Frugal the New Normal for Wealthy, Schwab Survey Shows

Wealthy investors will continue to be careful with their money, Schwab found in a survey of 1,100 independent advisers with more than $252 billion in assets under management, the latest installment in its semi-annual Independent Advisor Outlook Study.

Thirty-two percent said “frugal spending habits” will be the new consumer behavior with the greatest staying power. This jibes with similar reports from Booz (see MME, Feb. 24, 2010, “Consumers Can’t Shake Frugality, Booz Survey Shows”) and Allianz (see MME, Feb. 10, 2010, “New 6% Savings Rate to Funnel $800 Billion to Investments Annually”).

In the Schwab survey, the emphasis on frugality was followed by a “focus on saving money," cited by 26% of the advisers. All told, 59% of advisers expect consumer savings to increase in the next six months, and 62% said their clients are more focused on paying off debt.

That said, 55% of the advisers believe the current national savings rate of 4.8% should be at least 9%.

“Advisers 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.

Perhaps because of their clients’ new sensitivity to saving, only 57% of advisers said achieving client goals will be “very or somewhat difficult,” down significantly from 84% who were pessimistic about this a year ago. Also, 31% of advisers said their clients need reassurance, down from 49%, and 65% expect the S&P 500 to rise in the next six months.

However, Clark urges advisers to continue to be conscientious about working with their clients: “We know from this study that advisers have spent considerable time over the past year communicating with their clients, but while many advisers say they are in more of a ‘back-to-business’ mode, there is clearly a continuing need for advisers to play a role as educators for their clients.”