Brokers stick to 'wait it out' script as markets plunge

NEW YORK (Reuters) - The stock market quaked on Wednesday after a week of tremors, but financial advisers and stockbrokers stuck largely to their scripts.

They said the 2008 market debacle taught them to reach out to clients in times of turmoil and warn against drastic moves.

“We’ve preconditioned people not to get spooked too much on short-term movement,” Mike Frazier, president of Bedell Frazier Investment Counselling in Walnut Creek, California said Wednesday morning as the Dow Jones Industrial Average had lost more than 330 points.

Frazier, whose firm manages $400 million for about 350 families, said fewer than a handful of clients called him Wednesday, in part because he has weaned them from “momentum” stocks that were up 20 percent to 30 percent over the last few months. Most of his clients have about 20 percent of their investment money in cash, and a substantial exposure to bonds, he said.

A New York City-based adviser at Morgan Stanley on Wednesday similarly said his team of three brokers were only slightly busier than usual.

“We’re calling to say we’re here and not hiding, but they’re not calling back,” said the veteran adviser, who deals largely with older clients who invest primarily in government bonds. His partners who are much more active in equities had a few people buy stocks at the levels they fell to Wednesday morning, but nobody was selling.

Michael Pomerantz, a Cherry Hill, New Jersey-based independent financial adviser, had a more frenetic day.

“The Dow Jones Index dropped below 16,000 and all of a sudden 2008 comes into play and people are worried,” he said.

Pomerantz said he thinks many investors are over-reacting to a return of volatility. Still, he has been moving clients from stocks into short-term bond and money market funds over the past week, shifting their mix from 60 percent equities and 40 percent fixed income to a 50-50 split, he said.

For clients who are in stocks, Pomerantz makes sure they are in large-cap U.S. companies like Clorox Co, McDonald’s Corp and Pepsi that fare well even in rocky markets, he said.

In Coral Gables, Florida, Raymond James & Associates adviser Scott Barkow canceled a lunch meeting with a fund wholesaler and told his staff to order in. “We are doing some hand holding,” he said. Barkow has been able to limit clients’ losses in stocks and exchange traded funds through stop-loss orders which trigger “sells” when their holdings fell between seven to 10 percent. Instead of reinvesting that cash, he is keeping it liquid for the moment until the markets calm down a bit, he said.

Brian Power, a principal with the Westfield, New Jersey-based RIA Gateway Advisory, said he has gotten five to seven calls from concerned clients and some who see the downturn as an opportunity.

“We’re telling clients to be a little bit more patient and not to try to catch a falling knife,” Power said. “Let the market hit its bottom and prove that it’s actually solidifying before putting in more money.”

Late on Tuesday, Ashvin Chhabra, chief investment officer of Merrill Lynch Wealth Management sent company advisers some positive guidance on stocks to use with their clients.

“While investors may not get the double-digit returns they have enjoyed since 2009, conditions remain favorable for equities,” he write. “Our advice remains to stay invested.”

Reporting By Jessica Toonkel, Elizabeth Dilts and Jed Horowitz. Editing by Linda Stern