At least on paper, Ultra High Net Worth investors are doing alright. On a scale of 0 to 100, on which 100 equals “wealthy,” these investors with a net worth between $5 million and $25 million (not including primary residence) grade themselves at 74. They also anticipate significant boosts to their current wealth position. What do they foresee providing this significant boost?
According to Financial Behaviors and the Investor’s Mindset: Ultra High Net Worth Investors 2016, the largest percentage of surveyed UHNW investors (67 percent) anticipate getting better future returns from investments. “These elite investors put a lot of stock in their investment knowledge and abilities,” observes Spectrem President George H. Walper, Jr. “They rank ‘smart investing’ along with hard work and education as the three primary factors in their wealth creation. But just behind that is frugality, and so it is telling that the next largest percentage (17 percent) anticipate getting a significant boost to their current wealth position by more stringent budgeting to cut down on spending.”
Fourteen percent of UHNW investors anticipate that an inheritance will provide a significant boost to their current wealth position, while less than 10 percent project that they will earn greater earnings from their current or future job (9 percent) or a change in their household, such as children leaving home, which would impact spending patterns.
Analysis by age finds significant generational differences in projections of what will provide the most significant boost to the current wealth position in UHNW households. Anticipation of better future investment returns increases with age with 57 percent of UHNW Millennials and Gen Xers looking toward seeing better investment returns in the future, compared with 64 percent of Baby Boomers and 76 percent of World War II generation investors.
UHNW Millennials and Gen Xers, closer to the beginning of their work careers, are significantly more likely than older generations to anticipate higher income from their current or future job (53 percent vs. 8 percent of Baby Boomers and just 3 percent of the oldest investors ages 71 and up.
The youngest investors, too, comprise the largest percentage of surveyed UHNW households, who anticipate received the most significant boost in their current wealth position from receiving an inheritance (25 percent), and budgeting and frugality (25 percent).
Analyzed by advisor-dependency, the largest percentage of UHNW investors who anticipate better future investment returns providing them with a significant boost to their current wealth position are the least (self-directed) and the most advisor-dependent (advisor-assisted and advisor-dependent).
Across occupation segments, business owners are the most likely to anticipate a significant boost to their current wealth position from better future investment returns (73 percent), a major event such as selling their business (36 percent), and more stringent budgeting (28 percent).