Millionaires' view of the financial environment has improved dramatically in the last two years, according to a recent survey by Fidelity Investments, and their feelings about the financial environment for the coming year are positive.
At the same time, they are showing confidence in the stock market with domestic stocks being the asset class added more often than others in the last year, the survey says.
Fidelity ranks millionaires' feelings about the financial environment on a scale of -100 to +100 with 0 being neutral. The survey has been compiled five times starting in the fourth quarter of 2006 and includes responses from 1,020 people with $1 million in assets, not counting retirement plans and real estate.
The research measures millionaires' confidence levels in five key areas, including the stock market, consumer spending, the economy, business spending and real estate values.
While millionaires' view of the current financial environment is a negative 29, that is a substantial improvement over the -54 from the fourth quarter of 2010 and -91 from the first quarter of 2009. The negative view of current conditions stems from a lack of confidence in the value of real estate, worry about the economy in general and business spending, the survey says.
However, their view of the next year is a positive 39 and their view of the stock market is positive for both this year and the future. Millionaires rank individual domestic stocks as their number one investment addition in the last year.
The findings are important because "in many ways, what millionaires have been thinking and doing can be a strong indicator for financial trends, as they are often the first to jump on an opportunity in the market," says Michael R. Durbin, president, Fidelity Institutional Wealth Services.
It is important for financial advisors to know what millionaires are thinking so they can tailor their services for them and attract more millionaire clients, says Alexandra Taussig, senior vice president, Fidelity National Financial, marketing. The full report is available at https://fidelityinstitutional.fidelity.com/fi/campaigns/mobasi/index.html.
Most of the millionaires (74%) say they feel wealthy and 86% of them consider themselves self-made millionaires, as opposed to being born wealthy. Those born wealthy are more inclined to use a financial advisor (75%) than self-made millionaires (69%).
Those born wealthy want more specific services, such as personal trust services and tax planning, than the self-made millionaires. Millionaires' views on the current financial environment also significantly impacts how they invest and the type of advice they seek. Those having a negative outlook show a greater concern about retirement issues and employ a more conservative approach to investing, the survey says.
Of the respondents, 30% are more concerned with preserving their wealth while 20% are concerned with generating wealth. Those concerned with generating wealth are not just the younger investors; six out of 10 are baby boomers. They report feeling more financially secure than those concerned with preservation and they are willing to accept greater risks.
Those concerned with generating wealth also are more likely to move with their financial advisor if he or she leaves a firm (71%) than those concerned with preserving wealth (53%).
"Advisors should be thinking about what their clients' goals are, whether they want to preserve wealth or generate growth, and whether they have a positive or negative view in order to know what to talk to them about," says Taussig.