Bearish advisers trim stocks, eye cash

Financial advisers are feeling 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 that their assets under management have grown over the past four years. What's more, 55% said that the profitability of their firms has increased, and 37% said that they are hiring employees. But 8 in 10 said that the election is affecting them or affecting clients, and 88% said that political gridlock has worsened over the past four years. Concerns about unemployment almost doubled, with a third of advisers expecting an increase in the jobless rate, versus just 18% in the same survey in 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 those surveyed said that they think inflation will increase, up from 44% in January. Not surprisingly, advisers said that 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 that the newly elected president should address. The study collected opinions of 839 advisers who hold $183 billion in assets in custody at Schwab. [email protected] Twitter: @dvjamieson