High-net-worth clients aren't immune to having serious concerns about their finances because of the tumultuous economy, according to financial advisers.
"Folks are starting to worry about principal at rates that are becoming alarming. A couple of my clients have even started, for the first time of which I'm aware, budgeting and tracking expenses, which is certainly odd for families with net worth in excess of $5 million, for the most part," said Todd Lowe, president of Louisville, Ky.-based Parthenon LLC.
"Wealthy clients are having the [same] concerns as people with less money," said Mark Snyder, principal of an eponymous financial advisory firm in Medford, N.Y. "They want to know, 'What's happening with my money, and what's happening in the market?'"
High-net-worth clients have additional worries, said Barry Glassman, a senior vice president at Cassaday & Co. Inc. in McLean, Va. "The average Joe is not concerned with exceeding the [$100,000] limit for a bank deposit insured by the Federal Deposit Insurance Corp.," he said.
Wealthy clients are also trying to come to grips with the risks posed by "more complicated financial products," such as hedge funds, and private-equity and structured products, Mr. Glassman added.
And he pointed out that people with more money in the country's financial system become particularly anxious "when the sanctity of the financial system is challenged."
According to a late-August online survey of 1,300 high-net-worth Americans by Rhinebeck, N.Y.-based Phoenix Marketing International, investors in two of its separate demographics — those with investible assets of $250,000 to $999,000 and those with more than $1 million in investible assets — had reduced their exposure to stocks and alternative investments since late May.
In addition, more than a quarter of the affluent respondents to the survey said that they increased deposits into their bank accounts between May and August, while 15% of millionaires said that they reduced their stock holdings.
A summary of the survey's findings cited as reasons for the changes "the deteriorating economic environment," including declining home values, the subprime-mortgage crisis and the volatile stock market.
David Thompson, managing director of affluent marketing for Phoenix, said he expects the trends in the August survey to accelerate in the wake of the recent market drop.
"Clearly, all bets are off at this point," he said.
Even back in May, wealthy Americans expressed "record levels of pessimism" about their retirement in a survey released by The Phoenix Cos. Inc. of Hartford, Conn., according to Walter Zultowski, senior vice president of research and concept development.
"This shows high-net-worth people are not immune to what's going on," he said, adding that he has no doubt that the pessimism expressed in the survey has increased since the market meltdown last month. Financial advisers need to be more proactive, Mr. Zultowski said, noting that one-third of those surveyed said that they didn't receive advice from any adviser, and 41% said that they didn't have a primary adviser.
"This is an excellent time for advisers to revisit their practice and add more-holistic features that give more value to the client," he said.
Mr. Snyder said he has been telling some clients that even though their net worth is high, they may have to work longer and retire later. His firm manages $150 million in assets.
Mr. Lowe said he has been discussing "the time horizons necessary for business cycles to come and go," as well as "the importance of living within one's means." His firm has $500 million in assets under management.
Wealthy clients need to "be more skeptical and diligent with non- traditional, complex products," said Mr. Glassman, whose firm has $1 billion in assets under management.
The market volatility, he added, has also been an opportunity to "reintroduce clients to the term "risk."
The survey from The Phoenix Cos. was conducted online with 1,900 individuals around the country and conducted by Rochester, N.Y.-based Harris Interactive Inc.
E-mail Charles Paikert at [email protected].
