What the Wealthy Think: The U.S. Trust Annual Survey of Affluent Americans
In 1993, U.S. Trust began surveying the opinions of the top 1% of the wealthiest Americans, defined as individuals with adjusted gross incomes of more than $325,000 annually or net worth greater than $5.9 million. Conducted by an independent market researching firm, past surveys have investigated reactions and attitudes among baby boomers, men compared with women, and top-ranking executives to such issues as philanthropy, how the affluent attained economic status, raising children amid affluence, 9/11, and more.
Our latest survey looks into worries about global unrest, the U.S. economy, and views on investments and the stock market.
Financial Worries and Concerns
The number one worry of affluent Americans today is that terrorism here and abroad will have a negative effect on the economy and securities markets. Nearly 90% of the nation’s wealthiest citizens cited the impact of terrorism as their primary concern now, up from 86% in 2003. Growing concern about the impact of terrorism far surpassed the second-ranking financial worry among the affluent—that the next generation will have a more difficult time financially. In 2004, 75% of those surveyed cited this as a major worry, down from 82% in 2003. The third major financial concern is that taxes will rise steeply over the next few years. The affluent are significantly more worried about rising taxes—70% of respondents worry about this now, compared to 59% in 2003.
Optimistic Outlook about the Stock Market
The affluent are more optimistic about the outlook for the U.S. stock market today, continuing an upward trend that began in 2002. The U.S. Trust Affluent Investor Index increased to 66, compared to 62 in 2003 and 58 in 2002. The vast majority (92%) has seen their portfolios increase in value over the past 12 months versus 69% in 2003. In spite of their growing confidence in the stock market, nearly two-thirds (65%) of the affluent say they are not making any changes to their portfolios right now. Their asset allocation is virtually unchanged from last year with only one-third of their assets invested in domestic equities.
The Most Promising Sectors
Affluent Americans believe the most promising sectors to invest in over the next 12 months are healthcare, pharmaceuticals, and biotech, favored by 79%, and technology, favored by 72%. The technology sector staged a strong comeback among the affluent over the past year—only 54% felt the sector was attractive in 2003. Defense and aerospace stocks, on the other hand, declined in favor from 71% in 2003 to 59% in 2004.
Desire for Improved Corporate Governance
Nearly all of those surveyed (96%) said that corporate audits should be conducted by accounting firms that do not do consulting work for the company being audited.
In a further effort to eliminate conflicts of interest, 86% said that Board audit committees should be composed of financial experts compensated only by their director’s fees. In addition, 73% favor separating the roles of chief executive officer and chairman, with the latter being an independent director who is not a member of management.CEO Compensation
A majority of the survey respondents (63%) said that the compensation of most CEOs at large public corporations today is too high, while 70% felt that corporate executives should be compensated in direct correlation with how well their company’s stock is performing. However, only 43% believe it is a good idea to cap executive compensation at a percentage of what the average worker makes.
Integrity of Financial Advisors
An overwhelming number (95%) cite “is trustworthy” as being the most essential attribute in choosing a financial advisor. This was followed by “understands my situation” (83%) and “keeps me informed” (75%). Interestingly, being a top performer ranked fourth at 69%.
Only three types of advisors were deemed to be very trustworthy by more than one-third of the affluent: CPAs or accounting firms (53%), private banks (41%), and investment management firms compensated by fees instead of commissions (38%). Those rated least trustworthy were: mutual fund companies, rated very trustworthy by 21%, insurance companies (20%), and stockbrokers or brokerage firms (19%).
Source : http://www.ustrust.com/public/ustrust/experience_ustrust/affluent_survey?cmsid=P-446707&lvl1=experience_ustrust&lvl2=affluent_survey
