HNW Americans More Pessimistic, Risk-Averse

The economic turmoil over the last couple of years has shaped the way high-net-worth individuals view their own investment portfolios, their economy, and their government, a new report shows. 

As a result of experiencing a negative impact on their personal net worth as a result of the global economic downturn (cited by 37% of respondents), many wealthy Americans are taking a more active role in their money management, according to a new report by Barclays Wealth, “The Changing Wealth of Nations.”  Nearly half (44%) are reviewing their investment portfolio more than they were before the recession, and 22% say they now spend more than five hours each week actively investing their money. 

However, this increased interest in their portfolios has not translated to more reliance on their advisers or peers for advice.  Post recession, the majority have not changed how frequently they are speaking with their financial advisers, nor their friends and colleagues about investing (56% and 64%, respectively). 

Investment Strategies

The majority (60%) divulge that the global downturn has made them more concerned about wealth preservation, and nearly half (47%) are avoiding high-risk investments more than they were before the downturn. 

Approximately half of the U.S. respondents believe that the U.S. (49%) and global (51%) economies will continue to deteriorate either over the next few years, or at least over the next year before then improving.  While approximately one-third (34%) believe the U.S. economy is currently stable, that same group foresees only limited growth over the next few years. 

As for what investments wealthy Americans are selecting, Barclays found that lower risk and an increased focus on wealth preservation are top priorities for U.S. high-net-worth investors.  When considering where to invest, equities and real estate are the asset classes they expect to perform best, with the majority of U.S. respondents predicting equities and property will do well over the next five years.

Matthew E. Brady, Head of Wealth Advisory, Americas, at Barclays Wealth, commented: “The sustained uncertainty around the prospects and timing of the global economic recovery is causing investors to favor the familiar and perceived less complex asset classes of equities and property.  However, the outlook among wealthy individuals is notably more cautious than their institutional peers.” 

Wealth Origins

Of those wealthy Americans surveyed, three-quarters of are self-made, citing savings over time as the main source of their wealth, something Barclays said is consistent with the finding that they continue to prioritize saving and not purchasing.  In fact, three-quarters of wealthy Americans identified "saving for the future" as most important to them right now, while buying art/antiques, fashion/clothes, and interior design ranked lowest in importance to this group.

The majority of those surveyed (68%) agree that the global recession has changed the way the wealthy are seen by others.  When asked what wealth means to them, nearly all (91%) said it allows them freedom of choice in their life, and 80% reported that wealth is a reward for hard work. 

Those surveyed also revealed some negative feelings toward the government.  The majority (60%) say that the downturn has caused them to trust less in the government, and two-thirds (66%) do not feel the U.S. government handled the economic downturn well.  Slightly fewer than half (44%) do not think the wealthy have an increasing responsibility to pay higher taxes. 

Gender Differences

Men and women show differences in their attitudes toward investing and decision making, the research found. According to the report, wealthy American women are less likely to consider themselves knowledgeable about finance and investing (72% of women surveyed, 86% of men) and are less interested in finance and investing (72% of women, 83% of men).  Women spend less time actively managing their money, and are more likely than men to say they "don't know" how they expect specific asset types to perform. Consequently, Barclays said, they are also more likely to rely on others for financial advice (54% of women, 44% of men). 

More so than men, American women view wealth as a means to happiness and status; they are more likely than men to cite wealth as "a sign of success" (70% of women, 65% of men) or something that "makes me happy” (78% of women, 69% of men).

“The Changing Wealth of Nations” report was researched by Ledbury Research and written in conjunction with Barclays Wealth, is based on two main strands of research: a survey conducted in February and March 2010 of more than 2,000 high-net-worth individuals from 20 countries, including 500 from the U.S., with more than $1.5 million in investable assets (200 of whom have more than $15 million in investable assets) and a series of interviews with business leaders, economists, entrepreneurs, philanthropists and other wealth experts from around the world.