Survey: Advisors disappoint high net worth

The percentage of millionaires feeling pessimistic about their financial future has surged six-fold since the Phoenix Wealth Survey began. The survey shows the high net worths’ view of financial security has flipped since last year, with 74 percent saying they felt less wealthy than they did a year ago.

“The continuing economic turmoil has stripped America’s millionaires of their confidence and sense of security; they are feeling far worse off than they did during the last economic downturn in 2003,” said Dr. Zultowski. “This pessimism has affected their attitudes about their financial future as well as their behaviors.”

According to study results, it took only two years for optimism levels to drop by half, with 17 percent of the HNW reporting a high level of optimism about their personal financial future as compared to 34 percent in 2007. Those who said they were “extremely” or “very secure” for the long term plummeted to 28 percent from 45 percent in 2007.

The survey’s “gloom barometer” is in fact gloomy. The ratio of pessimists to optimists is about two-to-one, with 59 percent expressing doubts about the state of the national economy in the next one to two years compared to 30 percent of optimists.

Dr. Zultowski calls 2009′s numbers “particularly stark” when compared with the last bear market in 2003. At that time, 37 percent said they were pessimistic about the economy for the next one to two years.

Today’s millionaires are similarly downbeat about the return of the equity markets to more sustainable growth levels, according to survey findings. Close to two-thirds see improvement in the next 13 to 36 months. A smaller but significant group – 17 percent – predicts that a return to sustainable growth levels will take longer than 36 months.
Survey findings reveal preserving wealth has become the priority for the HNW.

Half of survey respondents say they have become more risk-averse and significantly more – 59 percent – are investing to preserve assets versus 41 percent for return. In 2000 – the study’s inaugural year – the investing priority for 56 percent of respondents was return with just 44 percent saying their goal was to preserve assets. The prior peak in the high net worth’s interest in preserving assets – 58 percent – was in 2003, the last time the economy skidded.

The investing priority shift has resulted in more people adding bonds and exchange traded funds (ETFs) to their portfolios, with an increase of 5 percent for bonds (52 percent) and 6 percent for ETFs (20 percent).

“Surprisingly, even though the high net worth are taking action, they remain confused about investing,” said Dr. Zultowski. Half of those surveyed say they are confused about the best way to invest their money, a marked increase from 32 percent in 2008 and almost double the percentage in 2007, when just 26 percent of respondents said they were confused.

The HNW don’t foresee any long-term behavior changes. Sixty-five percent say Americans will save more and borrow less in the near term, but when financial conditions improve, they will return to borrowing more and saving less. Just one quarter see a permanent change.