RJ and Makay

Schwab recently released an Independent Advisor Outlook Study focused on RIAs. 1200 RIAs were surveyed. The survey was conducted by Koski Research.  RIAbiz writer, Brooke Southall, shares these points about the findings:

1. Social media isn’t very popular. Of the 1,200 RIAs polled for the semi-annual survey, only 13% consider themselves “eager learners.”  The majority, 41%, say they are “tentative users”, and the remaining 34% call themselves “skeptical users.”  If they used social media, most RIAs in the study (42%) chose LinkedIn for professional usage. Even though 45% of RIAs surveyed use Facebook, only 6% leverage it professionally, compared to 39% who use it personally. Even less popular is Twitter, with just 3% of RIAs reporting that they use it professionally, and only 7% saying they use it personally. Blogging isn’t popular either. Only 14% of RIAs say they keep a public journal, and of those, 8% blog professionally and 2% see their blogging as both personal and professional. These attitudes back up findings from another study on social media and RIAs by Pershing-Aite, and may be reviewed in 9 Things to Know About the “truth” Concerning RIA use of Social Media.
2. After the economic and market downturn of 2008-2009, most advisors say their main preoccupation was keeping existing clients, and some spent a lot of time holding clients’ hands, but now only 30% reported that clients needed reassuring in July, versus 49% in January and 43% last July. An earlier Schwab study suggests that the emphasis on keeping clients was really just a way to avoid proactive marketing (see: Schwab study shatters three RIA myths).
3. The current securities market environment and outlook hasn’t been considered good for some time, which may explain why 71% of advisors say it is now “difficult” to achieve client goals, up from 58% in January.
4. In an attempt to better achieve the goals, RIAs say the number one category that they will invest in is large capitalization companies in emerging markets. The number one category to be cut back is international small cap in developed countries.
5. During the past six months, 92% of RIAs polled won new assets, with 41% coming from full-service brokerage firms, 34% coming from other financial professionals and 25% were do-it-yourself investors. This finding is like others in studies about the same subject, including where breakaway brokers come from. It is also helpful to learn that wire house clients perceived greater value with RIAs.
6. The number one reason advisors say clients would leave a full-service firm to join an advisor is that the client wanted more personal attention. This is according to 64% of RIAs surveyed. The reason in second place, with 62% of RIAs surveyed agreeing, is that the client lost trust in the firm.
7. Advisors are proactively preparing for the near possibility of tax increases, with 52% realizing capital losses to offset expected increases in the capital gains tax. Also, 50% say they are selling investments that have appreciated in value in advance of capital gains tax increases, and 43% are adding tax-free income sources to client profiles. Converting traditional IRAs to Roth IRAs is another tax tactic with 42% of advisors reporting they are using this approach. (See: Look at the benefits but beware the dangers. Of Roth conversions).  Since advisors control so little relating to client returns, they better pay attention to circumstances that are within their control. The survey suggests they are well aware of what those are.
8. In the future, ETFs should get a 25% increase in investments on the part of RIAs, and alternative investments should get 20%
9. All in all, advisors still feel it is a bull market, with 59% finding it “unlikely” that the economy will fall into a double dip recession, and 28% finding it likely. The rest are neutral.

Other Links of Interest:

Nine things worth knowing from Schwab’s newest advisor study (by brooke southall, RIAbiz.com)

Independent Advisor Outlook Study, July 2010 (Charles Schwab)

-RJ & Makay