Nail-biting level is high

Although the financial services industry has seen a bit of a recovery, the market for financial advisers may still experience a contraction, according to an AlixPartners LLP survey.

In late August, AlixPartners surveyed 1,000 households across all key demographics, including gender, age, location, education, employment status, income level and ethnicity.

The participants were asked to describe their investment behavior since the financial crisis began, comment on their likely investment behavior over the next three years, and discuss how they will make investment decisions.

Of those responding, 26% said that they don’t plan to invest for the next three years. Another 27% said that, at best, they are “unsure” about investing during that same time frame, and 21% of those in households that earn more than $75,000 a year said that they have stopped investing in stocks and mutual funds entirely.

The results point to a structural contraction of up to 26% in the market for financial services firms and advisers and suggest that financial services companies could be wasting up to 50% of their marketing budgets on those who won’t or might not invest, according to Pierre Buhler and Clarence Hahn, co-leaders of the financial services practice at AlixPartners,

The data also showed a gender gap. Thirty-two percent of female investors — compared with 21% of male investors — said that they won’t invest over the next three years, meaning that male investors are about 50% more likely than females to invest during that time frame.

Erika Safran, a certified financial planner with Financial Asset Management Corp., said she thought that responses based on a “short-term financial event” — the six-month market slump from September 2008 until March — weakened the study’s implications.

“It’s totally understandable that 21% [of households earning more than $75,000] couldn’t tolerate the financial turbulence,” she said. “But if the other 79% of my clients continued their investment course during catastrophic market conditions, that means my marketing strategy is working.”