The recession's over? Don't make me laugh

75% of advisers surveyed say economy isn't much better

Sep 26, 2010 @ 12:01 am

By Jessica Toonkel

The recession ended in June 2009, the National Bureau of Economic Research announced last week, but 74.5% of the 665 financial advisers who responded to an InvestmentNews online survey don't feel much like celebrating.

Almost half of the advisers who took part in the survey, which was conducted last Tuesday through Thursday, said that their clients' financial situations are about the same as they were a year ago.

Sixty-one percent of advisers cited economic uncertainty as the most significant factor contributing to clients' reluctance to invest. Many investors are sitting on the sidelines until they get a better handle on the economy, the markets, taxes and the political situation with the upcoming midterm elections, advisers said in interviews.

“Once you get some certainty — and I do think we will get that in the next few months — people will start to feel like the recession is over,” said Douglas K. Flynn of Flynn Zito Capital Management LLC, which manages $265 million.

With the unemployment rate close to 10%, advisers said that investors are very cautious about the economy.

“It's all about jobs,” said William E. Koehler, chief investment officer of ETF Portfolio Partners Inc. “It won't feel like we are out of a recession until the unemployment number gets better.”

Even affluent investors who are gainfully employed or retired are worried about the unemployment numbers, and that is causing them to be cautious about investing, advisers said.

“I work in one of the most affluent counties in the country — Marin County [Calif.] — and my clients are affluent, they aren't out of jobs; but they keep hearing about the 10% unemployment rate, and it's really getting to them,” said Nancy Caton, an independent adviser with $166.7 million in assets under management.

Eighteen percent of advisers cited stock market volatility as the primary factor in clients' reluctance to invest, while only 9% cited uncertainty about tax rates.

Most advisers — 81% — said that just having the news out there that the recession is over won't help them coax clients back into the markets.

At least one adviser said the bureau's pronouncement had provided some comic relief.

“For the rest of the day, I would joke to every client I saw, "Hey, the recession is over,' and start laughing. The recession may have technically ended in the summer of "09, but the effects will linger for months and years to come,” said Malcolm A. Makin, president of Professional Planning Group, which manages $650 million in assets.

“It takes a lot more than some think tank in D.C. telling us that the recession is over,” said Joseph LaScala, chief executive of Acumen Investment Services, an affiliate of Paulson Investment Co. Inc. “Clients aren't just going to start being confident again.”

Overall, advisers think that President Barack Obama could be doing a lot more to help the economy.

Forty-five percent of those surveyed gave him an F on his economic efforts, while 23% gave him a D. Only 4% gave him an A.

“There is no confidence in the policies being put forward,” said Michael Black, a financial adviser with Michael Phillips Black Wealth Management, which has $100 million in assets under management. “Collectively, the uncertainty is paralyzing people from making decisions.”

Despite advisers' concern, many of those interviewed said that they are optimistic that the markets will pick up in the coming months.

“I think most people are slowly coming around,” said A. Scott White, an adviser with Scott White Advisors, which manages $65 million in assets. “They started over the cliff's edge, and they didn't fall off.”

E-mail Jessica Toonkel at


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