Daniel Moskowitz, president of Chatham Wealth Management, said his firm has run up against plenty of clients who are still scared of the stock market.
But he and his colleagues have been successful in luring clients off the sidelines. The reassuring message: A balanced portfolio combining short-duration bonds and blue-chip stocks with high dividends is "the safest way for them to meet their income needs."
If all advisers were as persuasive as Moskowitz, they might be swimming in new assets: Americans have a record $5.9 trillion in liquid deposits in domestic accounts, said Dan Geller, executive vice president of Market Rates Insight, in San Anselmo, Calif.
The reason, Geller said, is that they just do not trust the recovery.
It's true that consumer confidence indexes show modest improvements since the end of the recession, but it's what consumers are doing with their money that counts, he said.
Americans appear hesitant to tie up their money, even though inflation is easily outstripping the paltry interest rates paid by their liquid accounts.
Both the Consumer Confidence Index, by the Conference Board, and the Consumer Sentiment Index, by the University of Michigan, are subjective, Geller said: They use questionnaires to measure how consumers feel about the economy. A more objective measurement is what they ultimately do with their money, he said.
The reassuring investment pitch from Chatham Wealth Management, in Chatham, N.J., has helped the firm to add $15 million of new assets since August.
But some advisers fear that market-phobic investors have waited too long to jump back in. "The fact that so much money is sitting on the sidelines doesn't concern me as much as what happens to it next," said Jonathan Bergman, a financial planner with Palisades Hudson Asset Management, in Scarsdale, N.Y. "My concern is that investors on the sidelines redeploy now and the market doesn't meet their expectations."
Bergman isn't calling a top to the market, but said he does not expect returns in the next couple of years to match those of 2009 and 2010.
Even after the market's relative comeback, the best way to grow long-term capital and beat inflation is to invest in a diversified securities portfolio, Bergman said. "As long as investors have a long-term view and won't bail on stocks during a volatile time, then they should invest in stocks," he said.
If stocks are risky, liquid accounts are a sure loser right now, Geller said. Money sitting idle in liquid accounts, such as checking, savings and money market accounts is earning an average of 44 basis points of interest. By comparison, the annual inflation rate in February 2011 was 2.1 percent.
Much of the money parked in liquid accounts has shifted there from CDs and other term accounts, Geller said. From March 2009 to March 2011, nearly 13% of total deposits shifted from term accounts to checking, savings and money market accounts.
In March 2009, during the recession, liquid account balances made up 62.2% of total deposits. By March 2011, liquid accounts balances, as a percentage of total balances, reached a new record of 75%, according to Geller.
