personal and financial picture, and the advisor’s own experience as a business owner in this challenging economic environment,” said Mr. Clark. “This drives their nuanced understanding of both the opportunities and the challenges facing clients, and helps set their advice apart.”

Many advisors are advising clients to focus on cash and real assets, in lieu of large and small cap equities.

Regarding international equities, their preferences include:

  • Canada – 30 percent
  • Australia –23 percent
  • Germany – 19 percent

Compared to other investment, ETFs are the advisors’ favorite.

Presidential campaign

The political battle between Gov. Mitt Romney and President Barack Obama affected 80 percent of the advisor-client relationships. Thirty-three percent of advisors said clients are obsessed about politics and are “staying on the sidelines.” Fifty-nine percent says their client meetings include the election as a topic, but 40 percent stay away from political discussions.

RIAs say the top 3 issues for the president:

  • Reducing the deficit – 61 percent
  • Lowering the unemployment rate – 53 percent
  • Reforming the tax code – 52 percent

“It is by serving clients well in this environment that independent advisors are building lasting value in their client relationships and ultimately in their businesses,” added Mr. Clark.

Advisors’ growth

Since 2008, three-fourths of the advisors say their assets under management have increased, and 55 percent of the firms have higher profitability.

Thirty-seven percent has added staff:

  • Investment management – 48 percent
  • Client service — 47 percent
  • Operations support – 47 percent
  • Business development – 32 percent

RIA business issues

Like most businesses, respondents are on the alert for issues that might impact their firms – the breakdown:

  • Regulatory changes – 49 percent
  • Client demographics – 27 percent
  • Succession planning – 25 percent
  • Firm expenses – 24 percent

Strangely, nothing was said about Wall Street.

From the Coach’s Corner, recommended articles:

“Be fearful when others are greedy. Be greedy when others are fearful.”

– Warren Buffett



Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.


Seattle business consultant Terry Corbell provides high-performance management services and strategies.