- The Washington Times - Wednesday, July 17, 2002

A great number of individual investors aren't panicking, despite a spate of corporate accounting scandals and the drubbing the stock market is taking, financial advisers and portfolio managers say.

Advisers say the continued plummeting of the market which has wiped out trillions of dollars of stock wealth has led to their dishing out more advice and restructuring clients' investment plans.

The Dow Jones industrial average, Standard & Poor's 500 index and Nasdaq Composite Index have suffered double-digit-percentage losses this year, with the S&P 500 and Nasdaq at five-year lows.

"We're basically looking at how clients can keep their fixed incomes from going down and whether their risk tolerance is correct to their withdrawal needs," said David Fox, director of Portfolio Management for Sullivan, Bruyette, Speros & Blayney Inc. inMcLean.

Fund managers worldwide continue to have little confidence in U.S. stocks, according to a survey released yesterday by Merrill Lynch. Of 279 institutional investors surveyed, 100 said they see the United States as having the worst corporate earnings outlook. Further, 95 of those investors rated the United States as having the worst quality of earnings in terms of volatility, predictability and transparency.

Like most advisers, Mr. Fox said some of his investors are pulling out of the market.

"People are concerned." he said. "We get a few calls of people wanting to get out, as you will see with current headlines, corporate problems and crises of confidence, but no more than usual when the market hits bottom, assuming it will soon."

But many are hanging in there.

"Most of the people are, in fact, surprisingly calm, because this has been going on for two years," said Bob Jones, senior vice president and Bethesda branch manager for Legg Mason. "We're not getting panic … what we're doing is a lot of handholding."

Recent news of accounting irregularities at telecommunications giant WorldCom Inc., energy trader Enron Corp. and other major corporations has hurt the level of confidence in the markets, but most experienced investors haven't let it affect their overall investment strategies.

"People understand Enron and WorldCom. … That's what I'm getting," Mr. Jones said. "What they're saying is, 'I'm angry about it.' And that's good."

The group getting hit the hardest and asking the most questions is retirees, Mr. Fox said.

"People who are on a fixed income and can't make up the assets are most challenged at this time," he said.

Clare Hushbeck, a spokeswoman with AARP, said older Americans who are thinking of retiring should stay with their jobs. Putting more money toward a retirement plan helps offset investment losses from an unstable stock market, she said.

"With the way things are looking, it's smart for people who are nearing retirement to stay employed," Ms. Hushbeck said. "There are a number of things they can do, like downscaling their hours, work part time if possible or try 'phase retirement,' where a person eases gradually into retirement to see if he or she is ready."

As a result of a declining economy, she said more members are rethinking large expenditures, such as vacations and home improvements, and collecting more information on employment-opportunity laws, she said.

The AARP membership call center, which serves people 50 and older, has been handling three times its normal volume in financial-advice calls, Ms. Hushbeck said. "One thing I tell members is, 'Get a financial planner, because it's a cost you can't afford not to make,'" she said.

When the market was strong, Mr. Jones said, he saw a lot of people invest in the stock market on their own, without the help of financial planners. But that has changed.

"Now, one of the things they're finding is that when things get ugly, there's no one there to help you," he said. "People are beginning to recognize the value of advice."

Mr. Fox said most of his clients are trying to be upbeat and weather the instability.

"The economic numbers are favorable, and we just need to get through these accounting problems and crisis in consumer confidence," he said. "What we don't want is having people throw in the towel just in time for the market to rebound."

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