August was a month of extreme volatility, largely blamed on the S&P downgrade of U.S. long-term debt. While that move triggered panic selling among most retail investors, the wealthy stood out, taking a steady and balanced approach, according to a study conducted by PriceMetrix.

The notion that wealthy investors are “fleeing” equity markets is misguided, it said. “In fact, despite an increase in market volatility, August 2011 was the most active month for millionaire equity trading in the last two and a half years.”

The report says retail investors with over a million dollars invested with at least one financial advisor represent 9% of retail households with full-service brokerage accounts.

“Despite their small representation, they wield significant influence, accounting for 1 in 3 retail equity trades and 51% of total retail equity principal traded,” the firm reported.

August 2011 was a busy month for large retail investors and their advisors. The average million dollar client executed more than 5 equity trades (well above the 2011 monthly average of 3.5), representing total principal traded of $84,000. And these clients did more buying than they did selling.

Millionaire investors traded more principal in August 2011 than in any month since October 2008, when they traded on average $101,000. The study found that the stocks of Apple, Bank of America and CenturyLink were the most favoured by millionaires in August.

Nearly three quarters (74%) of these millionaire investors had their trades executed in fee-based accounts, representing 47% of the total principal traded by those investors.

Sadly, the study also revealed an increase in “sympathy pricing”, the tendency for advisors to discount their services in poor markets.

“While trading activity increased by almost 50%, the same cannot be said for pricing. The average trade principal in a transactional account was $34,000 in August (equal to the 2011 average), while the average commission dropped to $233, off 15% from the 2011 average of $276,” the report said, a direct result of advisors discounting fees to keep wealthy clients.

Nevertheless, these facts clearly show that increased market volatility in August 2011 did not slow down retail trading activity. “Indeed, quite the opposite. Investors who work with full service investment advisors are not demonstrating widespread panic.”

These investors not only stayed in the markets, but also increased their investments.

“Volatile months like August 2011 represent an excellent opportunity for advisors to reach out to their clients, communicate, re-evaluate their portfolios and look for new opportunities.”

It concludes that volatile markets are the perfect opportunity for advisors to remind their clients why they’ve chosen to work with them.