Even millionaires are now worried about retirement.
A new survey released by Merrill Lynch earlier this week showed increasing concern about retirement among affluent Americans with $250,000 or more in investible assets. But clients with $1 million or more in investible assets are also worried, and are reconsidering their portfolios and retirement planning approaches, say wealth managers.
“There’s a newfound feeling of vulnerability among wealthier clients,” said Lyle LaMoth, head of U.S. Wealth Management for Merrill Lynch Wealth Management. “They thought they had what they needed, but now they can’t get six percent to seven percent on their fixed income. So what they thought was ‘the number’ doesn’t feel like the number anymore and they’re not feeling as affluent.”
As a result, high net worth clients are taking less risk, saving more and even postponing retirement, according to wealth managers.
“Clients with $1 million to $10 million want to make sure they don’t blow it,” said Wes French, partner at French, Wolf & Farr, an Atlanta-based wealth management firm with $250 million in assets. “They’re much more concerned about protecting the downside and they’re spending a great deal less. The folks I’m meeting with are less concerned about missing a speculative surge in one asset class or another and much more interested in having a thoughtful, well-crafted strategy that gives them upside potential with protection on the downside.”
In Arizona, doctors, lawyers and other professionals are putting off retirement, even if they have accumulated $1 million or more, according to Timothy Rowland, chairman, Rowland Carmichael Advisors in Scottsdale, Ariz. “They may have more zeroes in their statements, but their behavior is the same,” said Rowland, whose firm manages about $385 million in assets. “Everybody is working twice as hard for half the money. They’re trying to build up cash and don’t want to repeat 2008.”
New Jersey-based Tom Orrechio, principal of Modera Wealth Management said even clients with as much as $4 million in assets are feeling vulnerable. “They’re most worried about what happens if the market drops and they end up in a nursing home,” Orrechio said. “They want to maintain their standard of living and long-term care is a legitimate concern for them.”
Reviewing Portfolios
Accordingly, Orrechio, whose firm has approximately $950 million in assets under management, said he’s sitting down with these clients and reviewing both cash flow and life style. “We want to see what’s necessary and what’s not,” he said. “We’re asking if they have the necessary stuff protected for the rest of their life and making sure they have ample cash. And knowing they can get by on this cash if the market craters puts them more at ease.”
In addition to stressing broad diversity as a way to manage risk for his clients’
retirement portfolio, French said he also wants to make swift tactical decisions in response to market conditions. For example, he pointed to the “incredible run” of small cap stocks and said after seeing a 30 percent appreciation he decided to protect his clients’ profits and cut back on their holdings. “We want to look for under appreciated assets,” he said.
Women More Concerned
The Merrill Lynch survey also found that among the affluent, women are more concerned and less confident about retirement than men. That’s something that seems to be true among those with over $1 million in assets as well, said wealth managers.
“Women are much more cautious,” said Rowland. “They tend to live longer and feel they have a lot of responsibility. When we’re working with a couple, it’s very rare that the wife is the optimistic one.”
Orrechio said that even for his wealthy female clients, “it’s more about the money being there than making money. Making sure the family is secure is very important for them.”
Both wealthy male and female clients nearing retirement are also expressing increasing concern about making sure their children and grandchildren are provided for, according to Sharon Oberlander, a Merrill Lynch managing director and wealth management advisor who heads the Oberlander Group in Chicago. “They’re definitely thinking about it more and talking about education costs and other things their children and grandchildren may need,” she said. “They feel less secure than they used to.”