Schwab: Investors 'Cautiously Optimistic' About Market Outlook

January 21, 2004 ( - A majority of investors are optimistic about the outlook for the financial markets heading into the new year, but looking back on the past three years, many are planning a more cautious approach.

More than eight out of 10 (82%) investors polled by Charles Schwab & Co., Inc describe themselves as optimistic and the same number agree that even with declines in the broader markets prior to 2003, they “still believe in investing.”   This in turn leads nearly half (46%) to say they are “very optimistic” about the market outlook for the next three years and the same number plan on increasing their investments this year, according Schwab’s study of 515 investors with at least $100,000 in investable assets.

However, investors are not planning on leaping in head first, as most look at the past three years as reason to be cautious.   Sixty-six percent of the respondents described themselves as “cautious” rather than “confident,” and 42% rate it “extremely” or “very” important they manage their investments differently.  

Generally, nearly half of the investors (49%) plan on being more involved in managing their money today than they were previously, while 33% said they are specifically more cautious about their abilities to manage their investments.   Whereas only 43% of those sampled said they were “extremely or very involved” in their investments during the past three years, 57% said they are “extremely or very involved” today.   Additionally, 31% of investors are more likely to seek out professional investment advice and guidance.

“We see these responses as strong evidence that investors, while chastened by the sting of the market’s downturn, still firmly believe in the long-term benefits of investing and in their ability to harvest those benefits,” Daniel Leemon, Schwab’s chief strategy officer, said in a news release.   “We’re also heartened by the fact that they want to make changes moving forward – it indicates that investors are savvy, have thought about their wants and needs, and are eager to make improvements in the new year.”

However, while nearly three-quarters (74%) of respondents said they considered it very important to have available “excellent tools and services to make decisions” on their own, only 60% said they were very satisfied with the tools and services currently available to them.

Broker Relationship

Schwab also probed into what investors consider an “ideal broker/financial advisor relationship.”   Overall, the most important characteristic of an ideal partnership was working with “someone you trust,” cited by 87% of the survey’s pool.   At the same time, many investors must not consider their current situation ideal, as only 68% say they are satisfied with how trust is embodied in their current advisor.  

The discrepancy between what investors want and what they have did not stop with trust.   While 82% feel it is “very important” to work with “someone who has a comprehensive knowledge and understanding of the marketplace,” only 65 percent are very satisfied with their current relationship.   Additionally, the same number (82%) said it is “very important” to work with “someone who understands and respects the level of involvement you need,” yet only 60% said their current advisor or firm embodies this trait.   Investors also cited a slight disconnect in:

  • “Someone who is focused on understanding your individual financial needs” is very important to 79% of respondents, but only 53 % are very satisfied with how well their current advisor or firm understands their needs.
  • “Someone who ties your investment strategy directly to personal life goals” is very important to 74% of respondents; yet only 53% say they are very satisfied with their current situation.

Leemon, though, sees opportunity in the separation between what investors want and what they have.   “Quite frankly, though the results show some dissatisfaction on the part of investors, we look at these results as good news,” said Leemon in the release.   “Now that investors have new attitudes and higher expectations of both themselves and their financial service providers, we welcome the opportunity to address these unmet needs.”

Overall, investors are looking for more from their financial advisor; mostly because they feel as though they are already have too much on their plate.   In fact, citing work and home commitments, one third (34%) said they still don’t have the “time and energy” needed to manage their investments.