Atkinson: We never viewed fixed income as the way to actually generate an income stream. It's just a dangerous game to allocate so much into fixed income just to live off the yield, so we've always professed a total return strategy. What we've done from a total return portfolio strategy is establish a dedicated cash allocation in the portfolio, which is going to be in any of their portfolios, but from a reporting standpoint we help the advisor educate the client on its proper function. So really nothing has changed from a portfolio construction perspective. What's changed is the reporting, the transparency.
FA: James and Stephen, you probably know your clients' ages. Are you seeing declining balances among people over 65 or 70?
Langlois: They work more and delay their retirement. If you talk to advisors about what in the past five years people have done, they change the time horizon they have for when they retire as much as try to pull money out of the portfolio because they can control that. I think the profound impact that the market crisis brought with consumers is that they realized that they couldn't control things. They can control-but for health issues-how long they work and those sorts of things, and that's how they have been generating incremental income-but [they are] working more or finding, as we talked about, other forms of employment to get the health insurance, to get your income to cover your costs.
Wertheim: They are classifying the new boomers and the old boomers now. Thank goodness I'm a new boomer, but you know one of the things advisors say is really the biggest problem with clients is their spending behaviors, overspending. And so I think you're exactly right, they would rather delay retirement than reduce spending, and that's just kind of unbelievable.
FA: One thing that I've heard from some advisors is you don't have to lecture clients nearly as much about overspending.
Wertheim: I think that lasted for a little while. Unfortunately, many people have gone back to their ways. At least, that is what we hear from advisors.
Carney: I can't tell age by our data. But a couple of things I can see. One, there has not been a tremendous shift in allocation, other than one big shift: the increase in real estate investments. The one thing I hear in talking to a number of our advisors is that what they've started doing is applying more focus on goal-based planning.
FA: Tiburon Strategic Advisors has seen a pretty big increase in clients looking to the Schwabs, the Fidelitys, the people that help self-directed investors. But when you look at the earnings out of a Schwab or TD, it doesn't seem like they're making a lot of money. Is a lot of it going into money market funds where they're earning nothing?
Lynch: I think one, throughout the industry, whether it's broker-dealers or custodians, they are experiencing significant margin compression. I mean, there is virtually no margin when we compare to just a few years ago. Even if you are accumulating more assets as a custodian or a broker-dealer, it's really tough with no margin on the money market assets. There are very few places to make that up, but they are gaining market share and the do-it-yourselfers, maybe the assets are moving from one bucket to the other, so maybe it's advisor-directed to do-it-yourselfers, but the net assets aren't producing increased margins. What we are seeing is this share of wallet changing, [but] I don't know that consumers fit neatly into one bucket or the other.
FA: What do you think is driving it?