The first Friday at the start of each month is a day that the whole nation focuses on as if it were the Super Bowl. Financial professionals have long been fixated on rotating economic statistics du jour, whether it's the money supply, consumer spending or the savings rate.
But clients' laser-like focus today on the monthly unemployment figures, a legacy of the Great Recession, is something altogether different, according to George Walper, president of Spectrem Group, who spoke at the second Forum on Innovation and Growth In A Post-Economic Crisis Era. What clients fear is a prolonged economic downturn characterized by long-term unemployment that spawns unhealthy fissures in society.
After six months in late 2008 and early 2009 that saw more than 500,000 people lose their jobs and left 15 million Americans out of work, this obsession is understandable. It cuts across all income and, in fact, rises with wealth levels in certain cases.
Both wealthy and ultra-HNW investors assign far greater importance to employment levels than they do the level of the stock market. When asked what they viewed as an indicator that the economy was improving, the responses were striking.
Would the Dow Jones Industrial Average staying consistently above 10,000 reveal a better economy? For the mass affluent, folks with less than $1 million, 45% said yes. But among millionaires with $1 million to $5 million, only 23% said yes. The ultra-HNW crowd was slightly more sensitive to the equity market, with 30% saying a sustained Dow above 10,000 would signal an improving economy.
Compare that to investors' attitude toward a future drop in the unemployment rate. Among the mass affluent, 70% cited job growth as the most significant indicator that the economy was improving. That figure climbs to 76% for millionaires and 78% for ultra-HNW investors. Perversely, the less one needs to work the greater the significance they attach to unemployment.
Wealthy clients may be financially independent or secure in their own jobs, but they still have friends, children and grandchildren they worry about, Walper said. For most of the investors Spectrem surveyed, an improvement in the economy meant an unemployment rate of 7% or lower.
Their concern about a prolonged economic downturn, which worries 79% of millionaires, is directly related to their second-biggest fear, the financial situation of their children and grandchildren. This bothers 66% of millionaires and 71% of ultra-HNW investors.
What's striking is that these well-heeled folks no longer fear for their own jobs. Fear of job loss for them or their spouses only worries 30% of millionaires and 17% of the ultra-HNW crowd. But their engagement with the rest of society still makes the jobs situation a problem of paramount importance.
Other key issues include the prospect of inflation, maintaining their current financial position, the health of their family, having enough money in retirement (52% of the ultras with more than $5 million worry about this), and financing their children or grandchildren's education.
Whatever one thinks of the recently enacted health-care bill, the yearlong national debate over it has prompted a lot more thinking and introspection over the subject. Walper noted that it is sparking conversations among investors and advisors and among family members and friends alike.
Anger toward advisors has dissipated over the last year, he added. But that doesn't mean that clients haven't changed.