Spectrem’s Affluent Investor Index is a monthly survey designed to determine how investors currently feel about the state of the economy and the state of their portfolio. The index is regularly segmented by age, gender, political affiliation and wealth, but when it is segmented by working status, the most significant dichotomy is revealed.

 “Advisors have two sets of clients, those who are working and want to improve their eventual retirement from a financial standpoint, and those who are already retired and want to improve or maintain their current financial status,’’ said Spectrem president George H. Walper Jr. “The index indicates that the current economic outlook for those two segments could not be much farther removed from each other. On average, retirees simply don’t have the same optimistic outlook or the same level of confidence in the economy and their own financial picture.”

To begin, the August Spectrem Affluent Investor Confidence Index, which tracks changes in investment sentiment among investors with more than $500,000 of investable assets, was at 7, a one-point improvement over the previous month.

But when investors were segmented by retirement status, the Index showed to be at 15 for investors still working (that same one-point improvement) and only at -2 for retired investors (the same as in July). That 17-point gap is wider than the gaps show when segmenting for wealth or political affiliation.

(Notably, the gap between male and female investors is larger, with males having an index rating of 13 and females with a rating of negative 6.)

Millionaire retirees reported a much higher index rating for August than they had in July, going from 5 to 11, and nearly matching the Millionaire working investor rating of 13.

The Spectrem Household Outlook, which asks investors to rank four financial components (Household Income, Household Assets, Economy and Company Health) in their lives, shows nearly constant dissimilarity between investors who are working and those who are retired. The overall outlook rating is 33.63 for non-retired investors and 14.3 for retired investors; for comparison, the difference between the Outlook for males and females was less than 15 points but the gap between Republicans and Democrats in August was higher than it was for the working-retired segment. Republicans had an outlook of 33.43 and Democrats were much less optimistic, with an outlook of 12.69.

From an investment standpoint, the major difference between retired and not retired investors is simply activity. While only 26 percent of working investors said they were not investing in July, 48.4 percent of retired investors stayed on the sidelines from an investment standpoint. However, that is a decrease of almost 4 percent of retired non-investors from July.

The Spectrem Affluent Investor Confidence Index includes a rotating question that deals with current issues affecting investing and finance. When asked to select the one news story most affecting the economic outlook of investors, 43 percent of working investors chose “the political environment” while only 34 percent of retired investors did so.

The retired investors were more likely than working investors to select “taxes, 7 percent to 4 percent) and the economy (7 percent to 2 percent) 

Top Takeaways for Advisors

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There is a world of difference between investors who are working and investors work are retired from the standpoint of outlook and financial confidence. Advisors must remember that retired investors are not done trying to improve their portfolio, but they can feel trapped in their financial circumstances and could use positive reinforcement from their financial professional.  

 

©2017 Spectrem Group