Millionaires’ Outlook Reaches 5-Year High: Fidelity

Survey participants ranked individual domestic stocks as their No. 1 investment added in the last year, followed by certificates of deposit/money-market accounts/cash equivalents, equity exchange-traded funds, individual domestic bonds and domestic equity mutual funds.  

Of those investments, significantly more millionaires chose equities over fixed-income investments—an inverse trend from the investment strategies of the average investor, according to Fidelity.

Fidelity said Millionaire Outlook was the first in its annual “Insights on Advice” series. As part of this year’s series, Fidelity has launched an interactive website with insights and resources from the study with the goal to help financial advisors serve their clients and help everyday investors approach generating wealth like a millionaire.

Millionaires: A Profile

The 2012 study found that today’s millionaire is 61 years old on average, with some $3 million in assets. Seventy-four percent of survey participants felt wealthy, and those who did not said they would need an average of $5 million of investable assets to begin feeling wealthy.

• Eighty-six percent of today’s millionaires considered themselves self-made, while 14% said they had grown up wealthy.
• The self-made group reported investments/capital appreciation, compensation and employee stock options/profit sharing as their top sources of assets, while those born wealthy were more likely to cite inheritance, entrepreneurship and real estate investment appreciation.
• Self-made millionaires typically felt just as financially secure as those who were born wealthy.
• Born-wealthy millionaires were greater financial advice users with distinct advice needs, such as personal trust services and foundation/endowment management.
• As investment strategies, self-made millionaires were more likely to add equity investments, while those who were born wealthy typically had more real estate investments.

Thirty-five percent of millionaires had a negative outlook on the current financial environment, while 31% had a positive current outlook. The remaining 34% had a neutral outlook.

• Despite a lack of confidence in the current financial environment, those with a negative outlook still had a favorable outlook on future recovery (+11).
• Those with a negative outlook also were more actively receiving financial advice on topics such as general financial planning and retirement planning.
• The investment strategies of those with a positive outlook showed that they had been more active in the stock market, while those with a negative outlook typically had added more cash-like products.

The study found that when it comes to concerns about their financial future, 30% of today’s millionaires were focused on preserving their wealth, while 20% wanted to grow their wealth.

The remaining 50% had other financial concerns, such as managing income flows in retirement, supporting the lifestyle they want in retirement and managing investments.

• Those looking to generate more wealth were just as wealthy and financially secure as those who were looking to preserve wealth.
• Of those looking to generate wealth, 61% were older boomers and seniors.
• Wealth generators were also more loyal to their financial advisors, with 71% of generators likely to move with an advisor who switched firms.
• Generators had been more active in the stock market along with being more likely to add domestic bonds to their portfolios than those intent on preserving their wealth.