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Advisors Are Not Panicking

by Steven

Even though our lawmakers didn't seem to be able to get it together yesterday, it is a positive sign that advisors are not fully retreating from the markets. In the kasina survey released September 26, 2008, 29% of financial advisors said that they are investing more in equity funds, while only 24% reported that they were investing less as a result of the current market conditions.

It's also good to see that the Treasury Department's announcement to create a temporary insurance system for money funds reestablished confidence among advisors. 37% of advisors prefer to park their clients' money in money market funds right now.

Furthermore, we found that more advisors are increasing their investments in bond, equity, and money market funds. Variable annuities and alternative investments, however, are not faring as well. 22% of intermediaries are investing less in VA's, while only 16% are investing more. Additionally, 31% of intermediaries are now investing less in alternative products (130/30, hedge funds, etc.), while only 14% are investing more.

The reason behind their optimism is not quite clear. One reason might be that most advisors weren't alive during the Great Depression. Therefore, unlike their parents and grandparents, they are unable to imagine the worst.

Hopefully, lawmakers will get it together today and pass the bailout. Advisors are going to benefit from avoiding panic in this market environment.