Advisers Grow Business Despite Market Conditions

A release from OppenheimerFunds said 40% of advisers believe that the stock market has bottomed out. A large percentage (91%) of advisers think the current market crisis is being felt globally, with 61% indicating it will get worse in the U.S. before it gets better. However, the majority (82%) think the current crisis is short-term and will last less than three months to one year.

“While recent fiscal and monetary action has helped to stabilize the financial system, we aren’t in the clear yet,” said Brian Levitt, economist. “It is one thing to prevent a financial crisis and another thing to reaccelerate the economy.”

Market Response

More than half of advisers (53%) say they believe the U.S. dollar will continue to deteriorate. Of those, 89% are advising clients to diversify by adding global exposure into their portfolios, the release said. Almost all (97%) of advisers have recommended to clients that current conditions could be a good buying opportunity in some areas on the market. While attractive investment opportunities might exist, investors need to be selective, Levitt said.

The data suggest that a downturn is expected from advisers: Three-fourths advisers expect to see a losing year every three to five years, and 23% expect to see one every six to 10 years.

About half (49%) of advisers indicated that no one is to blame for the ups and downs of the current market, but one-quarter of the advisers blame banks. Others blame corrupt executives (12%), President Bush and the government (7%), and the Federal Reserve (4%).

Client Activity

Despite the difficult market environment, advisers are not losing clients. Clients are still focusing on the long-term goal of retirement despite any woes in the short-term.

Of those surveyed, 44% reported adding 5 to 10 new clients to their book so far in 2008 and 25% added more than 10. The wealth of this new business is in retirement savings, the release said. Advisers said 93% of their current clients are still saving for retirement, and most of the clients (92%) value diversification.

In terms of what clients are doing with their money specifically, 71% of advisers report that 0 to 5% of clients are taking money out of mutual funds, OppenheimerFunds said. Of the money being taken out, 53% is in the form of exchanges and 47% are redemptions. Most exchanges (30%) were into U.S. equities, followed by money market funds (27%), global equities (20%), other U.S. fixed income (13%), international fixed income (8%), and, lastly, U.S. treasuries (3%).

Levitt said investors should consider opportunities in the large-cap growth sector, which are trading at reasonable valuations and have the ability to grow their business without concerns about credit availability.

What’s Next?

Looking ahead, advisers’ top concerns for the remainder of 2008 are: higher taxes (68%), inflation (67%), and the credit crunch (64%). Also, 49% believe that the election year is contributing to the current financial crisis.