Emerging Millionaires: An Opportunity For Advisors - But Expect A Change In Demographics - Survey

Eliane Chavagnon, Editor - Family Wealth Report, January 17, 2014


The millionaire-of-tomorrow’s mindset

Looking at each of the above-identified behavioral traits, Fidelity’s study found that this emerging segment is generally on the ball financially, with 77 per cent having reported that they already have or are currently managing household expenses more closely, and 85 per cent feeling they are in control of their debt. Increasing wealth was their second top financial goal, and over quarter (27 per cent) said they were looking to improve their returns on investments.

However, they may be missing the investor mentality to boost their wealth. For example, the study found that cash, CDs and money markets constitute the second-largest asset category in their portfolios, and close to half (45 per cent) reported they are focusing their investment strategies on reducing risk, minimizing loss and avoiding market volatility. But as wealth increases, so too does the level of complexity of managing it.

In addition to the alarming finding that 77 per cent of the respondents do not have a financial plan, nearly four in ten do not even intend to establish one. Yet, respondents tended to cite not having enough saved for retirement as their top financial concern.

“Millionaires of Tomorrow seem to appreciate the importance of saving for retirement now if they are to be well positioned in the future,” said Oros. “But without a plan in place to reach their goals, they may not be taking the necessary steps to save enough for retirement.”

Meanwhile, as regards the finding that 70 per cent lack investing knowledge, it is interesting to note that only 51 per cent are turning to financial advisors while 39 per cent are opting to “go it alone,” Fidelity said. Additionally, of those not working with an advisor, 46 per cent felt advisors aren’t interested in investors with smaller assets, and 53 per cent were put off by advisor fees.

“Keeping in mind the long-term value these relationships may bring, advisors may want to consider altering their fee structures or their services to cater to this fee-averse group,” Fidelity said.

As Michael Liersch, director of behavioral finance at Merrill Lynch Wealth Management previously told Family Wealth Report: “I think the biggest opportunity based on what we’re seeing from the data is that younger investors want to be seen as individuals and they want advisors and wealth managers to come to them with a structured way of helping them articulate what they want out of the investment process and what they need to do to achieve that.”

Affluent Investor Insights was an online study conducted by Bellomy Research, an independent firm not affiliated with Fidelity Investments, from May 16, 2013, to May 29, 2013. It was focused on understanding investors’ attitudes, behaviors, and preferences related to investing, wealth management, and advice usage. It was held among a target sample of 813 respondents.

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