Are Todays High Net Worth
Ready To Repeat History?
First of a Series
The bear market of recent memory clearly impacted the financial behavior and mindset of the American consumer. This has been documented in many research studies over the past several years, showing consumers had become more conservative in their investing attitudes and less confident in their self-advising abilities. Now that equity markets have rebounded, the proverbial $64,000 question is: Have consumers financial behavior and mentality been altered permanently, or will they return to their bull market ways of the past?
Now in its 5th year, the Phoenix Wealth Survey has established a record of documenting the financial attitudes and behaviors of the high-net-worth market, something very useful for advisors who focus on this niche.
Here are the themes that we see emerging:
What Your Peers Are Reading
Optimism Has Returned. From the data shown in the accompanying display, it is clear positive feelings toward the economy over the short term have significantly improved. This attitude, of course, is always sensitive to events in the external environment. Barring any significant change in the current equity markets or any significant terrorist activity on U.S. soil, this optimism will more than likely continue to increase.
We also see that optimism regarding the economy, in general, has translated into optimism regarding the high-net-worths outlook on personal finances. When placed in the context of the “long term,” however, this turnaround in attitude isnt as strong. This attitude is at about the same level of 2 to 3 years ago when it was declining. Attitudinally, it is as if the clock has been rewound to 2002.
Less Gun Shy About Investing. With high-net-worth consumers feeling more confident about the economy and their own financial future, it is not surprising that they also are feeling more confident about investing. Results show that larger percentages see themselves as “investors” rather than “savers” than was the case last year. There is also an increase in the percentage agreeing with the statement “to make money, I need to take above-average risks.”
The graph on page 34 tells the story better than anything else. When asked which is more important”preservation of my capital” or “return on my capital”it can be seen that return carried the day in the year 2000. These investment priorities crossed in the following year, with the concern for preservation peaking. In 2003, however, the focus shifted back to return. Once again, todays high-net-worth consumers are back to 2 years ago in terms of their investment priorities.