The “Mass Affluent” Lack Confidence

This was a finding of the Bank of America (BofA) Merrill Lynch Merrill Edge Report, published in tandem with the launch of the Merrill Edge platform (see “BofA Merrill Lynch Launches Merrill Edge”).  

Forty-five percent believe they will never be wealthy and 63% say saving for long-term goals such as retirement or college-saving will be harder five years from now.  These results come from a survey pool in which 75% have a household income in excess of six figures.   

The top financial concerns of the “mass affluent” population are rising healthcare costs (76%), ensuring retirement assets last through lifetime (67%), impact of tax reform (62%), and impact of the economy  on ability to meet financial goals (60%).   Perhaps of most concern is that 28% have had to tap into long-term savings accounts, such as retirement or college-saving, in order to meet short-term financial needs.  The reasons for doing so include handling monthly expenses (29%), major purchases (22%), or paying off debt (14%).

The findings suggest that having a financial plan is one way to improve chances of meeting financial goals.  Half (51%) of “mass affluent” participants do not currently have a formal or written financial plan, 29% of which have never had one.  Among those who have had a financial plan at some point in the past, 58% said they reached their goals.   

When asked about their reliance on retirement products and services offered by their employer, 7% said they rely solely on retirement options provided by the employer, 39% said they rely heavily on the employer-plan with additional vehicles such as IRAs or stocks, and 30% said they rely modestly on the employer-plan with additional investment vehicles of their choosing.   

The report found several ways in which this demographic can improve their confidence:

• Understanding how federal and state regulations affect my finances – 67%
• Having access to a complete picture of my finances – 58%
• Knowing how to appropriately allocate assets across my investment options – 57%
• Receive advice from a qualified investment professional – 56%
• Knowing more about financial markets – 55%
• Knowing how to better manage cash flow – 50%

Trust and satisfaction with financial professionals is relatively high among mass affluents, with 53% saying they see financial professionals as being trustworthy, and 78% citing satisfaction.   

All of these concerns, whether perceived or actual, have left the mass affluent demographic to believe retirement will come later than originally expected; 41% expect to retire later than they did only one year ago.  One qualitative quote gathered in the survey said, “Ten years ago I hoped to be retired by age 50. Now I am 53 and hope to retire by age 60.  By the time I get to 60, I suppose that I will be shooting for 70.”