Millionaires’ Outlook Reaches 5-Year High: Fidelity

Domestic stocks top their list of investments; consumer and business spending drives optimism

Most American millionaires are self-made, and how they achieved their wealth as well as their financial outlook and goals influence their investment behaviors, according to a study released last week by Fidelity Investments.

Fidelity’s fifth Millionaire Outlook surveyed more than 1,000 households with investable assets of at least $1 million, excluding workplace retirement accounts and real estate holdings.

Using a scale where +100 represented the most favorable outlook, zero was neutral and -100 was the most negative outlook, the new study found that millionaires’ outlook of the future financial environment had reached +39, the highest level since the survey’s inception in 2006.

Their confidence in the future was driven by positive sentiment about business spending (+43) and consumer spending (+42).

However, they remained concerned about the current financial environment (-29), owing to their lack of confidence in the value of real estate (-75), the economy (-49) and business spending (-32). Even so, their near-term confidence continued to rise, having consistently increased by nearly 50% each year since 2009.

“One trend has held true throughout the life of this study—the millionaire investor’s outlook has been consistently pragmatic about current market conditions and pervasively optimistic about a future recovery,” Michael R. Durbin, president of Fidelity Institutional Wealth Services, said in a statement.

“In many ways, what millionaires have been thinking and doing can be a strong indicator for financial trends, as they are often the first to jump on an opportunity in the market—as they have recently with domestic stocks.”

Survey participants ranked individual domestic stocks as their No. 1 investment added in the last year, followed by certificates of deposit/money-market accounts/cash equivalents, equity exchange-traded funds, individual domestic bonds and domestic equity mutual funds.  

Of those investments, significantly more millionaires chose equities over fixed-income investments—an inverse trend from the investment strategies of the average investor, according to Fidelity.

Fidelity said Millionaire Outlook was the first in its annual “Insights on Advice” series. As part of this year’s series, Fidelity has launched an interactive website with insights and resources from the study with the goal to help financial advisors serve their clients and help everyday investors approach generating wealth like a millionaire.

Millionaires: A Profile

The 2012 study found that today’s millionaire is 61 years old on average, with some $3 million in assets. Seventy-four percent of survey participants felt wealthy, and those who did not said they would need an average of $5 million of investable assets to begin feeling wealthy.

  • Eighty-six percent of today’s millionaires considered themselves self-made, while 14% said they had grown up wealthy.
  • The self-made group reported investments/capital appreciation, compensation and employee stock options/profit sharing as their top sources of assets, while those born wealthy were more likely to cite inheritance, entrepreneurship and real estate investment appreciation.
  • Self-made millionaires typically felt just as financially secure as those who were born wealthy.
  • Born-wealthy millionaires were greater financial advice users with distinct advice needs, such as personal trust services and foundation/endowment management.
  • As investment strategies, self-made millionaires were more likely to add equity investments, while those who were born wealthy typically had more real estate investments.

Thirty-five percent of millionaires had a negative outlook on the current financial environment, while 31% had a positive current outlook. The remaining 34% had a neutral outlook.

  • Despite a lack of confidence in the current financial environment, those with a negative outlook still had a favorable outlook on future recovery (+11).
  • Those with a negative outlook also were more actively receiving financial advice on topics such as general financial planning and retirement planning.
  • The investment strategies of those with a positive outlook showed that they had been more active in the stock market, while those with a negative outlook typically had added more cash-like products.

The study found that when it comes to concerns about their financial future, 30% of today’s millionaires were focused on preserving their wealth, while 20% wanted to grow their wealth.

The remaining 50% had other financial concerns, such as managing income flows in retirement, supporting the lifestyle they want in retirement and managing investments.

  • Those looking to generate more wealth were just as wealthy and financially secure as those who were looking to preserve wealth.
  • Of those looking to generate wealth, 61% were older boomers and seniors.
  • Wealth generators were also more loyal to their financial advisors, with 71% of generators likely to move with an advisor who switched firms.
  • Generators had been more active in the stock market along with being more likely to add domestic bonds to their portfolios than those intent on preserving their wealth.
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