How Financial Advisers Are Shifting Investments

Here is what financial advisers are recommending to clients for the rest of 2010.

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Over a quarter of financial advisers plan to invest more in U.S. and emerging market large cap stocks in the next six months. Some financial advisers also intend to decrease their fixed income and cash investments, according to a Charles Schwab and Koski Research survey of 1,199 investment advisers whose assets are administered by Schwab. Here is how the financial advisers plan to shift investments for the remainder of 2010.

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International large cap equities in emerging markets. Over a quarter (28 percent) of financial advisers plan to shift client assets into international large cap equities in emerging markets, the most interest expressed among any asset class. However, 16 percent of financial advisers plan to reduce or eliminate these emerging market investments from client portfolios.

U.S. large cap equities. Interest in U.S. large cap equities is also strong, with 27 percent of financial advisers planning to invest more in these funds. Just 14 percent of financial advisers would recommend pulling your money out of U.S. equities.

International small cap equities in emerging markets. Financial advisers are currently giving international small cap equities in emerging markets mixed reviews, with 20 percent of advisers planning to invest more and 24 percent intending invest less or nothing.

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Fixed income. Shifts to fixed income investments peaked in January 2009, when 42 percent of financial advisers moved some of their money into this asset class. However, only 19 percent of the advisers surveyed plan to further increase their allocation to fixed income products and 22 percent now plan to invest less.

U.S. small cap equities. Some 21 of financial advisers plan to reduce or eliminate their allocation to U.S. small cap equities, while 16 percent plan to increase it.

International large cap equities in developed markets. Slightly more financial advisers plan to reduce or eliminate their investment in international large cap equities in developed markets (22 percent) than increase it (15 percent).

Cash. Shifts to cash investments peaked in January 2008. But now 28 percent of financial advisers plan to reduce the amount of cash held in their portfolios and only 14 percent intend to choose more cash investments.

[See How to Tell if You Have a Good 401(k) Plan.]

International small cap equities in developed markets. Perhaps the least popular asset class in this year’s survey is international small cap equities in developed markets. Some 21 percent of financial advisers plan to reduce the amount they allocate to this investment and another 6 percent plan to completely eliminate these funds from their portfolio. Just 10 percent of advisers expressed increasing interest in small cap equities in developed markets.

However, these asset tweaks appear to be doing little to increase the confidence of individual investors. Some 30 percent of financial advisers say they have had to reassure clients that they will be able to achieve their investment goals over the past 6 months, up from 12 percent in July 2007. Half of the financial advisers say their clients are less optimistic about being able to retire on time than they were last year.