Investors generally are not selling stocks, they “are not running for the hills” in the Coronavirus crash as many did in the 2008 crash. That’s what Charles Schwab officials said, in an online conference on Tuesday, in reviewing client trends. They added that cash inflows have been strong, citing recent figures
“This is quite a bit different from a client standpoint from 2008. We are not seeing them react to the volatility as much” according to Joe Vietri, leader of Schwab’s 363 branch network. Schwab’s physical branches are closed to the public owing to the virus. “This does feel different,” says Rob Williams, vice president, financial planning
Vietri, a 27-year Schwab veteran, noted that he lived through 2008. The difference is that this downturn is that “health issues are more front and center,” he adds.
Vietri says clients generally are more controlled about the market woes because “they have seen market conditions like this before and are telling us that they are going to wait it out. There was definitely a lot of panic back in 2008-200. We are definitely not seeing that this time. They have been very rational this time,” Vietri adds that managed investment asset flows are up some 60 percent. “There have been very, very strong flows,” Vietri says. They were up 20 percent in March compared to a year ago, he said.
He says the “buy only clients” are outnumbering the sell only clients. This is more common, Vietri says, among the younger clients, those 60 and under. The older clients are less likely to be buy only clients but they are often likely not to sell but to rebalance a portfolio or to update a financial plan, according to Vietri. Those without a plan, Williams says, need to understand why this is usually not a time to sell.
The Coronavirus, Vietri predicts, will end up having a dramatic long-term effect on how Schwab conducts its business.
He adds that the both phone and digital engagements are “really seeing strong increases.” Vietri says Schwab was already moving in the direction of a move digital model. “Log ins to our mobile app are up 53 percent year over year.” The online chat is up 57 percent, he adds. “This is going to change client behavior even when we get on the other side of this.” Vietri says even elderly haven’t panicked because their plans have usually contained one to two years of liquid assets as part of a long-term plan.
He said client surveys show 36 percent are bullish on the market compared to 64 percent who are bearish. But Vietri points out that those numbers have hardly changed since last fall and that is a good thing.
Williams adds that advisors need to explain to clients and would be clients that “panic is not a strategy” and “trying to time the market is not an effective strategy.” Williams says advisors must remind clients that investing is a long-term process and that today’s developments are “a very scary short-term thing. “
But something else that could be frightening, besides being in the market during a crash, is the potential for missing the upturns. Over a 19-year period from the turn of the century, if you were in the market, as measured by the S&P 500 and including some terrible times, you received some 6.2 percent a year on average. If you missed just the 10 best days, your average was only 2.4 percent, according to Williams.