Many mass affluent investors have not seen their financial situations improve in the past year, and list not saving more toward their 401(k) plans and children’s college funds as top regrets, according to a new report from Bank of America.
More than half (52%) of the mass-affluent investors with $50,000 to $250,000 in investable assets said their financial situation is the same as it was a year ago. At the same time, 23% said they have seen an improvement in their financial conditions in the past year, but only because they’ve changed their behaviors.
“They don’t consider themselves wealthy or ahead of the game,” Dean Athanasia, a Bank of America preferred and small business segment executive, said of the mass-affluent crowd in a conference call. “Twenty-three percent say it’s better, only because they’ve reduced their expenses and costs overall.”
The report comes from Bank of America’s Merrill Edge business, which includes both advisory centers providing advice and brokerage services and an online investing platform.
The report’s results come from a phone survey of 1,004 individuals with $50,000 to $249,999 in investable assets from July 20 to Aug. 4. All of the respondents were based in the U.S., while 300 were over-sampled in Los Angeles, San Francisco and Washington.
Of the respondents surveyed, 35% said they are not wealthy, 25% said they will never be wealthy, 14% said they are wealthy and another 14% said they will be wealthy one day. Thirty-two percent of the respondents cited “not earning enough” as a reason they will not be wealthy, while 23% pointed to the impact the recession has had on their finances.
The Merrill Edge report, which is conducted semiannually, also showed that top concerns for the mass-affluent investors include planning for retirement and their children’s education. That comes as more mass affluent investors see themselves retiring later than they planned, now up to 47% from 42% in January.
Passing on financially responsible behavior to the survey respondents’ children ranked as their top priority, while choosing the right spouse came in second.
“It has become important to these folks that their kids don’t repeat the mistakes that they perceive they’ve made,” John Thiel, head of U.S. wealth management for Merrill Lynch, said during the call.
When it comes to retirement, regrets include not contributing more to 401(k) plans (17%), making high-risk investments (15%) and carrying credit card debt (13%). Almost half (49%) of the respondents said they planned to increase their retirement savings in the next six months.
With college education savings, 41% said that daily expenses have interfered with saving for their children’s education, while 25% said they underestimated how long it would take to save for that goal. Thirty-two percent said they plan to focus on college savings in the next six months.
When it comes to making those plans, mass-affluent investors said they turn to a financial adviser most (63%), followed by friends and family (55%), news outlets (44%), banks (41%) and brokerages (37%).
The Merrill Edge report comes as Bank of America aims to increase its offerings to the mass-affluent market, including a hiring spree of financial solutions adviser professionals around the country. Those advisers operate under a separate business model from the Merrill Lynch financial advisers led by Thiel.
“We feel this is a largely underserved market, where the financial advisors out there today don’t reach in deep enough into this client base,” Athanasia said of the mass-affluent population.
Merrill Edge’s goals include making sure the mass-affluent investors it serves have a financial plan, regularly update that plan and check in with a financial solutions adviser. The firm aims to have an edge over competition by having the ability to look at a client’s full balance sheet through its bank and its brokerage units, including assets, debt, credit cards and mortgages.
The Merrill Edge business is an efficient way of serving the mass-affluent clients, Athanasia said on Tuesday, who rank lower on the scale of investable assets compared to the firm’s other wealth management clients.
“The profitability of the business model is sound,” Athanasia said, who did not elaborate with specific numbers.
Lori Konish writes for On Wall Street.