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June 21, 2017 at 12:30 PM
As Americans’ definition of wealth evolves from a lofty, unattainable number to something more attainable, so does the industry need to evolve.
“We’ve watched as many firms set their account minimums high and their fees higher, making it difficult for people to access professional planning and advice,” Terri Kallsen, executive vice president and head of Schwab Investor Services, said in a statement. “As Americans’ definition of wealth evolves, the industry needs to modernize its approach to find new ways to deliver good value and a great experience to a broader population.”
(Related: What Fee Compression? Advisor Fees Show Little or No Decline)
Rob Williams, director of income planning for the Schwab Center for Financial Research, told ThinkAdvisor that he agrees.
“The industry does need to modernize, and it is,” he said, adding that it should not only be a question of having a lot of money. “It’s not a closed club. Everyone should be involved.”
Schwab developed the Modern Wealth Index to help track how well Americans across the wealth spectrum are planning, managing and engaging with their wealth.
The index, which is based on a survey of 1,000 Americans aged 21 to 75 conducted from April 12 to April 20, asked Americans how they define “wealth.” The survey found two opposing views, with some describing wealth as a specific sum of money and others describing it more as a state of mind.
When asked to define wealth, the top sentiments were having a lot of money (27%), enjoying life’s experiences (24%), being able to afford anything they want (22%), living stress-free and having peace of mind (19%), and having loving relationships with family and friends (12%).
When asked to express how much is required to be considered “wealthy” in America, survey respondents say it’s an average of $2.4 million, or nearly 30 times the actual median net worth of U.S. households according to the U.S. Census Bureau.
However, when asked to compare these two opposing ideas of wealth at a more personal level, Americans lean into things that money can’t buy: 65% equate wealth with having good physical health vs. having lots of money (35%) and 58% say wealth is about having gratitude vs. having money (42%).
Kallson echoed these findings when she said that “wealth is often thought of as a lofty, unattainable number that doesn’t apply to most of us, but that’s an old-fashioned notion that needs to be retired.”
“It doesn’t matter whether you have a lot or a little — what matters is that you think about the money you have as your wealth, and that you pay attention to it,” she said in a statement. “Being engaged is the only way to reach your personal goals.”
In order to make planning and wealth accumulation and management more attainable for more Americans, Williams said that simplicity and transparency is needed within the industry.
