Year-to-date, the S&P 500 is down about 8 percent. Yet the president of LPL Financial, the largest independent broker/dealer in the country with some $462 billion in advisory and brokerage assets, said there isn't yet any indication end clients are fleeing from riskier assets, dramatically changing allocations or outright selling securities. But the firm has seen an increase in cash balances.
“Activity in the short run slows down as people become a bit more thoughtful about putting new money to work or how they allocate that money,” Dan Arnold told WealthManagement.com on Wednesday.
Client cash balances reached a record $28 billion at the end of the third quarter 2015, and is expected to tick higher when LPL reports earnings on Feb. 11.
“That’s new deposits coming in that people just aren’t putting to work yet because advisors are counseling them to either pause or be patient or continue to assess the marketplace,” Arnold said. “In some cases, you’ll see, to a lesser degree, people liquidating certain securities positions and going to cash to wait for the transition and restrategize or adjust their approach.”
Arnold said the firm’s advisors are stepping up their conversations with clients, some of whom need more handholding than others. LPL brokers are also aggressively turning to the firm's research and market commentary to help with those conversations, he said.
If the market volatility persists, Arnold said advisors he speaks with have said it could be an opportunity to capture new clients from other advisors who aren’t as responsive.
“They saw it in ’09,” Arnold said. “I think we saw a tremendous amount of mobility amongst end investors, and advisors who tended to focus on being responsive—serving and supporting their clients—turned that into opportunity.”