With great wealth comes great confidence in one’s financial knowledge. Our first quarter wealth segment studies bear this out.
Financial Behaviors and the Investor’s Mindset: Ultra High Net Worth Investors 2016 finds that investors with a net worth between $5 million and $25 million (not including primary residence) are more confident than their less wealthy counterparts that they are “very knowledgeable” about financial products and investments. Forty percent of UHNW feel this way vs. 21 percent of Millionaires and 12 percent of Mass Affluent households with a net worth between $100,000 and $1 million.
UHNW investors are also the most likely to credit their smart investing for their wealth creation. Eighty-five percent credit their investing acumen compared with 79 percent of millionaires and 69 percent of Mass Affluent investors.
As with less wealthy households, the largest percentage of UHNW investors (51 percent) consider themselves “fairly knowledgeable” with still a great deal to learn. This is a lower percentage than Millionaires (59 percent) and the Mass Affluent (55 percent).
Only 17 percent of UHNW believe themselves to be “not very knowledgeable, with an understanding of some things.” A scant 3 percent consider themselves “not at all knowledgeable.”
An analysis by age reveals some telling financial confidence gaps. Among those who consider themselves just “fairly knowledgeable,” the largest percentage (57 percent) are from the WWII generation ages 71 and up, followed by Baby Boomers ages 52-70 (50 percent)
At 37 percent, UHNW Millennials ages 35 and under and Gen Xers ages 36-51 are the least likely to consider themselves only “fairly knowledgeable.” Conversely, these younger age segments are significantly more likely than older generations to profess to be “very knowledgeable” about financial products and investments (51 percent). In comparison, just 42 percent of Baby Boomers and 34 percent of the WWII generation consider their financial knowledge to be on that level.
Interestingly, UHNW Millennials and Gen Xers are more likely than Baby Boomers and the WWII generation to admit to being “not very knowledgeable” (12 percent vs. 7 percent and 8 percent, respectively).
It is not the wealthiest UHNW investor who has the most confidence in their financial knowledge. Half of these investors with a net worth between $10 million and $14.9 million consider themselves “very knowledgeable,” vs. 41 percent of those with between $15 million and $25 million and just 36 percent of those with between $5 million and $9.9 million.
The least wealthy UHNW investor is most likely to consider themselves to be just “fairly knowledgeable.”
This may not surprise you: Among various levels of advisor-dependency, it is the self-directed, who make their own financial and investment decisions, who comprise the largest percentage (57 percent) who consider themselves “very knowledgeable.” Also as might be expected, UHNW professionals, such as doctors or lawyers (50 percent) and senior corporate executives (53 percent) also are the most likely across occupations to consider themselves the most knowledgeable about financial products and investments.