What a difference a year makes: Adviser satisfaction rises

While no one is popping champagne corks and raising their glasses to a revival of fortunes, financial advisers are a decidedly less pessimistic bunch this year.

The third annual Industry Attitudes survey conducted this summer by InvestmentNews found that just 20.3% of 454 respondents felt less satisfied with their jobs than a year earlier. That is a big improvement from the level in 2002, when 42% reported less job satisfaction.

Meanwhile, 55.6% of respondents said they were more satisfied with their jobs compared with a year earlier, up slightly from 54% 2002.

“I’m definitely smiling more,” says Stephen Gorman, president of Gorman Financial Management Inc. in Hingham, Mass., which manages about $100 million.

“I’m looking at positive numbers when I run client reports,” he says. “Plus, it’s getting a lot easier to write the cover letters for those reports.”

That said, Mr. Gorman isn’t about to let his guard down.

“Even if we do move into a strong bull market, there’s bound to be setbacks,” he says.

“There will be disappointing earnings and economic reports. There may even be some sort of terrorist attacks.”

Welcome to life after one of the worst bear markets in the history of the stock market. Indeed, much has changed over the past 365 days.

A year ago, the United States was preparing to drop bombs on Iraq. Also, the stock market had barely picked itself up after hitting its Oct. 9 low.

Lawmakers were haggling over the details of a new federal budget, a battle that nearly undermined the Securities and Exchange Commission’s ability to carry out its congressional mandates under the newly implemented Sarbanes-Oxley Act.

Corporate earnings were still mediocre and the overall health of the economy weak.

Fast-forward to today, and it is easy to see why advisers are starting to feel good about getting up in the morning.

The war with Iraq is over, though U.S. soldiers remain on the ground there. The stock market is on a roll, with the Standard & Poor’s 500 stock index, the Dow Jones Industrial Average and the Nasdaq Composite Index up 18.8%, 18.8% and 51.2%, respectively, for the one-year period through Wednesday.

The improved market conditions have helped boost assets at many advisory firms.

About 74.4% of survey participants said their companies’ assets had increased over the previous 12 months. That is up significantly from the level in 2002, when 41% reported an increase.

Of those that posted an increase, assets under management had grown by an average 26.6%, according to this year’s findings.

But 25.6% of the respondents said their firms’ assets under management had actually decreased during the previous 12 months. Still, that was down from 50% in 2002.

The average drop in assets totaled 22.1%.

A better market wasn’t the only reason for asset growth. Incredibly, 100% of the survey’s respondents said they had picked up additional clients over the previous year, up from 68% in 2002.

Another big mood enhancer has been the overall health of the economy. While growth remains fickle, economists are projecting that the nation’s gross domestic product will grow at a healthy 4.5% annual rate this quarter and at 3.9% in the fourth quarter.

“The prospects for an economic recovery have improved significantly over the past year,” says Brian Nottage, a senior economist with Economy.com Inc., a forecasting company in West Chester, Pa.

“I think we’ve turned a corner,” Mr. Nottage says. “The conditions are in place for a sustainable recovery, with business starting to spend again and consumers still holding on.”

Of course, not all advisers are feeling optimistic about their businesses.

Pessimistic realist

In fact, Harlan Shab, a principal at Delta Equity Services Corp., a brokerage firm in Bolton, Mass., remains downright pessimistic – or, as he likes to call it, downright “realistic.”

“The phones aren’t ringing,” Mr. Shab says.

“We’re getting five or 10 orders a day instead of the usual 80 or 90. People have lost their taste for the market.”

Lou Stanasolovich, president of Legend Financial Advisors Inc. in Pittsburgh, which manages $160 million, says one negative byproduct of improving market and economic conditions is that individual investors are starting to slip back into a do-it-yourself mentality.

In the mid- to late 1990s, many investors chose to manage their own portfolios. When the market tumbled, many of those same investors flocked to advisers for help.

Now it seems some are starting to think they can go it alone again.

Mr. Stanasolovich says his firm received 81 “very good” inquiries last year from prospective clients. So far this year, that figure is down to 35.

“People are starting to feel good about themselves again,” he says.

Indeed, the survey’s results bear him out. Some 17.3% of respondents reported hearing from clients less during the year. That was up significantly from 9% a year earlier.

Meanwhile, 31.9% of advisers reported that their clients had contacted them more often, down from 33% a year earlier.

“It’s been a nice breather for us,” says Armond Dinverno, co-president of Balasa Dinverno Foltz & Hoffman LLC in Schaumburg, Ill., of the drop in telephone calls by panic-stricken clients over the past 12 months.

Despite fewer calls, as well as a corresponding drop in new clients, he says his firm’s assets had climbed by 11% year-to-date, as of Oct. 10, not counting market appreciation.

On the flip side, the ever-widening investigations by state and federal regulators into improper fund trading by such companies as Bank of America Corp. in Charlotte, N.C., Bank One Corp. in Chicago, Janus Capital Group Inc. in Denver and Strong Capital Management Inc. of Menomonee Falls, Wis., may be just the catalysts that drive some investors back to advisers.

“Janus has proven to be great PR for people to use us,” says Mr. Stanasolovich, who adds that he has been asked by several clients to move them out of Janus funds in recent weeks.

Despite less-frequent client contact, the majority of advisers are looking forward to brighter days. More significantly, they are positioning clients’ portfolios’ for those days.

In fact, 46.4% of respondents reported increasing their clients’ exposure to stocks this year. That is a huge increase from the 4% who took the same course of action a year earlier, according to the survey.

Meanwhile, 27.8% said their clients had been less exposed to the financial markets, down dramatically from 54% the previous year. And 25.8% said their clients’ exposure to stocks had held steady this year, down from 42% in 2002.

Not surprisingly, clients continue to harbor mixed feelings about the stock market. Asked whether any of their clients had suggested abandoning the stock market altogether over the previous 12 months, 62.5% of respondents answered “yes.”

“The more sophisticated clients are aware that the stock market is the place to be to make money,” says Elliott S. Collins, an adviser at WesCliffe Asset Management Inc. in Denville, N.J.

“At the same time, they are not quite ready to commit 100% yet,” he says. “So we are doing a lot of dollar cost averaging, whether it’s with stocks or mutual funds.”