A recent study Charles Schwab finds that Americans have very different views of what wealth means. Their definitions of the term range from a specific amount of money to a specific state of being.
When it comes to a monetary definition, the firm found that Americans set the bar high. Asked how much money is needed to be wealthy, Americans on average reported $2.4 million or 30 times the actual median net worth of U.S. households. This is of particular concern for advisers considering the common notion that financial advice is an option only available for the wealthy. However, research indicates several Americans desire advice about saving and investing.
“Wealth is often thought of as a lofty, unattainable number that doesn’t apply to most of us, but that’s an old-fashioned notion that needs to be retired,” said Terri Kallsen, executive vice president and head of Schwab Investor Services. “It doesn’t matter whether you have a lot or a little—what matters is that you think about the money you have as your wealth, and that you pay attention to it. Being engaged is the only way to reach your personal goals.”
However, Kallsen believes the industry as a whole could improve its efforts to erase the misconception.
“Not every investment firm is built to encourage this level of engagement across investors of all types and sizes, Kallsen explains.” We’ve watched as many firms set their account minimums high and their fees higher, making it difficult for people to access professional planning and advice. As Americans’ definition of wealth evolves, the industry needs to modernize its approach to find new ways to deliver good value and a great experience to a broader population.”
But even though the top answer respondents picked when asked to define wealth was having a lot of money (27%), the survey found Americans also associate wealth with a state of being or a state of mind.
The next top answers were enjoying life’s experiences (24%),being able to afford anything they want (22%), living stress-free and having peace of mind (19%), and having loving relationships with family and friends (12%).
These results were generated from Charles Schwab’s “Modern Wealth Index.” The annual study aims to gauge how Americans across the wealth spectrum are planning, managing, and engaging with their wealth.
The study also found that written financial plans help Americans make good choices.
Additional findings from the 2017 Modern Wealth Index can be found at aboutschwab.com.