The affluent are feeling the economy’s pinch, even if not quite as hard as others, according to the Merrill Lynch Affluent Insights Quarterly. The survey, conducted between Sept. 13 and Oct. 7 by Braun Research and released Thursday, revealed that not only are the affluent cutting back on their spending for such nonessentials as luxury items and entertainment (27%), they are also creating emergency funds (19%), paying down debt and drawing upon long-term savings to meet daily expenses.
In a conference call discussing the results of the survey, Sallie Krawchek (left), president of Global Wealth & Investment Management (GWIM) for Bank of America (BAC), pointed out that there were three recurring themes in the responses: health care concerns, worries about retirement—with conservatism and nervousness predominating among women and younger investors—and the fact that these stresses are indeed experienced by the affluent given their financial position.
One of the biggest surprises was the conservatism and low risk tolerance among the younger affluent: Krawchek pointed out that among the young (18- to 34-year-olds, with the mean 31 years old), 70% worried that their assets would not last through retirement, compared to 57% of older respondents
“The typical order of things,” said Krawchek, “is that younger investors are more risk tolerant than older investors, but this is not the natural order of things. Younger investors … are more concerned and conservative than their parents.”
The affluent's primary financial concerns are: rising health care costs; outliving their assets; being able to afford their desired lifestyle; the impact of the economy on meeting their financial goals; the current state of the real estate market; and caring for an aging parent.
Andy Sieg, head of retirement and philanthropic services for Bank of America Merrill Lynch, said that health care and retirement concerns “really pop as top concerns for affluent households.” The data on these concerns, he adds, has been stable over the years. “Even among American’s most affluent households,” he emphasized, “there is a sharp level of concern about healthcare costs. The impact on the financial industry is that advice on health care is important. Planning for health and wealth are two sides of same coin. How do we help them engage in longevity planning?”