Advisers' worries about inflation wane

The reality of a sluggish, deflationary economy is sinking in among advisers. In a survey released today of 1,199 advisers who hold assets in custody at The Charles Schwab Corp., only 20% believed the Federal Reserve will raise interest rates over the next six months. In January, nearly 40% said they felt a rate hike from the Fed was coming. And while the January survey showed that half of the advisers expected inflation to increase, now only 28% expect to see higher inflation. Clients are concerned as well, advisers reported. Half of the advisers' clients now doubt their ability to retire on time, according to the survey, and 40% are less optimistic about their investment performance than six months ago. Schwab advisers also said that 47% of clients are reducing expenses. Some 14% of advisers said they're likely to hold more cash now, up from 10% in January. They're also more likely to cut back on developed equity markets overall, and allocate more to emerging-market and U.S. large-cap stocks. Despite the tough times, 92% of adviser respondents said they brought in new assets in the past six months, with 41% of those assets coming from full-service brokerage firms and 34% from other types of firms. The Schwab survey was conducted July 13-23. The firm held $597 billion for more than 6,000 advisers as of June 30.