8 Issues Weighing On Affluent Investors' Minds Right Now
For those in the financial services industry, the opinions and perspectives of affluent Americans - often referred to as the "mass affluent" crowd - are particularly important.
The more advisors know about these current and potential clients, the better they can serve them and bolster their assets under management.
These highly coveted clients, defined as adults aged 18 years of age or older living in households with at least $100,000 in annual household income, account for 25% (roughly 59 million) of the U.S. population.
Here's a closer look at what wealth managers need to know about this key demographic and what issues and concerns they?re grappling with today.
Sources: Stephen Kraus, chief insights officer of the Audience Measurement Group of Ipsos MediaCT, who also helps lead the Mendelsohn Affluent Survey. Spectrem Group?s June Affluent Investor Confidence Index.
Wealth management firms have varying income definitions for this crucial client base, but U.S. households with more than $100,000 in annual income hold 70% of the country's net worth, garner 60% of all the country's household income and account for a majority of consumer spending in many key categories.
They're young, old and every age in between. Some are working parents with kids. Some are single without kids. Some are single parents. Some are closing in on retirement. Some are working at their first job out of college. In other words, they span the whole spectrum but, individually, have very disparate needs and investment concerns and goals.
The Mendelsohn Barometer, a monthly survey of at least 900 affluent Americans and another 150 "ultra affluents" - the 2% to 3% of investors with more than $250,000 in annual household income - in June found that only 36% of these folks are optimistic about the economy.
That's down 8% from the same survey in May and represents the lowest level of affluent investor confidence so far in 2012.
The Mendelsohn Barometer reports that 44% of those surveyed said they were generally pessimistic about the U.S. economy - the highest level of affluent investor angst recorded since the peak of the U.S. debt ceiling crisis last summer.
In a similar survey conducted last month by Chicago-based Spectrem Group, wealth investors collectively said they are less confident about their day-to-day financial situation (income, assets and the overall economic picture) today than they were in December.
It's a mixed bag of worries, but the country's unemployment rate - stuck at right above 8% nationwide - tops the list.
One respondent to the Mendelsohn survey said "[high] jobless numbers may be permanent" things seem stagnant and kind of a low new normal.
Then there?s the European debt crisis. Twenty-eight percent of ?ultra affluents? said they?ve even gone so far as to change some investment decisions and allocations as a result of what?s going on overseas.
Not surprisingly, the November election is also weighing on these affluent investors? minds. Spectrem Group reports that the number of investors who reported being most concerned about the political climate more than doubled from April, rising 7 percentage points to 12% in June.
The Mendelsohn Barometer found that well-heeled investors are losing their affinity for the precious metal. Among affluent investors, only 43% said they now consider gold to be an "excellent" or "very good" investment compared to 55% last fall.
Forty percent of affluent investors surveyed said they now view real estate as either an "excellent" or "very good" investment, a new one-year high.
Among "ultra affluents," 57% said they were enthusiastic about real estate, outpacing their optimism for both gold and equities.
Spectrem Group's survey found that affluent investors' investments in cash jumped 3.6 points in June to 25.8 points, while all other investment categories retreated.
Bond mutual funds fell by 1.3 points to 7.3 points, the lowest reading in more than year while stock mutual funds pulled back 0.6 points to 31 points.
Keep in mind, this is a snapshot in time. While affluent investor optimism is down right now, it?s very malleable and can change on a dime.
In February and March, investors? outlook and enthusiasm for the market jumped markedly on the heels of an encouraging jobs report. Just because affluent investors are skittish today and looking for any signs of a recovery they can believe in doesn't mean they will be in two months ? or even in two weeks. So be ready.
In these uncertain times, wealth managers would be wise to connect with clients often - touching base on their overall outlook and shifting investment preferences to deliver the advice and service they'll need when the overall investment climate improves.
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