Most conservative investors? The young and the affluent

Most conservative investors? The young and the affluent
With two of the most severe bear markets of this century fresh in their short-term memories, affluent investors — particularly the youngest investors — appear to be quite skittish about investing in anything but the safest of asset classes.
FEB 22, 2011
With two of the most severe bear markets of this century fresh in their short-term memories, affluent investors — particularly the youngest investors — appear to be quite skittish about investing in anything but the safest of asset classes. Merrill Lynch Global Wealth's most recent quarterly survey of affluent investors (those with more than $250,000 in assets), found that 47% of the 1000 people it surveyed consider themselves to be conservative investors. And the most conservative segment of the group were the youngest (18-34 years old) — 59% of whom described themselves as conservative. “It's no mystery why this group would be very hesitant coming into the market,” said Lyle Lamothe, head of U.S. Wealth Management at Merrill Lynch Global Wealth Management in a teleconference call. “But we view it as a temporary phenomenon.” If it isn't, many affluent investors, whether young or old, may not have the kind of retirement they planned on. Many investors, according to the Merrill survey, don't understand the long-term consequences of adopting a conservative asset allocation strategy. Of the self-described conservative investors surveyed by Merrill Lynch, 66% of them said “conservatism” would actually help them avoid losing money in turbulent markets. Just 25% felt that such an investing approach would keep them from seeing high rewards during stronger markets. And only 10% felt that conservatism would keep them from saving enough for retirement. There are conflicting ideas and expectations amongst affluent retail investors, and advisers would do well to bone up on some behavioral finance principles in dealing with this hair-pulling, hand-wringing bunch. “Emotion and intellect are involved here, and we have to use both to address client needs,” said Bill Moran, a Merrill Lynch wealth management adviser based in Washington D.C. A more conservative investing strategy may not effectively address the legitimate worries about greater health care costs and longer life-spans. The solution to this problem, according to the Merrill, is education. “There's more risk, but there's also more reward if you're allocating in a sensible way,” said Mr. Lamothe. “Our industry's job is to make sure we're working on education and are ready to assist these investors.”

Latest News

Former Western Asset Management star bond manager fined $3 million
Former Western Asset Management star bond manager fined $3 million

Kenneth Leech pleaded guilty in June to one obstruction charge, and could face six to 12 months ⁠in ​prison.

Morningstar rolls out agentic AI platform built on its research
Morningstar rolls out agentic AI platform built on its research

Launch of Direct AI follows a model portfolio tie-up with Envestnet as advisors juggle AI adoption and private-market due diligence.

Advisor moves: Osaic draws Equitable advisor overseeing $245 million in assets
Advisor moves: Osaic draws Equitable advisor overseeing $245 million in assets

Meanwhile, Cetera's streak of Commonwealth recruitment continues in Washington, and an LPL advisor hops over to Raymond James in Maine.

AlphaCore adds $400M Blue Rock in Mid-Atlantic push
AlphaCore adds $400M Blue Rock in Mid-Atlantic push

The Sussex County wealth firm, built around business-owner clients, extends the California-based aggregator's footprint in the East Coast.

Bluespring Wealth builds $1B team with Family Wealth Counseling deal
Bluespring Wealth builds $1B team with Family Wealth Counseling deal

The Kestra-owned RIA acquirer merges the planning firm into KDI Wealth Management, creating a majority woman-led advisor team

SPONSORED Built on insurance experience to deliver on long-term promises

Knighthead Life entered the market with a competitive MYGA. A strong launch earned advisor confidence and paved the way for FIAs.

SPONSORED In the Age of AI, Trust Becomes the Advisor's Greatest Asset

As AI makes financial information more accessible than ever, Lana Hock explains why human judgment, trust, and empathy remain the qualities clients value most in a financial advisor