American investors, waiting for the other shoe to drop after their experience with the Great Recession, continue to spend less on investment expenses. The $151 billion spent on advice, commissions and custody in February 2013 represented 1.3% of personal consumption, equaling the average since the market downturn. Compare that with 1.6% over the previous 12 months and the 16.3% spent on health care. (That health care number, by the way, is two percentage points higher than the average over the previous 10 years.)
Experts say that many individual investors have not re-engaged in the market even though they are getting woeful returns on safer investments. This approach hurts retirement savings, as does the reluctance to spend on advice. A heightened focus on fees by the government and the media may be contributing to that reluctance.
The market can’t be sustained solely by institutional investors. With negative outflows from U.S.-based mutual funds in 36 of the last 44 months, it needs consumers to jump back in.
