Advisers sticking with equities, survey finds

More than half of registered investment advisers responding to a recent survey believed that the market slide made it a good time to invest in stocks, and 93% said their clients were not cashing out their investments.

The survey was sponsored by the institutional custody arm of Omaha, Neb.-based TD Ameritrade Holding Corp. and was conducted Jan. 4-13. The results resembled those in a similar polling conducted in the fall by Fidelity Investments’ clearing arm, National Financial Services LLC of Boston.

In that survey, three out of four respondents forecast that the Standard & Poor’s 500 stock index would rise an average of 15% in 2009, and 90% said the index would be flat to positive.

The TD-sponsored survey — of 506 RIAs contacted by phone — found that 43% recommended that clients not change their equity allocations, and 31% said they had put more of their clients’ money into the stock market. Only 14% had liquefied their clients’ stock investments, and just 3% had removed all or most of their clients’ assets from stocks.

“A majority of advisers remain steadfast and continue to follow their clients’ investment plan, even in the midst of unprecedented market volatility,” Brian Stimpfl, managing director of advisor advocacy and industry affairs at Jersey City, N.J.-based TD Ameritrade Institutional, said in a statement.

The TD survey, however, did find that 53% of respondents had in-creased their client’s cash investments, and 43% had added more in fixed income. (The move into cash, according to some RIAs interviewed by InvestmentNews, is a good reason to invest in equities on the theory that the stagnant cash will eventually be reinvested in the stock market.)

The Fidelity survey found that 21% of respondents had moved client assets into what they considered safer investments, and 7% into more-aggressive investments.

To address client concerns about current market conditions, many advisers are increasing their contacts with clients, according to the TD survey. It found that 41% had stepped up their outreach to the end of encouraging clients to stay the course with their investments.

The survey may understate how much harder advisers are working to calm jittery clients, several RIAs said.

“The one thing clients say they want most from us is to be more proactive in communicating with them,” said Scott Roulston, chief executive of Fairport Asset Management in Cleveland. He said his team is working much longer hours and on weekends, and re-cently held its first conference call for clients.

“The focus has shifted from more-traditional investment analysis to financial planning discussions about their short-term versus long-term needs. We don’t need to talk about the markets as much, because everyone knows what’s happening there.”

Tom Orecchio, who oversees about $350 million of client assets at Modera Wealth Management in Old Tappan, N.J., said his staff has been on the phone every day with clients in the past few months.

“In this environment, communication is key,” he said. “We’re reminding them not to plan the next 20 years of their life based on the here and now, just as we did when things were moving in a different direction during the Goldilocks economy.”

Mr. Orecchio said it’s hard to generalize about across-the-board reallocations. His firm’s trading volume has soared as it has reallocated portfolios and harvested cash, but he noted that it’s very difficult to get investors in this environment to increase their allocations to stock. “It can work for younger people who are working, but it’s tough for those who are retired and can’t replenish their losses. We have not made huge changes to stock allocations.”

Unlike the generally upbeat market outlook noted in the Fidelity survey — of 1,200 brokers and advisers reached by phone in October and November — RIAs in the TD Ameritrade survey were more cautious. The latter survey yielded widely differing views on overall rates of return, ranging from negative returns to positive results of over 20%.

The TD survey was conducted by Maritz Inc., a St. Louis-based market research firm. The margin of error in the survey was plus or minus 4%, meaning that in 19 cases out of 20, answers from 506 respondents differed by no more than four percentage points in either direction.

E-mail Jed Horowitz at [email protected].

Related Topics: E*Trade Financial Corp.