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High net worth investors lack confidence in stock market

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Nearly a year and a half after the 2008 economic meltdown more than half of high net worth Americans still lack faith in the stock market, according to a survey of CPA financial planners conducted by the American Institute of Certified Public Accountants.

Fifty-four per cent of respondents said their clients, who typically have between USD500,000 and USD5m in assets, are currently not very confident in the market.

Nearly three quarters, 74 per cent, said clients have grown more risk averse in their investment decisions in the past year.

Sixty-two per cent reported that retirement-age clients are postponing retirement from one to five years.

"Regardless of net worth, every American has to make it a priority to understand how the prevailing economic climate, whether it’s good or bad, affects individual personal finances," says Clark M. Blackman II, chair of the AICPA’s Personal Financial Planning Executive Committee. "This new survey of CPA financial planners shows that wealthy investors still feel nervous about the stock market and are being conservative in their investment decisions."

The temporary suspension of the estate tax is not spurring them to take action on their estate plans, especially with speculation that Congress at some point this year may reinstate the tax retroactively.  A large majority, 82.3 per cent, said their clients are taking a wait-and-see attitude toward estate tax planning.

Financial means notwithstanding, high net worth clients have reduced their spending. A total of 87.3 per cent of respondents said their clients were either spending slightly or significantly less.

Six in ten of the CPAs surveyed, 58 per cent, reported that anticipation of higher future tax rates was most likely to trigger 2010 conversions of traditional individual retirement accounts to a Roth IRA. Nearly as many, 54 per cent, say they are advising clients to pay tax on Roth IRA conversions in 2010 despite an IRS allowance that allows taxes to be paid over three years. Roth IRAs offer several advantages over traditional IRAs.

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