Data & Research May 6, 2008

Affluent Boomers Adjust Portfolios Because of Economic Worries

One in four affluent Baby Boomers is changing his retirement plan and 40% are downsizing their lifestyles in response to the economic downturn, according to Bell Investment Advisors annual Affluent Boomer Survey.
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A press release on the survey results said almost one quarter (23%) of affluent Boomers turning 60 this year said they are planning to change their investment strategy in preparation for a potential recession. Of those, the majority (69%) plan to invest in more conservative investments such as money market funds and bonds, while only 21% plan to invest more in stocks or stock mutual funds.

Though most said they plan to shift to more conservative investments, more than half (54%) said seeking higher returns is their primary goal for the next five years.”This finding underscores the fundamental lack of understanding many investors have about risk and return,” said Jim Bell, founder and president of Bell Investment Advisors. “Boomers will not achieve higher returns if they shift to more conservative investments as the survey findings suggest.”

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The survey found almost 30% of affluent Boomers said they have more financial stress now than they did six months ago, with affluent female boomers reporting more financial stress than men (35% verse 24%). Of the 25% Boomers who said they are changing their retirement plans due to the economy, more women (31%) than men (19%) indicated they are making changes.

Lifestyle changes cited by boomers surveyed include contributing less to charity (22%); cancelling, shortening, or postponing a vacation (21%); reducing retirement savings (18%); and postponing retirement altogether. Forty percent of respondents said they are reducing spending in response to the economy, and only 4% said they downsized housing.

Over a fourth (28%) of affluent boomers reported that they either lost a job in the last 12 months or know someone age 60 or over who has. More than one third (35%) of the most affluent boomers surveyed (those with more than $3 million earmarked for retirement) were affected by job loss, compared with just 24% of those with $1 to $3 million saved, and 30% of those with under a million saved for retirement.

The Affluent Boomer Survey was conducted by Opinion Research Corporation from April 1 to 6, among a random sample of 500 adults composed of 250 men and 250 women who were born in 1948 and have investable assets of $1 million or more.

More information is available at www.bellinvest.com.

Compliance May 6, 2008

California Abandons Proposal of Investment Manager Registration Rule

The California Department of Corporations shelved a proposed amendment requiring certain California investors to register.
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The proposed amendment was introduced last October to Rule 260.204.9, which exempts from registration any person who is not publicly an investment adviser; has few than 15 clients; has assets under management of $25 million or more; or works for venture capital companies.

The proposed amendment would have limited the registration exemption to advisers who work for venture capital companies. All other advisers would have been required to register with the Department of Corporations or the Securities and Exchange and Commission.

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The Department’s proposal was an attempt to require the registration of hedge fund managers who are no longer subject to federal regulation, said a news alert from Bingham McCutchen law firm. The withdrawal of the amendment means California will remain one of the few states (along with New York and Connecticut) in which most hedge fund and private equity fund advisers located or doing business within its borders are not required to be registered with that state’s securities regulator.

“After a review of the comments received during the public comment period, further consideration of the rulemaking action, and in light of the ongoing actions by federal regulators, the California Corporations Commissioner has determined that the proposed amendment is premature at this time,” according to a statement from the department on Thursday, reported in HedgeWorld.

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