Fidelity Checks Its Wealthy Customers’ Pulse

High-net-worth investors comment on market conditions and taxes

Fidelity Investments took the pulse of its customers with at least $250,000 in investable assets via a webcast interface on Sept. 6, and released the results on Wednesday.

The survey covered potential tax increases, sector growth and opportunities in emerging markets. On average, 1,574 attendees responded to each question, and the majority had more than $250,000 in investable assets.

Key findings of the poll:

Market Conditions

  • Just 46% of high-net-worth investors thought that the market would end 2012 higher than its current levels, and 30% believed it would be down from current levels.
  • Despite market pessimism, these investors still expected positive returns. When asked about their average long-term annual return, investors said 5.8%, which compared with the 1.3% annualized S&P 500 return from the previous five years.
  • Only 34% of respondents believed the current market rally was sustainable. This lack of confidence may explain why 54% of investors were only partially invested or slowly re-entering the market.

Taxes

  • Fifty-six percent of high-net-worth investors believed that politicians would postpone a decision on taxes and spending until 2013 when a new Congress was in place. Thirty percent believed a modest short-term compromise would be achieved.
  • Potential income tax increases were the greatest concern of respondents (35%), with capital gains tax increases second (27%).
  • The top three steps half of respondents said they could take in anticipation of tax increases were converting retirement assets to a Roth IRA (12%), accelerating income into 2012 (12%) and deferring losses or deductions into 2013 (10%).

Investment Opportunities

  • Forty-five percent of high-net-worth investors believed that large cap equities offered the greatest potential upside over the next 12 months. This was followed by mid-cap equities (29%) and small-cap equities (26%).
  • For the next 12 months, the energy sector was investors' top choice (22%) for earnings potential. Information technology and health care were tied for the second spot at 19%. 
  • While 32% of investors were already in the biggest emerging markets (Brazil, Russia, India and China), only 12% were investing in smaller emerging markets in Asia, Africa or Latin America.

“Successful investors keep their eyes focused on their long-term goals, in spite of short-term turmoil,” John Sweeney, executive vice president of Fidelity Planning and Advisory Services, said in a statement.

“By cutting through the day-to-day noise, managing risk and looking for long-term opportunities, our high-net-worth investors are exhibiting just that kind of mindset.”

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