RIAs cool on economy, markets

Both advisers and their clients have become more conservative as the markets and economy have struggled. Only 37% of advisers are now bullish on the stock market, compared with 56% last January, according to a survey Schwab Advisor Services released today. Cash, fixed income, gold and foreign currencies are the only four asset classes in which advisers are likely to invest more. Most, 52%, still think a double-dip recession is unlikely, but that's down from 59% in January. And just over a third (36%) of advisers think consumer spending will increase, down from 68% last January. Advisers expect defensive industry sectors — health care, utilities and consumer staples — to perform best in the next six months. The results are a “bit of a reversal” from the higher confidence levels seen at the beginning of the year, said Bernie Clark, head of Schwab Advisor Services. The study, which surveyed 911 advisers who custody assets at Schwab, was conducted from July 26 through Aug. 5, during the debt ceiling debate. Advisers polled after the debt agreement was reached July 31 were more bearish on the market and more likely to believe another recession was coming. Despite the challenges, clients seem to be hanging in there. Advisers reported that in the past six months, just 23% of clients needed reassurance about reaching investment goals. That number is unchanged from January and has been declining since January 2009. Clients appear to understand that they're in a complex market environment, Mr. Clark said. Furthermore, 91% of advisers said they brought in new assets in the past six months. The biggest source of new clients for Schwab advisers are wirehouses (36%), but 25% of new clients were former do-it-yourself investors, up from 22% last January. Advisers are getting more referrals from do-it-yourself investors who have become clients of independent registered investment adviser firms, Mr. Clark said.