Mo’ money, mo’ concerns?
Ultra High Net Worth investors have heightened concerns over national financial issues compared with their personal financial situation, according to our new wealth segmentation study of households with a net worth between $5 million and $25 million.
According to our Financial Behaviors and the Investor’s Mindset: UHNW Investors 2016, UHNW investors are more concerned about the political environment and government gridlock than they are about their personal financial situation. The increasingly contentious presidential race has no doubt heightened concerns among these elite investors about the economic direction of the country in the event one of the likely nominees—who have starkly different economic views—is elected. Roughly nine-in-ten UHNW investors cite the political environment as their primary national concern. This is up slightly from last year. There is more increased concern over last year that the nation’s political leaders cannot or will not work together to fix the country’s economic problems. Eighty percent cite government gridlock as their primary national concern, compared with 73 percent in 2015.
In contrast, less than half (44 percent) express concern about maintaining their current financial position. This is, however, up from 38 percent who expressed the same concern in 2015.
On the national front, UHNW investors are expressing heightened concern compared with the previous year about terrorism (76 percent vs. 73 percent), stock market performance (77 percent vs. 68 percent), and the national debt (78 percent vs. 74 percent). Tax increases are a primary national financial concern among seven-in-ten (72 percent) UHNW investors.
More than half (56 percent) are most concerned about low savings rate interest, while 48 percent are concerned about inflation and just over one-third (46 percent are concerned about an increase in interest rates, news about which have played havoc with the market in recent years when speculation was rife about if or when the Federal Reserve would at last raise interest rates for the first time in a decade
On the home front, UHNW investors indicate they are more concerned about health issues than financial ones. More than half (55 percent) are concerned about their spouse’s health, while half express concern about their own. Roughly half (48 percent) are most concerned about spending their final years in a care facility, while four-in-ten are primarily concerned about having someone to take of them in their own age (44 percent) or assuming responsibility for their aging parents (41) percent.
We find that age is not a significant factor in what national financial issues concern UHNW investors. Millennials and Gen Xers, though, are significantly less concerned about the political environment and government gridlock than are Baby Boomers and World War II generation households.
These younger investors are more concerned than their older counterparts about financing their children’s education, while the oldest UHNW investors express concern about health issues.
These findings are a reminder to financial advisors that long-term relationships with their clients are more than investment track record and portfolio standing. We recommend:
· In talking to new and existing clients, delve deep into the national and personal issues about which they are most concerned. These can be factors in determining their risk tolerance.
· Be proactive in communicating with clients, especially in times of market volatility. UHNW investors have the highest expectations of service and would appreciate communication that anticipates their questions and concerns.
· Be responsive if a client contacts you with their concerns. Our research finds that the primary reason investors would seek a new financial advisor is that their own did not return calls or e-mails in a timely manner.
· Educate your clients about the national issues that concern them, such as interest rates and how a rise could impact the economy and their investments.