Where Did the Mass Affluent Households Go?

U.S. households with $5 million or more in investable assets claimed the bulk of the pandemic market runup, while mass affluent households with $100,000 up to $500,000 dropped in number over the same time period, according to a recent report by Hearts & Wallets, a market research and benchmarking firm.

The report is based on government sources and a Hearts & Wallets Investor Quantitative Database survey fielded in August 2020 with a sample of 5,920 U.S. households. 

The survey found that as of last August, nearly 80% of wealth, $53.8 trillion, was held by about 10% of U.S. households with $1 million or more. 

Although the $29 trillion increase in retail investable assets over the past seven years was spread across households with at least $500,000, more than 80% of the coronavirus market runup of $12.7 trillion went to households with $5 million or more. 

These assets are heavily concentrated among people 55 to 74 because most households with $5 million-plus are in this age group, Hearts & Wallets reported. These older, wealthier households control $40.2 trillion of the $68.3 trillion, or 59% of all U.S. retail investable assets. 

The 1% of U.S. households that are in the 55-to-74 age group and have $5 million or more control 32% of all U.S. retail investable assets.

Disappearing Mass Affluent

In 2019, mass affluent investors in the $100,000 to under $500,000 wealth group accounted for 25.3 million households that controlled $7.5 trillion. The survey found that in 2020, these numbers dropped to 21.9 million households with $5.6 trillion, resulting in a one-year decline of 3.6 million households controlling $1.9 trillion less in investable assets.

The report said many households in the mass affluent wealth groups moved into higher wealth groups in 2019, but fewer households in asset groups below the mass affluent level moved up to replenish the mass affluent than in prior years. 

The main reason for lack of upward mobility? These households could not save enough or had little or no exposure to equities.

“Wealth groups often referred to as mass affluent took a major hit over the past 18 months as the COVID market runup polarized wealth concentration in America,” Laura Varas, chief executive and founder of Hearts & Wallets, said in a statement. 

“Simplified investment solutions could encourage the mass affluent to engage with the capital markets.” 

Inheritance Myth 

Looking ahead, the fastest-growing age group is 75 and older. According to the report, households in this age group will increase by 40% to 20.8 million in 2030, up from 14.9 million in 2020. By 2030, these households will account for 15% of all households, up from 12% in 2020.

“A common myth is that inheritances will go from boomers to millennials, when the reality is the majority of wealth transition will go from the Silent Generation to their Gen X heirs,” Amber Katris, subject matter expert at Hearts & Wallets, said in the statement. 

“Older households and their families can benefit from support to have difficult conversations about finances and from financial solutions to support aging family members.” 

(Photo: Adobe Stock)