Not all ultra-high-net-worth investors are alike. Doctors, lawyers, accountants and other professionals have a unique approach to investing, according to a new study by Spectrem.
The study of investor behaviors and attitudes includes segmentation of investors by occupation, and compares professionals against business owners, managers and senior corporate executives. All have a net worth in the $5 million-to-$25 million range.
Understanding how professionals stand out can prove helpful to advisors who serve them, Spectrem said.
“Knowing how an investor’s profession affects investment attitudes makes it so much easier to make recommendations and satisfy the investor,’’ Spectrem’s president, George Walper, said in a statement.
“In the case of professionals, many of their investment behaviors are easily explained based on their background of investing in themselves first.”
Researchers asked investors which of about a dozen factors played a role in their personal wealth creation. Not surprisingly, nearly all selected “hard work” as a factor.
Ninety-seven percent of professionals selected “education,” compared with 89% of senior corporate executives who made that selection. In addition, 64% of professionals said “luck” was a factor, and 52% said “decisions made for me by my financial advisor.”
Professionals also had the highest incidence among respondents, at 35%, of selecting “inheritance.”
What Trump Bump?
Seventy percent of wealthy professionals in the study, the highest percentage of respondents from any one occupation, said their financial situation today was better than a year ago.
At the same time, just 37% of professionals believed the results of the November presidential election would benefit their investment returns versus 47% overall.
Spectrem said it was noteworthy that two-thirds of professionals, again the highest percentage by occupation, admitted to concern over the Trump administration.
Spectrem suggested that advisors working with professionals check whether they fit the characterization that the last year had been an especially good one for investments. Then ask why, and suggest increasing investment in those areas that worked well for the client.
For the first time, Spectrem said, it asked investors their feelings about the suggestion that the federal government should forgive all or most college student loans — a topic of interest to anyone who has ever taken a student loan, including doctors, lawyers and dentists.
Sixteen percent of professionals said the government “definitely’’ or “probably” should forgive college student loans. In contrast, only 5% of senior corporate executives expressed a similar sentiment on the topic.
Spectrem said it was possible that many professionals still have liabilities related to their college and graduate work, so finding out those liabilities would benefit the investor-advisor relationship because the advisor would have a better idea what weights exist on the investor’s portfolio.
The study also found that professionals were likeliest among investors segmented by occupation to consider the reputation of the companies where investments are made, and the past track record of investments.
Professionals were by far the most interested in socially responsible investing segmented by occupation. Spectrem said this meant advisors should consider pitching such investments to the doctors and lawyers among their clientele.
Indeed, advisors risk alienating clients by failing to talk to them about investments that focus on the environment, society and governance.
Global assets professionally managed under sustainable and responsible investment strategies soared to $23 trillion in 2016.
Millionaire Investor Confidence Soars
Growing optimism about Trump administration proposals to reform the U.S. tax system lifted sentiment among affluent investors in April to its most bullish level in years, Spectrem reported.
The Spectrem Millionaire Investor Confidence Index rose 10 points from March to 20, the largest month-to-month increase since January 2014 and just the third time in the last decade that the index has reached 20.
The Spectrem Affluent Investor Confidence Index gained four points to 10 in April, its highest reading since July 2015, and up six points from the same period last year.
The monthly investor confidence indices track changes in investment sentiment among the 16.3 million American households: affluent ones with more than $500,000 of investable assets and millionaire ones with $1 million or more.
The April survey was fielded at mid-month.
A recent study found that 1,700 millionaires are minted in the U.S. every day.
Spectrem said the surge in confidence was largely driven by millionaires’ growing interest in re-engaging with the market. Only about a quarter said they would stay on the investment sidelines, a 20-month low.
In addition, the percentage of millionaires who said they would invest in stock mutual funds in the coming month surged by some 15 percentage points to 50%, a 39-month high. Their intention to invest in stocks was little changed from the previous month, at 43%.
Also pushing indexes higher was the Spectrem Millionaire Household Outlook, a monthly measure of confidence across four financial factors that affect an investor’s daily life: household income, household assets, company health and the economy.
At 33.40, the April outlook was at its highest level since November 2014. Confidence in household assets was at a 33-month high, and household income was at a 26-month high.
Company health and the economy were flat in comparison with the previous month, but all four components were up from April 2016.
“The sudden uptick in confidence among millionaires in April is likely a reaction to a strong first quarter performance in the markets, with the S&P 500 Index and NASDAQ rising nearly 6% and 10%, respectively, during the period,” Walper said.
“Although non-millionaires are more tempered in their optimism than their millionaire counterparts, they too were more confident in April than they have been in quite some time.”
— Check out Top 10 Surprising States With Most Millionaires on ThinkAdvisor.