Stunned by trillions of dollars of losses in the financial crisis, Americans will be investing significantly less in the future, according to a new survey by AlixPartners. Forty-nine percent of the 1,000 people the consulting firm surveyed have either stopped or reduced investing in stocks or mutual funds, 26% have no intention to return to these bedrock financial vehicles in the next three years, and another 27% were unsure whether they had the endurance to return to the markets in that timeframe.
But the reactions were more muted among higher-income people and men, with only 21% of those earning more than $75,000 a year saying they have stopped investing altogether in stocks or mutual funds. Thirty-two percent of women said they are unlikely to return to the market, compared to 21% of men. AlixPartners says financial companies should restructure their offerings and marketing plans to address these bifurcations in the market.
"Investors are cross, cautious and confused," said Clarence Hahn, co-leader of the financial services practice at AlixPartners. "Financial firms have to figure out who is going to start investing again and to win back trust by building into their offerings a level of oversight, due diligence and risk management."
Pierre Buhler, the other co-leader of the financial services practice, added that to convince investors to get over this critical turning point, investment firms must ensure that their customers are getting financial advice.
AlixPartners also said that financial services firms appear to be mis-spending up to half of their marketing dollars. "In this kind of market, rifle shots, not scattershots, are what's needed right now," Hahn said.
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