Nation's Pain, Advisors' Gain

Any human be-ings with an ounce of decency normally feel a sense of misgiving when they find themselves poised to benefit from others' misfortunes. Occasionally, though, people can turn misfortunes into opportunity and this is one of those times.

Over the last few months, one economist after another has proclaimed the end of the Great Recession. Some believe there are all sorts of coiled springs poised to reverse razor-thin inventory levels that could propel GDP upward at a 3% or 4% rate in the second half of 2009.

There is one little problem with this scenario: Consumer spending, which represents 70% of total economic activity, remains in a coma.

Even optimistic economists who predict 3% to 4% growth through 2011 concede that consumer spending is unlikely to grow at a rate much above 2%.

Most Americans are taking a long, hard look at their balance sheets, and they don't like what they see. If they wanted to spend, which they don't, it's difficult to see how they'd pull it off. The entire Wall Street machinery that fueled the consumption boom of the last 30 years by securitizing everything from mortgages to credit cards to car loans has been decimated.

That means any expansion will have to be led by exports, investment and government spending, the latter of which has outpaced the overall economy for most of this decade.

If you are wondering how much longer government can sustain its above-par growth rate, you are not alone. One would think it will reach the same inflection point that consumer spending has, causing a shop-and-spend-until-you-drop society finally to drop for good.

Still, virtually everyone agrees that Americans will face no choice but to increase their savings rate for at least several years, muting consumption for the first time in decades. And as society ages, it's possible the move away from spending could be semipermanent.

This secular shift toward increased savings and frugality could have profound consequences in a variety of areas, none of them more obvious than the advisory business. While consumer products companies may find themselves hamstrung, the advisory business should flourish.