A NEW survey sheds light on the growing independent investment advisor business in the United States and finds that these advisors have little interest in small-cap stocks and prefer large-cap international equities, exchange traded funds (ETFs) and large-cap domestic stocks.
The Charles Schwab Winter 2010 Independent Advisor Outlook Survey was completed by more than 1,100 advisors with with more than $252 billion in total assets under management custodied at Schwab. The average advisor in the survey has just over 300 clients whose average age is about 60. Half of their clients have accounts of less than $1 million, with a mean account size of $1.48 million.
The study also finds that consumers are continuing to leave bulge-bracket brokerages in favor of the estimated 33,000 registered independent investment advisors (RIAs) in the U.S., with 92% of advisors saying they won new clients in the last 6 months.
Interestingly, 46% of these new clients were previously served by full-service wirehouse advisors, and 65% of advisors say new clients moved because they had “lost trust” in their previous advisor.
Fully 86% of advisors surveyed say being independent gives them an edge over full-service brokerage advisors, while 83% say their role as a fiduciary helps them win new business.
ETFs, large-cap international stocks favored
ETFs are the preferred investment vehicles for advisors surveyed, and 36% plan to invest more in ETFs during the next six months. Internal Schwab data indicates that more than 70% of the 6,000 advisors who custody assets with Schwab are using ETFs.
To achieve additional ETF allocations, advisors say they will pull mostly from cash (37%) and mutual funds (33%). After ETFs, commodities ranked second in popularity (18%), followed by mutual funds with hedging strategies (17%), precious metals (14%), REITs (13%), real estate (11%) and separately managed accounts (11%).
Following a trend first seen in July 2009, advisors are continuing to gravitate toward large-cap equities — particularly international large-cap. One-third say they plan to invest more in emerging market large-cap stocks, while another 28% say they intend to invest more in large-cap stocks from developed markets.
Just 26% expect to increase their investments in U.S. large-cap stocks and only 16% plan to increase investment in U.S. small-caps.
Meanwhile, only 16% plan to invest more in fixed income, compared to a high of 42% in January 2009. About 35% of advisors expect to invest less in cash, and only 10% plan to invest more, compared to a high of 28% in January 2008.
The complete survey report can be downloaded at http://www.aboutschwab.com/media/pdf/advisor_outlook_10.pdf
Dominic (bio & disclosures) is IR Web Report‘s founder and an online investor relations consultant. He advises leading public companies and investor relations service providers worldwide on using the web for disclosure, engagement and profile building. You can contact him via the contacts page.
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