Two thirds of high-net-worth American households with five million or more in investable assets believe the country is worse off now than it was in 2007, according to survey findings by Northern Trust.
Respondents cite the rising deficit, ballooning national debt and stubborn unemployment rate as the main reasons they’re worried about the nation’s five-year outlook. Among high net worth investors, 29 percent attribute their negative outlook to the Obama Administration, but roughly the same number pointed to the President’s re-election as a reason for their positive outlook on the future.
Although most respondents believe the country is worse off, wealthy business owners showed a more positive outlook. Eighty percent said they planned to recruit more workers or would keep staffing levels stable in the next 18 to 24 months; 22 percent anticipate making capital investments in upgrading computers and other information technology within the same time period.
“The survey results mirror our clients’ divergent views around U.S. fiscal policy,” said Katie Nixon, Northern Trust’s Chief Investment Officer for Wealth Management. "In Northern Trust’s view, slow economic growth in the U.S. combined with an accommodative monetary policy, lends support to investing in risk assets such as equities."
Achieving Financial Goals
When describing the state of their own finances, close to three-quarters of high-net-worth individuals expressed confidence that they will achieve their financial goals, with only one in five less confident now than they were in 2007. Forty-one percent sited improved investment returns as the main reason they feel better off today. High-net-worth investors were split on their primary investment objectives, with 37 percent leaning towards growing wealth and 23 percent focused on generating income. The remainder said their paramount concern was capital preservation.
Just one quarter said they’re in a worse financial position now than in 2007. Negative sentiment was slightly stronger among men, with 25 percent versus 20 percent of women saying their household family finances had worsened. High-net-worth men were also less optimistic about the broader economy: 70 percent believe the country is worse off today compared to five years ago, compared to 56 percent of women.
A different picture emerges for investors with an average of 500,000 dollars. For this group, confidence has been shaken, with fewer than half expressing a high level certainty they will achieve their financial goals. Just 60 percent of affluent investors, who have $2.3 million on average, express a high level of confidence.
Investing Amid Uncertainty
The need to align financial goals with investments emerged as an important theme for high-net-worth respondents. A large majority (81 percent) said they prioritize the achievement of their life goals when they do their financial planning. Forty-one percent believe diversification of their investments is the most important action they have taken to make sure their life goals are met. Nearly one quarter said they had also increased their savings to achieve their long-term goals.
“Our survey found that 63 percent of wealthy investors are willing to take a calculated risk," said Ms. Nixon. “We know that risk and return are related, and we believe in taking thoughtful risk for clients to enable them to accomplish their financial goals. The success of this approach is no longer measured solely as performance versus an industry benchmark, but is measured against the achievement of client goals. Re-defining success, and building portfolios aligned with goals allows clients to avoid some of the behavioral pitfalls that plague investors."
More information is available on Northern Trust’s website at http://www.northerntrust.com/wealthinamerica.
Northern Trust’s nationwide survey of wealthy individuals seeks to highlight important wealth management issues. The online interviews were conducted by Phoenix Marketing International and NIA Enterprises between November 16 and December 17, 2012. The data contained in this report came from 1,700 online interviews and has a margin of error of +/- 2.4 percentage points at a 95 percent level of confidence.
Northern Trust is a premier wealth management firm that specializes in goals-based financial advice. We offer clients insightful perspectives and creative thinking, backed by innovative technology and a strong fiduciary ethos. Northern Trust is ranked among the top 10 U.S. wealth managers with $197.7 billion in assets under management as of December 31, 2012, and more than 70 wealth management offices in the United States and abroad. The Financial Times Group has named Northern Trust Best Private Bank in the USA for four consecutive years. In 2012 Northern Trust was also was named Best Private Bank globally for Innovation and Best Private Bank for Socially Responsible Investing.
About Northern Trust
Northern Trust Corporation (Nasdaq: NTRS) is a leading provider of investment management, asset and fund administration, banking solutions and fiduciary services for corporations, institutions and affluent individuals worldwide. Northern Trust, a financial holding company based in Chicago, has offices in 18 U.S. states and 16 international locations in North America, Europe, the Middle East and the Asia-Pacific region. As of December 31, 2012, Northern Trust had assets under custody of US$4.8 trillion, and assets under investment management of US$758.9 billion. For more than 120 years, Northern Trust has earned distinction as an industry leader in combining exceptional service and expertise with innovative products and technology. For more information, visit www.northerntrust.com or follow us on Twitter @NorthernTrust.