Good news for advisors looking to land affluent clients: Wealthy Americans are starting to regain confidence in future business and market conditions.
The American Affluence Research Center asked 335 people (each with a minimum net worth of $500,000) about their expectations for business conditions over the next 12 months. Fifty-four percent of respondents said they believed conditions would be better, and 55 percent said they expected the stock markets to improve.
The AARC’s future business conditions index for the spring was 139, a marginal improvement from the 131 recorded in the fall of 2002. However, the AARC’s stock market expectations index for the spring was 144, considerably higher than the 123 from the fall 2002 survey. An index of 100 indicates a neutral sentiment.
"The increase in optimism was important," says Howard Waddell, executive director of the AARC. But more importantly, says Waddell, a lag in retail sales bodes well for the investment industry.
The majority of wealthy Americans believe their income will change little or increase in the coming year. But there are still signs that all is not right: The wealthy continue to tighten their belts. Seventy-one percent of the survey’s respondents had delayed "non-essential purchases" and spent less on vacations since the market began its decline in 2000. In the fall 2002 survey only 56 indicated they had cut back.
"They’re still a little uncomfortable, still sitting on the sidelines," says Waddell, "but they’ve still got that income and what are they going to do with it? They’re going to put it into savings," says Waddell.
When asked if they planned to contribute a higher or lower percentage of income to savings or investment in the next 12 months 64 percent of respondents indicated they would make little or no change. However, 21 percent indicated they would devote a higher percentage of income to savings or investments.
The survey results also indicate that advisors might find greater success targeting a specific segment of the affluent market. According to the survey, those with the highest rates of saving and investing had $1 million or more in investable assets, had incomes of $200,000 or more and had a net worth of over $4 million.