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What Keeps Affluent Investors 'Up at Night?'

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Affluent investors are looking for “financial peace of mind,” but that, said Sallie Krawcheck, “is missing,” for many investors. On a conference call on July 28, Krawcheck, president of Bank of America Global Wealth & Investment Management (GWIM), revealed the results of the Merrill Lynch Wealth Management Affluent Insights Quarterly survey of 1000 affluent investors–which Merrill Lynch defines as those with $250,000 or more in investable assets. Some investors are worried about a double-dip recession, “or Japan type of scenario,” Krawcheck added.

The concerns these investors have appear to be growing broader and stronger. What do they worry about most? Many, 42%, are concerned about “maintaining their family’s standard of living,” and 40% worry about “health care costs,” according to the survey. It is the basic things, such as “saving/investing for retirement,” that concern 37%; “replenishing savings to pre-recession levels,” (35%); “daily/monthly expenses,” (33%); “college education costs/savings” (31%) and “mortgage payments,” (25%).

Many affluent investors cited family obligations: they have “added financial responsibilities,” such as “caring for an elderly parent or relative,” (45%), or an “adult child,” (36%), said Dean Athanasia, head of GWIM Banking and Merrill Edge, also on the call.


Krawcheck added that now, more affluent investors, 45%, “expect to retire later” than they had anticipated. That’s way up from last quarter, when 31% said that, and 29% who indicated that in January, she explained.

Retirement is an area fairly widespread worry: “70% don’t think their retirement plan thoroughly takes into account the potential for unexpected events,” according to Lyle LaMothe, head of U.S. Wealth Management for Merrill Lynch Wealth Management.

Perhaps the most surprising statistic in the survey results was that nearly twice as many affluent investors said teaching their children “financial know-how” was a higher priority than teaching them about “choosing the right spouse/partner.” Here, 51% opted for “financial know-how,” and only 26% said “choosing the right spouse/partner,” was most important, according to the survey. Only “maintaining a close relationship with family,” (54%), topped “financial know-how”

Surprise: A Risk Averse Younger Generation

Another surprising result of the survey was risk tolerance or aversion indicated by different age categories of investor. While you might expect that the older investors get, the more conservative they would be about investing, Krawcheck pointed out that the majority, (52%) of “younger investors, 18 to 34, with a mean of 30,” described themselves as conservative, meaning risk averse and looking at very conservative investments. She noted that “first and last impressions count,” and that these investors saw the Internet bubble burst and now see the ongoing market and economic turmoil. They are the second most conservative category, while only 45% of those in the group of 35- to 50-year-olds described themselves as conservative when it comes to risk. The most conservative are those 65 and older, with 55% saying that they are risk averse. Over all, 50% of those surveyed said they had a “low tolerance for risk.”

Comments? Please send them to [email protected]. Kate McBride is editor in chief of Wealth Manager and a member of The Committee for the Fiduciary Standard.


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