Recession Over? Tell That to Advisers

Jessica Toonkel Investment News September 23, 2010

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Survey reveals most advisers don't feel the economy has perked up – despite what the NBER says; ‘effects will linger for months and years to come'

By Jessica Toonkel

September 22, 2010 1:03 pm ET

The recession technically may be over, but financial advisers and their clients are still feeling the pain, according to a survey of 649 financial advisers conducted by InvestmentNews.

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On Monday, the National Bureau of Economic Research said that the recession technically ended in June 2009, a pronouncement that made some advisers laugh out loud.

“For the rest of the day, I would joke to every client I saw that, ‘Hey, the recession is over,' and start laughing,” said Malcolm A. Makin, president of Professional Planning Group, which manages $650 million in assets. “The recession may have technically ended in the summer of '09, but the effects will linger for months and years to come.”

Seventy-four percent of advisers surveyed said that they don't feel that the recession is over. Almost half of advisers said that their clients' financial situation is about the same as it was a year ago. (Click here for the full results.)

Sixty-two percent of advisers cited economic uncertainty as the most significant factor contributing to clients' reluctance to invest. With unemployment still close to 10%, advisers said that even their clients who are gainfully employed or retired are feeling the psychological repercussions of hearing about layoffs and people out of work.

“I work in one of the most affluent counties in the country — Marin County [California] — and my clients are affluent, they aren't out of jobs, but they keep hearing abut the 10% unemployment rate, and it's really getting to them,” said Nancy Caton, an independent adviser with $166.7 million in assets under management.

Eighteen percent of advisers cited stock market volatility as the primary factor why clients are reluctant to invest, while just 9% cited uncertainty about tax rates.

Most advisers (81%) said that just having the news out there that the recession is technically over won't help them coax clients back into the markets.

“It takes a lot more than some think tank in D.C. telling us that the recession is over,” said Joseph LaScala, chief executive of Acumen Investment Services, an affiliate of Paulson Investment Co. Inc. “Clients aren't just going to start being confident again.”

Overall, advisers think that President Barack Obama could be doing a lot more to help the situation. Forty-five percent of advisers surveyed gave him a grade of F on his efforts to address the economy, while 23% gave him a D.

Just 4% gave Mr. Obama an A.

“There is no confidence in the policies being put forward,” said Michael Black, a financial adviser with Michael Phillips Black Wealth Management, which has $100 million in assets under management. “Collectively, the uncertainty is paralyzing people from making decisions.”

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Recession Over? Tell That to Advisers

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