Schwab Study Finds High Net Worth Investors Confident in Their Advisors Despite Feeling Less Optimism About Markets and Economy Than Independent Advisors

Independent investment advisors report more clients needing reassurance about markets; say evidence of a recovery and end to political gridlock would boost investing confidence

SAN FRANCISCO--()--High net worth investors are not as bullish about the markets and the economy as independent advisors, but nonetheless have confidence in their advisors’ ability to meet their investment goals in the current environment, according to two new companion surveys released today by Charles Schwab Advisor Services. The first, the 11th semi-annual Independent Advisor Outlook Study, surveyed almost 900 RIAs representing $204 billion in assets under management, and found that 45 percent of independent advisors are bullish about the market in the six months. However, a second, first-time survey of 504 high net worth (HNW) investors found that only 29 percent are bullish about the market.

HNW investors however are confident in their advisors’ ability to meet their investing goals in the current market – only one-third (32%) believe it will be difficult for advisors to do so, and 25% feel it will be easy. Where investors do perceive that there are barriers to achieving primary investment goals, they point to the broader investing environment – not to the advisor specifically. The largest perceived barrier is a low return on investments in this market (57%), followed by market losses (37%). Conversely, almost three out of five (59%) independent advisors say they feel it will be difficult to meet their clients’ investment goals.

“It matters less whether clients are optimistic or pessimistic and more that they are realistic about the outcomes they are working towards. This is where advice really takes center stage – providing perspective and expertise within the context of an individual client’s long-term goals, which is what many RIAs do so well,” said Bernie Clark, executive vice president and head of Schwab Advisor Services. “Investors are bombarded daily with market and economic information, and advisors play a valuable role as trusted guides in helping clients separate the noise from the news and translating that information into tailored strategies that will help clients meet their long term goals.”

Women are key decision-makers in six of ten client relationships

For the first time, the Independent Advisor Outlook Study asked RIAs about the role of women in client relationships. According to surveyed advisors, women are part of decision-making around finances nearly 60 percent of the time, either as the primary or sole decision-maker (21%) or as part of a couple making decisions jointly (38%).

With regard to meeting with individual members of a couple separately, 79 percent of advisors feel it is not important at all, 13 percent consider it somewhat important and 8 percent see it as extremely important.

More than half of advisors do not think it is important for their firm’s advisors to match the demographic profile of their clients, but more than one-third consider it somewhat important (31%) or extremely important (4%). Almost half of all advisors report that there are no female advisors working at their firms.

Outlooks - markets, economy, investment choices

Advisors see more good news across broader economic trends over the next six months in comparison to the investors surveyed. Close to one-third (31%) of HNW investors think unemployment will increase, versus only 18 percent of advisors; 27 percent of HNW investors believe there will be another or a “double dip” recession in comparison to only 14 percent of advisors; and 60 percent of HNW investors see inflation increasing versus only 44 percent of advisors. In addition, advisors are twice as likely as HNW investors to believe energy prices will go down (16 percent versus 8 percent). The two groups are in sync on expectations for an increase in consumer spending (57% each) and that consumer savings will increase (33 percent for advisors and 30 percent for HNW investors).

While 45 percent of independent advisors are currently bullish on the market, up from 37 percent in the same study six months ago, they have not yet regained the 56 percent bullish level seen a year ago. More than two-thirds (67%) of advisors believe the S&P 500 will increase, up from 58 percent in the previous study but still below the 77 percent high reached a year ago.

Independent advisors plan to invest more in equities the next six months. Forty-one percent of advisors plan to invest more in domestic large cap, versus 32 percent six months ago, representing an all-time high for the Independent Advisor Outlook Study. Interest in domestic small cap is also up significantly, almost doubling over the past six months from 12 percent to 23 percent in the current study.

When asked about the investment vehicles they plan to invest in more in the next six months, independent advisors’ interest in ETFs has increased (34% compared to 26% six months ago), while interest in foreign currency dropped to 4% from 8%.

Independent advisors continue to see information technology (48%) and energy (37%) as leading market sectors over the next six months, although energy saw a drop of six percentage points from six months ago. Financials saw the most significant uptick in expectations for performance, with 27 percent of advisors indicating they expect this sector to perform best in the next six months versus 17 percent six months ago.

Demand for advice continues to grow

Over one-third (37%) of HNW investors say their desire for investment advice during the past four years has increased. When asked what words first come to mind about working with a financial advisor, investors stated knowledge (71%), advice (59%), investment performance (49%), trust (48%) and service (47%).

“High net worth investors are looking for a lot more from advisors than just performance,” said Clark. “Advisors who provide unbiased advice and have rich, honest dialogues with their clients about individual investment goals and challenges in the context of the broader investing landscape are best positioned to capitalize on this continued trend towards advice and to successfully grow their practices.”

What is driving investors to seek more advice? High net worth investors say they are worried about headline-grabbing risks at home and abroad, such as Federal government deficits (58%), political gridlock (57%), the economic crisis in Europe (54%) and uncertainty about taxes and inflation (41% and 37% respectively).

RIAs concur that clients are seeking support and guidance around these topics. Nine in ten independent advisors say they have discussed the economic crisis in Europe with their clients, and eight in ten have discussed Federal government deficits. Moreover, clients’ needs for reassurance have increased overall. Advisors indicated that in the past six months, over a quarter of their clients (27%) needed reassurance that they would meet their investment goals, which was up slightly (four percentage points) from six months ago when this study was last conducted and also year-over-year. Advisors also note that evidence of a market recovery (35%) and an end to political gridlock (30%) would boost investor confidence.

Almost all advisors (93%) reported gaining new clients over the past year. The biggest source of these new clients has been investors leaving full-service brokerage firms (39%). Other sources for new clients were DIY investors at 20 percent, banks at 10 percent and IBDs at 13 percent.

Additional Insights

The two surveys also yield insights on a number of other fronts related to the perspectives of independent investment advisors and HNW investors, including:

  • Primary investment goals and investment strategies from both the advisor and HNW investor point of view
  • Working relationships – HNW investors’ perspectives on the benefits of an advisor and RIA perspectives on why investors choose to work with them
  • Finding an advisor/getting referrals
  • Working with families and the next generation

These, and other detailed findings can be accessed in the full report available at www.aboutschwab.com/press/research/advisor_research.

About the Independent Advisor Outlook Study

The Independent Advisor Outlook Study, conducted for Schwab Advisor Services by Koski Research, has a 3.4% margin of error. Koski Research is not affiliated with nor employed by Charles Schwab & Co. Inc. Detailed findings can be found at www.aboutschwab.com/press/research/advisor_research. All data are self-reported by study participants and is not verified or validated. Advisors participated in the study between January 24 and February 3, 2012.

About the High Net Worth Investor Study

The High Net Worth Investor Study, conducted for Schwab Advisor Services by Koski Research polled 504 high net worth investors between the ages of 34 and 80 with a minimum of $1 million in investable assets and was conducted using an online panel of general investors. In reading the results of this study, the general rule of thumb is that the margin of error is about 4.4% on the total sample and greater when looking at results for specific subgroups.

Koski Research is not affiliated with nor employed by Charles Schwab & Co., Inc. Detailed findings can be found at www.aboutschwab.com/press/research/advisor_research. All data is self-reported by study participants and is not verified or validated. Individuals participated in the study between January 26 and February 3, 2012.

About Charles Schwab

The Charles Schwab Corporation (NYSE:SCHW) is a leading provider of financial services, with more than 300 offices and 8.6 million active brokerage accounts, 1.52 million corporate retirement plan participants, 801,000 banking accounts, and $1.83 trillion in client assets as of March 31, 2012. Through its operating subsidiaries, the company provides a full range of securities brokerage, banking, money management and financial advisory services to individual investors and independent investment advisors. Its broker-dealer subsidiary, Charles Schwab & Co., Inc. (member SIPC, www.sipc.org), and affiliates offer a complete range of investment services and products including an extensive selection of mutual funds; financial planning and investment advice; retirement plan and equity compensation plan services; referrals to independent fee-based investment advisors; and custodial, operational and trading support for independent, fee-based investment advisors through its Advisor Services division. Its banking subsidiary, Charles Schwab Bank (member FDIC and an Equal Housing Lender), provides trust and custody services, banking and mortgage services and products. Investment products offered by Charles Schwab & Co., Inc. are not insured by the FDIC, are not deposits or obligations of Charles Schwab Bank, and are subject to investment risk, including the possible loss of principal invested. More information is available at www.schwab.com and www.aboutschwab.com. (0412-2831)

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Opinions expressed by survey participants reflect market and other conditions at the time of the survey, are subject to change, and are in no way a prediction, projection, or guarantee of future performance. The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personal investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy in light of his or her own personal situation before making any investment decision.

Investors should carefully consider information contained in the prospectus, including investment objectives, risks, charges and expenses. You can request a prospectus by calling Schwab at 800-435-4000. Please read the prospectus carefully before investing.

© 2012 Charles Schwab & Co., Inc. (Member SIPC) All rights reserved.

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Contacts

Charles Schwab
Susan Forman, 415-667-0494
Susan.forman@schwab.com
or
The Neibart Group
Sarah Gormley, 718-875-2122
sas@neibartgroup.com

(Graphic: Business Wire)

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Contacts

Charles Schwab
Susan Forman, 415-667-0494
Susan.forman@schwab.com
or
The Neibart Group
Sarah Gormley, 718-875-2122
sas@neibartgroup.com