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Wealthiest Investors Heading Back to Stocks: Spectrem Report

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More than half of America’s wealthiest investors are eyeing a return to the equity markets in 2011, according to a new report released Tuesday by Spectrem Group.

A total of 52% of U.S. households with a net worth between $5 million and $25 million, not including primary residence, say they are likely to purchase equities over the next 12 months, according to Spectrem’s “Ultra High Net Worth Investor 2010.”

This makes equities, which include individual stocks and stock mutual funds, the most popular investment choice for ultra high net worth investors in 2011, surpassing cash (35%), international investments (33%) and fixed income products (31%), the report says.

“It’s not that the ultra wealthy are feeling more optimistic than they were in 2009,” said Catherine McBreen, Spectrem’s managing director, in the report. “It’s more that they realize cash is not their only investment option. Despite overall concerns about the economy, they are looking for opportunities and are finding stocks to be particularly appealing.”

Additional insights from the study, based on a survey of 516 households conducted in November 2010, are available on Spectrem’s newly launched Millionaire Corner website.  Chicago-based Spectrem Group, a strategic consulting firm specializing in the affluent and retirement markets, has been studying investors for the past 20 years.

“With more than half of the nation’s wealthiest investors likely to buy equities over the course of 2011 and given the sizable cash balances this group has amassed, stock market investors across the board may have even more reason to look forward to 2011,” said George H. Walper Jr. (left), president of Spectrem Group, in a statement.

Report highlights include:

  • The rules requiring a higher fiduciary standard for brokers reflects UHNWIs’ widespread perception that the fees charged by advisors are very expensive.  Nearly 60% of investors with $100,000 to $1 million in assets find the services of a financial advisor to be “very expensive,” and investors across all wealth levels rate accounting firms as by far the most trustworthy providers of financial services.
  • Ultra high net worth households had average cash balances, including money market funds, checking, savings, Treasury bills and CDs, of $659,000 at the end of 2010. This represented 10% of their total investable assets.
  • Wealthy investors said the recession, brought on in part by a bursting housing bubble, taught them that their home is not a stable financial asset. They ranked this lesson as more significant than realizations about debt, financial experts and insurance coverage.

Read about Spectrum’s Millionaire Investor Confidence Index at