Two thirds of high-net-worth American households with USD5m 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 per cent 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 per cent said they planned to recruit more workers or would keep staffing levels stable in the next 18 to 24 months; 22 per cent 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 US fiscal policy,” says Katie Nixon, Northern Trust’s chief investment officer for wealth management. "In Northern Trust’s view, slow economic growth in the US combined with an accommodative monetary policy, lends support to investing in risk assets such as equities."
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 per cent 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 per cent leaning towards growing wealth and 23 per cent 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 per cent versus 20 per cent of women saying their household family finances had worsened. High-net-worth men were also less optimistic about the broader economy: 70 per cent believe the country is worse off today compared to five years ago, compared to 56 per cent of women.
A different picture emerges for investors with an average of USD500,000. For this group, confidence has been shaken, with fewer than half expressing a high level certainty they will achieve their financial goals. Just 60 per cent of affluent investors, who have USD2.3m on average, express a high level of confidence.
The need to align financial goals with investments emerged as an important theme for high-net-worth respondents. A large majority (81 per cent) said they prioritise the achievement of their life goals when they do their financial planning. Forty-one per cent 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 per cent of wealthy investors are willing to take a calculated risk," says 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 behavioural pitfalls that plague investors."
