As noted by the talented Steve Higgins here, after close to a decade on the defensive, independent investors have returned to the market -- and Cerulli analysts warn that the trend could play against advisors looking to give those investors some help.
Assets in self-directed brokerage accounts surged 42% in the two years following the 2008 crash and now clock in at $3.7 trillion.
That may not look huge compared to the $12 trillion in advisor-led accounts, but the fast rate of growth here reveals that retail clients are once more feeling confident that they can go it alone.
The "independent investor" effectively stopped being a force in the industry in the aftermath of the 2000-1 bear market, paving the way for various advisor models to renew their dominant position in the marketplace.
The timing is also on the ominous side, Cerulli points out.
Self-directed investors admitted defeat after the turn-of-the-century downturn because they ran out of money and confidence. As they rebuilt their savings, they were less inclined to do it themselves and more eager to seek out professional help.
This time around, the ranks of self-directed investors soared while Wall Street was melting down. Clearly the wirehouses suffered from an overall erosion of confidence, but these disgruntled clients didn't pull out of the market entirely.
They simply decided that they could do it as well as the professionals, at a lower cost.
We now have a full trough-to-trough cycle since the 2000 bear market pushed these people back into the arms of advisors. The experience has taught all advisors a great deal and, presumably generated some impressive history of outperformance.
If the 2008 crash pushed them back out and today's market is skittering along, that long-term track record may be the best marketing advantage that advisors have.
Sometimes the independent investor beats the market and thrives. Sometimes he or she doesn't. But being able to keep sight of long-term goals and plans is where the advisor shines in any market environment.
That's what "staying the course" really means. It's not a commandment to stick with the advisor in a bad market any more than it's an invitation to chase augmented returns when things look good.