When researching investors, Spectrem segments them by wealth, age, gender and political party to see if there are indications any of those factors weigh more heavily in investment decisions.
From the standpoint of investor confidence and outlook, one of the most telling segmentations is when investors are separated by working status.
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. When the index is segmented by retirement status, a major dichotomy of opinion appears.
“This information is very significant in terms of how advisors view retirees,’’ said Spectrem president George H. Walper Jr. “While it is true, and our research shows, that affluent retirees do manage to enjoy their life outside of the workplace, the index indicates that they do have concerns about the economy as a whole and its impact on their investments, which are their financial lifeblood.”
Let’s start at the top, with the July Spectrem Affluent Investor Index, which tracks changes in investment sentiment among investors with more than $500,000 of investable assets. Among that group, the index for July was at 6, an improvement from June.
But when investors were segmented by retirement status, the Index showed to be at 14 for investors still working and only at -2 for retired investors. That is a wider gap than is shown by segmenting for wealth (between $500,000 in investable assets and $1 million), gender or political affiliation.
The gap is similar among investors who are in the $1 million-plus category, with those still working grading the index at 19 and those retired posting a score of 5.
The Spectrem Household Outlook, which asks investors to rank four financial components in their lives, shows similar dissimilarity. The overall outlook rating is 35.10 for non-retired investors and 13.5 for retired investors; for comparison, the difference between the Outlook for males and females was less than 10 points, 27.87 for males and 18.42 for females. Even the Republican-Democrat split (33.16 to 15.36) was not as great as the gap between retired and not retired investors.
It makes sense that the outlook related to Household Income would differ greatly, but the Household Assets rating split was 64.00 for non-retired investors and 31.9 for retired investors. The one area in which the two segments virtually agreed was in rating the Economy, with non-retired investors placing their outlook at 10.80 and retired investors placing it slightly lower at 7.1.
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, 52. 2 percent of retired investors stayed on the sidelines from an investment standpoint. Stock and stock mutual fund investing among retirees was way below that of the working investors.
Top Takeaways for Advisors
There is such a world of difference between investors who are working and investors work are retired. 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