Kind of blue: Downbeat advisers telling clients to stash cash

Advisers are positive about their own businesses, but they can’t say the same about the markets or the political landscape.

Three-quarters of the advisers surveyed in August in Charles Schwab & Co. Inc.’s semiannual survey of independent advisers said their assets under management had grown over the past four years.

What’s more, 55% said the profitability of their own firms had increased, and 37% are hiring employees. But eight out of 10 say the election is affecting them or affecting clients, and 88% agreed that political gridlock had worsened over the past four years.

Concerns about unemployment almost doubled, with a third of advisers now expecting an increase in the jobless rate, versus just 18% in the same survey last January. Almost a quarter (23%) are concerned about a double-dip recession, up from 14%.

“We have done surveys prior to elections before, but we’ve … not been in this position before” with interest rates at zero, huge global uncertainty driven by the eurozone sovereign-debt crisis, the fiscal cliff, uncertain tax rates and “arguably the biggest government divide” ever, said Bernie Clark, head of Schwab Advisor Services.

As a result, advisers plan to pare back U.S. stocks and put more into cash compared with January’s survey. Some 34% are bullish now, down from 45%.

Half of advisers think inflation will increase, up from 44% in January.

Not surprisingly, advisers say they are more likely to add to holdings in real estate, passive investments, gold and commodities.

The federal deficit, unemployment and tax reform are seen as the top issues the newly elected president should address.

The study collected opinions of 839 advisers who hold $183 billion in assets in custody at Schwab.

Related Topics: Charles Schwab & Co.