A brave John Philip Coghlan, who earlier this year became head of Charles Schwab's retail business, told advisors at Schwab Institutional's annual conference in Washington, D.C. that if they didn't like what he had to say they could throw the red, ripe tomatoes they had received at the door.

No one lobbed tomatoes, but they hurled their share of criticism.

The advisors' beef? Not "Why is Schwab competing for our clients?" but "Why isn't Schwab referring more clients our way?"

The reason may be less a question of intent than of growing pains. The financial giant is struggling. As its retail investor base contracts and becomes more costly to service, the parent is depending more and more on advisory business to shore up profits. In fact, aspiring affluent and affluent clients each only custody median assets of between $10,000 to $25,000 at Schwab. In contrast, advisors contributed more than 40% of new assets to Schwab by the half-year mark, with average account size hitting the $650,000 mark.

Now advisors, particularly those who are paying $10,000 or more a year to be part of Schwab's Advisor Network, are asking: What are we getting for our money? Some are extremely satisfied, but others report their experience has been uneven.

With 390 Schwab branches in the U.S. (down from 440 a year ago) and just 360 advisors signed up for the Advisor Network to date, one would assume advisors would be getting beaucoup referrals. But that isn't always the case, as planners at the conference pointed out. "I've met with six different branches in the South Carolina area, and they're just unresponsive," one advisor told Coghlan. "Some of the branch managers didn't even attend some of the meetings. What does that tell [the] people they're leading?"

Coghlan, who visited 60 Schwab branches this year, unbeknownst to the employees there (at least initially), admits he had very different experiences and he knows some planners are getting caught in the gears of Schwab's transition to advice. He promised, however, that branches are being reengineered or restaffed with proactively trained managers and reps.

To help, the broker-dealer also introduced a compensation structure which pays reps equally regardless of where they refer clients (to Schwab, U.S. Trust or independent advisors in the network)–as long as the clients stick. "Let me be clear: This is a new program and the level of inconsistency is unacceptable, and I promise it will change radically," Coghlan says. "We know who in our branches has best practices, and we're sharing them with those who don't. They can get with the program or get out."

Another planner said she's set up meetings with Schwab branches on the East Coast, but walked away with the impression that the staff "will start the dialogue with clients there. Then, if it doesn't work, they'll turn it over to advisors," she said.

"That's not the way it's supposed to work," Coghlan says. "I don't want the clients bounced around and asked, ‘Does this work for you? Does this?'"

Neutral compensation, training and constant monitoring of branch performance should help, he says. At the same time, Schwab is using a new TV ad campaign to market its overall advisory services to a wealthier clientele as it weeds out unprofitable clients in its "emerging affluent" market. To underscore its seriousness, it just raised in-house planning fees from $1,000 to $4,000.

"Schwab is still the home of the small investor," Coghlan says. "But it's a model that doesn't work for us today." Several advisors at the conference praised Deborah McWhinney, who succeeded Coghlan as president of its services for advisors, for improving services and operations significantly in the last 12 months. One advisor, who was publicly displeased with Schwab's retail initiatives last year, lauded McWhinney but groused that when he arrived at the conference, a longtime Schwab executive greeted him as "one of our our biggest whiners." Just when his firm, which has almost $1 billion in assets at Schwab, was starting to feel good about the custodian again.

Investors Start To Appreciate Advisors

After dealing with market collapses, a war on terrorism and repeated corporate scandals, it seems that investors are appreciating their advisors more than ever.

A nationwide survey by OppenheimerFunds Inc. found that the investors who are best at dealing with the adversity use a financial advisor.

Another study, meanwhile, suggests that more affluent investors are less thrilled with their advisors.

In the OppenheimerFunds survey, conducted on the Internet in September, investors nationwide with assets of at least $25,000 were questioned. Half of them used an investment advisor and half did not.

Among those with an advisor, 82% say their portfolio has performed well or better than the overall stock market, and 92% say they expect to be financially comfortable in retirement. More than two thirds, 67%, give their advisors an "A" for service quality, and 93% say their advisors have been very or somewhat helpful the past year.

By comparison, 62% of investors without an advisor say their portfolio has performed the same or better than the overall stock market over the last year.

These direct investors also express less optimism about their finances and the market, with only 36% of them expecting to be financially comfortable in retirement.

"The events of the past year have reduced the value of most investors' portfolios but placed a premium on professional financial advice," says John V. Murphy, president and CEO of OppenheimerFunds.

There was also a stark contrast in investing attitudes. Ninety-four percent of investors with advisors believe it's important to diversify a portfolio, compared with only 22% of direct investors.

"Investors who use advisors tend to have a long-term perspective and realistic views of market performance, and a genuine commitment to their investment strategies," says Dan Gangemi, OppenheimerFunds' director of market research.

The survey did, however, uncover concerns shared by all investors–whether or not they have an advisor. Ninety-eight percent of all investors, for instance, say they are concerned about the stock market and its volatility. Fifty-one percent believe the current run of corporate scandals is only "the tip of the iceberg," and 43% believe stocks will not again go up 20% or more two years in a row in their lifetime.

In the affluent investor survey, NFO WorldGroup polled 1,500 households with $500,000 or more in investable assets in May and June. The 2002 NFO Affluent Market Research Program found that 21% of respondents were not using an advisor.

Affluent investors, who tend to be more performance oriented, were apparently less than thrilled with advisor performance–giving them an overall grade of "C" when it came to general performance, ability to resolve problems and ability to protect and build client portfolios.

"In this economy, affluent investors are demanding excellence, not mediocrity, and they simply aren't getting it from the mainstream of the advisor community," says David Thompson, director of affluent market research at NFO Financial Services, a division of NFO WorldGroup.

FPA Names Elizabeth Jetton President-Elect

Elizabeth Jetton, an Atlanta-based advisor who has worked in financial services since 1981, has been named president-elect of the Financial Planning Association.

In keeping with association succession rules, Jetton will serve as president-elect in 2003, succeed current president-elect David Yeske and head the organization as president in 2004 and then serve as chairwoman in 2005.

Jetton was elected to the position by members of the association's board of directors. She has been a member of the board since 2000 and has served as the FPA's liaison with the Foundation for Financial Planning and chair of the finance committee. She is president of Financial Vision Advisors Inc. in Atlanta.

As president-elect, Jetton says one of her jobs will be to get more familiar with all facets of the organization. "My role will be to make myself available to the chapters and get as familiar as possible with the FPA's areas of focus," she says.

Speaking of why she sought the FPA presidency, Jetton says, "It's my own personal passion about the development of this profession. I'd really like to be part of educating the public and our industry and the media of the profession's value, and see it recognized."

The FPA also announced the appointment of four new members to the board of directors: Mark Johannessen, senior planner for Sullivan, Bruyette, Speros and Blayney Inc. in McLean, Va.; Troy Jones, president of Access Financial Resources Inc. in Oklahoma City; Dan Moisand, principal at Spraker, Fitzgerald, Tamayo & Moisand LLC in Melbourne, Fla.; and Nicholas Nicolette, principal of Sterling Financial Group in Sparta, N.J. Advisors Look For Government Intervention

A new study suggests a majority of advisors feel the stock market needs a dose of government intervention to get out of the doldrums.

In a survey recently released by Schwab Institutional, a majority of advisors say that criminal prosecution of corporate wrongdoers, corporate reform and stronger regulation of stock analysts are vital for boosting investor confidence.

"Independent advisors' outlook on the economy is extremely important because more and more investors are looking to them for help in achieving their goals," says Deborah D. McWhinney, president of Schwab Institutional's Services for Investment Managers.

"Unlike industry analysts or even corporate CEOs, advisors are in a unique position to listen to and influence investor attitudes toward the market," she says. "As a result, they tend to be very accurate arbiters of investor confidence."

The survey was conducted online between October 14 and 18 and consisted of responses from 1,476 advisors. Among the findings:
• When asked what has had the most impact on the stock market in 2002, 82% of respondents say corporate scandals, 70% say disappointing corporate earnings and 55% cite the public's fear of war with Iraq.
• The overwhelming majority of advisors, 90%, feel terrorism and fear of war have had some negative impact on the market, but only 55% say the impact has been significant.
• Most advisors, 82%, say prosecution of corporate wrongdoers is needed to restore investor confidence. And 43% say market forces alone aren't strong enough to improve corporate management practices and investor confidence.
• A majority of advisors, 55%, feel corporate reforms approved by Congress are helping improve investor confidence. But while 71% say new government policies have had some impact on the stock market, only 15% consider the impact to be significant.

Baby Boomer Kids Worried About College Savings

College-cost anxieties have befallen a new generation of Americans, according to a new survey.

The 50 million Americans born between 1967 and 1981–many of whom are children of baby boomers–are apparently just as worried as their parents were when it comes to saving for college, according to a survey conducted by the MainStay division of New York Life Investment Management (NYLIM) LLC.

The survey found that 58% of these "Generation-Xers" are either very or extremely concerned about saving for their children's college education. In fact, about a quarter–26%–fear college costs will be out of their reach by the time their children are ready for college.

The survey also found that 42% say they are saving more for college costs than their parents did, and only 17% expect their parents to help fund their children's college education.

Parents are most frequently using mutual funds and separate accounts for their college savings, the survey says. Twenty-seven percent of respondents say they're using mutual funds, 21% are using separate accounts and 20% are using individual stocks and bonds.

Other findings include: 18% say they are using the newer 529 savings plans for savings, 12% say they are using money market products, 12% are using IRAs and 5% are using annuities.

"We were surprised by the low level of GenXers currently participating in 529s, given their emphasis on planning ahead for their families," says Beverly J. Moore, managing director of NYLIM Retail Markets.

The survey was conducted in May 2002 and polled 530 U.S. consumers with investable assets of at least $50,000.

Utility Stocks More Volatile Than Ever

Bad news has spread across the utility sector since last year, starting with Enron Corp.'s high-profile bankruptcy, and now it's coming fast and furious. Electric utility TXU Corp.–previously so stable and staid–says it can't support its struggling European unit and cut its dividend 80% to 12.5 cents a share from 60 cents a share. American Electric Power Co. Inc. recently told Wall Street that earnings would be down 11% this year, and announced plans to scale back its operations.

The problem–aided and abetted by the rise of the energy trading pioneered by Enron–is that the sector has gone from reliable to downright volatile.

"I think those who view utilities as safe havens will find themselves very badly disillusioned," says Justin McCann, a utility analyst with Standard & Poor's equity research unit in New York.

Yet utility analysts and investors contend there are a handful of old-fashioned electric and gas utilities that can still provide investors with reliable dividend income. They are generally found among companies that face minimum exposure to growth industries like wholesale power, energy trading or risky overseas markets.

"There are some, but you do have to look," says Tim O'Brien, portfolio manager of the Evergreen Utility & Telecom fund in Boston. Such names include Southern Co., Florida Public Utilities Co. and Keyspan Corp.

The switch from safe to unpredictable started with deregulation in the mid-1990s, when the sector started dabbling in new businesses. Many investors didn't notice the switch because it came at the same time stock markets began their heady assent.

It's only been in the last year-and-a half that people started to notice their utility investments "moving a lot more than they used to," says Tom Roseen, a research analyst with fund tracker Lipper. The average utility fund has dropped 33.42% year-to-date, 36.5% in the past one-year period, and 14.2% since October 1999, according to data from Lipper.

Advisors Face Complex Decisions About Variable Life Policies

As with everything else tied to the stock market, owners of variable life insurance have taken a beating over the last year or two.

But deciding whether your client should stay or go can be complex when it comes to insurance, because leaving too early can mean paying a surrender charge that can tally tens of thousands of dollars. Plus, you stand to lose fees and premiums already paid.

In fact, those who assess their client's policies will likely find it best just to stick it out and take actions to stabilize downtrodden funds, including reallocating and moving assets to cheaper funds within their accounts.

Variable life insurance can also be more dangerous because the cash value pays the insurance costs and is often tied to the death benefit. Some people risk seeing their insurance coverage vanish if their funds lost enough money in recent years. With variable whole life, premiums and death benefits are generally fixed.

Variable life insurance policies were among the hottest products in the industry during the bull market of the 1990s, reaching a peak in 2000 when premiums grabbed 37% of all new insurance, according to data from insurance researcher Limra International. People expected excess growth from their investments to either decrease premium payments or to fund retirement or college tuition.

Instead, the stock market dropped to five-year lows this summer, pushing the average whole-life variable sub-account down 20.27% year-to-date through the end of September, according to Morningstar.com. Universal accounts, meanwhile, lost 21%. That compares with an increase of 23.72% in whole life and a 25.59% increase in universal funds in 1999.

For owners of variable universal life, the big question should be, "Is there enough value in the policy to support it, or will it self-destruct?" says David Woods, president of the Life and Health Insurance Foundation for Education. If this is the case, there are cost-efficient ways to exit, such as using a so-called 1035 exchange.

But a good number of policyholders will find that even if they've lost money, high exit costs make it hard to leave, says James Hunt, a life insurance actuary at the Consumer Federation of America in Concord, N.H.