SAN FRANCISCO, March 5 /PRNewswire-FirstCall/ -- Schwab Institutional,
a leading provider of custodial, operational and trading support for more
than 5,000 independent investment advisors, today released the findings of
the Independent Advisor Outlook Study, its new semi-annual survey of
independent investment advisors that measures their views on the
geo-political landscape, economy and investments. According to Cerulli
(Cerulli Quantitative Update: Intermediary Markets 2006), by the end of
2006, there were more than 15,000 RIAs across the country managing nearly
$1.8 trillion of U.S. wealth. Nearly 1400 independent investment advisors
with some $347 billion in assets under management participated in this
study.
Political Sentiment: Despite Political Divide, Investments are Stable
Advisors who participated in the study express strong viewpoints about
domestic political division and global political unrest, but they are
confident their clients' investment portfolios are stable. More than half
of those surveyed (53%) say the domestic political landscape is more
divided following the November Congressional elections; however, a
significant majority also say that neither the recent elections nor further
decline in Presidential approval ratings will have an effect on their
investment decisions in 2007 (76% and 81% respectively). More than half of
advisors (56%) believe the global political landscape will become more
volatile during the next six months, but the majority also say that
potential adverse events abroad will cause minimal impact on their
investment decision-making during the next six months.
Economic Sentiment: Relatively Neutral
Advisors are positive -- but not exuberant -- in their outlook for the
S&P 500: 78% percent of advisors think the S&P 500 will go up during the
next six months, but just 8% of those think it will increase by more than
10%. And they are downbeat on a few key economic indicators: 71% think the
housing market will continue to soften; 45% think inflation will increase;
and 43% think it is unlikely that the U.S. deficit will decrease during the
next six months.
Nearly half of advisors took a neutral stance on achieving client
investing goals in the next six months, with 47% saying it will be neither
easy nor difficult; only one in five advisors feel it will be easy. But
their clients appear to be calm and confident: on average, advisors say
just 15% of their clients needed reassurance about achieving their
investment goals during the past six months and 57% of clients have
realistic expectations about their returns. According to independent
advisors, their clients' top three concerns are: retirement (79%),
financial security for their family (63%), and paying too much in taxes
(47%); less than 10% of advisors report that long-term care and health care
expenses are the top concern for their clients.
"Independent advisors are incredibly steady and sensitive to the needs
of their clients -- objectivity and accountability are in their DNA," says
Deborah Doyle McWhinney, President of Schwab Institutional. "This study is
designed to spotlight their practices and views so consumers can begin to
better understand what makes independent advisors unique and sets them
apart from other purveyors of advice."
Independent advisors provide customized advice and wealth management to
affluent consumers with complex needs. Many of them are their own
proprietors, and according to Cerulli (Cerulli Quantitative Update: Advisor
Metrics 2005), they, on average, serve fewer clients than brokers, have
longer tenures as advisors, and are more likely to hold the Chartered
Financial Analyst(R) designation. McWhinney noted that consumers can learn
more about independent advisors at a new site (http://www.exploreindependence.com)
which includes a free white paper entitled "Investing in More Objective
Advice."
Additional outlook from advisors on financial products, markets and
sectors includes:
* Advisors have an affinity for large cap equities overall: nine out of
ten advisors (93%) plan to maintain or accelerate their investments in
both domestic and developed international large cap equities during
the next six months.
* Advisors are also very enthusiastic about investing in ETFs: The
majority of advisors (75%) invest in ETFs today and half of those plan
to invest more in the next six months.
* Advisors are less enthusiastic about REITs and real estate: 25% of
those who now invest in REITs plan to invest less or discontinue their
investments in the next six months; 17% of those who now invest in
real estate express the same sentiments.
* Hedge funds are being used by more than one-third of advisors, and
one-third of all advisors say that they would be more likely to invest
in hedge funds if there were more SEC oversight; however, 62% of those
who do not currently invest in hedge funds and private equity have no
plans to begin investing in those vehicles during the next six months.
* Advisors think healthcare, information technology, and the financial
sectors will be top performers in the next six months.
* Japan, Hong Kong and Singapore are deemed the top up-and-coming
developed international markets; China and India are cited as the
emerging international markets that will perform best during the next
six months.
Views on economic/fiscal policy include:
* Eight out of ten advisors (80%) approve of Chairman Bernanke's
leadership so far, and more than half (53%) of those surveyed do not
think that the Federal Reserve Board will raise interest rates in the
next six months.
* More than one-third of advisors (35%) would like to see a flat tax
instituted, led largely by Republicans and Independents; Democrats
were more likely to prefer significant reform of the current
progressive tax system over a wholesale change.
Advisor Views on Client Concerns, Portfolios
Advisors were also asked about their new clients, nearly half (49%) of
whom came from full-service brokerage firms last year. Among the findings:
* New clients who had previously worked with brokers typically came in
without investment guideline statements that were aligned with their
financial goals (75%) or appropriately structured estate planning
documents (52%).
* Fully 60% of advisors say that new clients who had previously worked
with brokers had portfolios that showed evidence of performance
chasing.
* The most common problem with the portfolios of these new clients was
an inappropriate risk profile for client goals (40%).
* Other problems cited were ownership of mutual funds with very high
expense ratios (17%), too many proprietary products (16%),
overweighting in one stock (14%), and overweighting in one sector
(13%).
A New Index of Advisor Optimism
An index that measures advisor optimism has been formed from a subset
of questions and has been benchmarked to 100 for the initial wave of the
study. Changes to the index relative to this benchmark wave will be tracked
over time. Based on the underlying set of questions, which focus on
advisors' economic outlook, the results suggest that advisors are currently
neutral. The Independent Advisor Optimism Index is based on 11 questions
from the complete online survey. These questions reflect advisors' outlook
on what will happen in the financial markets during the next six months.
Responses to the questions are given a value of -2 to +2 with 0 as the
midpoint. Each respondent is given an individual score based on the sum of
the values to their responses to these questions. This score is divided by
the number of questions and multiplied by 100 to provide an individual
average score. The index is the average of the individual scores, and this
average is established at 100 for the initial wave.
The Independent Advisor Outlook Study, conducted for Schwab
Institutional by Koski Research in January 2007, has a 2.63% margin of
error.
About Schwab Institutional
Schwab Institutional is a leading provider of custodial, operational
and trading support for independent fee-based investment advisors. This
year marks Schwab Institutional's 20th anniversary serving the independent
investment advisor industry. Since 1987, Schwab Institutional has supported
independent investment advisors by offering support and services to help
grow their businesses and help their clients reach their financial goals.
As of December 31, 2006, client assets custodied with Schwab Institutional
stood at $502 billion. These assets, managed by the approximately 5,000
independent advisor firms Schwab Institutional currently serves, represent
approximately one-third of total client assets custodied with The Charles
Schwab Corporation.
About Charles Schwab
The Charles Schwab Corporation (Nasdaq: SCHW) is a leading provider of
financial services, with more than 300 offices and 6.8 million client
brokerage accounts, 570,000 corporate retirement plan participants, 149,000
banking accounts, and $1.3 trillion in client assets. 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, http://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 Schwab Institutional division. The Charles Schwab
Bank, N.A. (member FDIC) provides banking and mortgage services and
products. CyberTrader(R), Inc. (member SIPC, http://www.sipc.org) is an
electronic trading technology and brokerage firm providing services to
highly active, online traders. More information is available at
http://www.schwab.com. (0207-0351)
Important disclosures:
Please call the Schwab Institutional Mutual Fund Trading Desk at
1-800-757-9847 to order a prospectus. You should carefully consider the
investment objectives, risks, charges and expenses carefully before
investing. The prospectus contains this and other information. The
prospectus should be read carefully before investing.
Investing in REITs may pose additional risks such as real estate
industry risk, interest rate risk and liquidity risk. Hedge funds incur
special risks and may not be suitable for all investors. Foreign securities
incur risks not normally associated with an investment in the US. The
advisor and investor should consult with counsel to determine whether a
particular investment is permissible or suitable for an investor. Sector
funds focus its investments on companies involved in the specific sectors,
which may involve a greater degree of risk than an investment in other
mutual funds with greater diversification.
The views expressed are for general information purposes only and are
not intended to provide specific financial, accounting, tax or legal
advice. Schwab makes no representation about the accuracy of the
information or its appropriateness for any given situation. For further
information, please contact your legal council.
The Standard and Poor's 500 Index is a broad-based measurement of
changes in stock market conditions based on the average performance of 500
widely held common stocks. The index tracks industrial, transportation,
financial and utility stocks; it is a large cap index. The composition of
the 500 stocks is flexible and the number of issues in each sector varies
over time.
SOURCE Charles Schwab
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Related links:
http://www.schwab.com/
CONTACT:
Alison Wertheim of Charles Schwab,
+1-415-636-5812, or alison.wertheim@schwab.com
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