The 2008 financial crisis drove the mass affluent into a definite funk. And even though the economy has rebounded of late, they well-off just can't seem to shake the investment blues.
Indeed, investors with between $100,000 to $1 million to invest are walking under a continual black cloud when it comes to their financial situation, according to a survey conducted in February by asset manager MFS Investment Management. The survey asked 596 individual affluent investors — and 610 financial advisers —their views on spending, self-assessments and outlook, as well as government spending and entitlement programs.
These investors are apparently on the fence between worry and concern, with 32% describing themselves as protective, 17% as pessimistic and 16% as fearful. Only 41% describe themselves as hopeful.
A central fear for the group is whether their retirement plans are shot, with 59% saying they are more concerned than ever about being able to retire when they thought they would. In fact, half said they have lowered their expectations about what life will be like in retirement. Around 44% say they have cut back on discretionary spending, while only 14% said they are spending more.
The fretting is overblown, MFS said. “The findings state that despite having accumulated significant assets, the mindset of mass-affluent investors is not matching the reality of their situation,” according to a statement from the company.
"Mass-affluent investors are in better financial shape than they give themselves credit for, with significant assets and strong home equity positions despite a weakened national housing market,” said William Finnegan, senior managing director of U.S. retail marketing for MFS, in the statement. “Their challenge, contrasted to wealthier investors, is they do not feel like they can 'play offense' with their portfolios."
Although 57% said they had received financial advice in the last year, the group is hoarding cash, with an average of 28% of their assets in cash. Less than half of the respondents, at 42%, called themselves highly confident that their portfolios are properly balanced to meet their long-term goals.
The group reported median household investible assets of $306,000. About 95% reported owning their own home. The median home equity for the group was $194,000, and those who have not retired have a median of 10.6 years to go.
One reason for all the pessimism could be the affluents' fears about the larger economy. Rising health care costs were cited by 18% as their greatest financial concerns over the next 12 months, followed by the growing federal deficit (15%) and a reduction in
Social Security benefits (15%).
