Independent Investment Advisors Say Frugal Is The New Normal For Affluent Americans, According To Schwab Study

Independent investment advisors see a renewed emphasis on personal financial discipline emerging as the silver lining of the worst stock market downturn since the 1930s, according to Charles Schwab’s most recent survey of independent registered investment advisors.

Charles Schwab is a leading provider of custodial, operational and trading support for approximately 6,000 independent registered investment advisors (RIAs). The semi-annual Independent Advisor Outlook Study (“study”) measures the views of independent RIAs on a variety of topics. More than 1,100 independent investment advisors with more than $252 billion in total assets under management participated in the study between January 19 and January 29, 2010.

Thirty-two percent of advisors who participated in Schwab’s latest study cite “frugal spending habits” as the new consumer behavior that will have the greatest staying power, followed by a “focus on saving money” (26%). In fact, 59 percent of advisors surveyed expect consumer savings to increase during the next six months. Nearly two-thirds of advisors (62%) say that their own clients have been more focused on paying off debt in the current market environment. However, advisors clearly feel that consumers should do even more: the majority of advisors (55%) recommend that American consumers save at least nine percent of their personal income, which is well above the current national savings rate of 4.8 percent ¹.

“Advisors tell us that the pain of the last 18 months may have been the catalyst for some positive behavioral changes regarding saving and personal financial responsibility,” said Bernie Clark, senior vice president and head of Charles Schwab Advisor Services™. “But the recent downturn also made many people realize that they need help and guidance, and advisors can play an important role in helping people achieve their long-term goals.”

Increased Confidence among Advisors and Clients

While recognizing that there is still hard work ahead, advisors feel more confident about achieving their clients’ investment goals. Today, 57 percent of advisors say that achieving client goals will be “very or somewhat difficult,” compared to 84 percent who felt that way a year ago. Investment advisors also believe that their clients need less reassurance now, saying that one-third (31%) needed reassurance during the last six months, compared to 49 percent in January 2009. However, clients are still hungry for more services and are asking for more support on basics such as financial planning (56%), tax planning and accounting services (38%), and general education on investments and finance (38%).