In the wake of last fall's financial crisis, mass-affluent investors are more out of step with the financial services industry than they have ever been. That was the message Spectrem Group's president George Walper gave to top marketing and strategic planning executives at the first Innovation and Growth in a Post Economic Crisis Era Forum in Boston on October 21.

No fewer than 90% of investors surveyed by Spectrem say that "the last 18 months have been the biggest setback of their lifetimes," Walper said. The level of anger among investors was "something we'd never seen before." Wall Street and Washington would appear to be the primary targets of the anger, he added.

While the psychological changes caused by the crisis are not as deep as the scars the Great Depression left in a previous generation, some changes could be permanent. "The panic has subsided and this means people have adjusted their living standards," Walper continued.

Investors' attitudes and behavior are unlikely to return to their pre-crisis disposition. "Young investors are more concerned with protecting principal and are increasing their savings," Walper continued.

All investors want to be "more involved than ever." In fact, between 2008 and 2009, the percentage of mass affluent that say they want to be more involved in "day-to-day management of my investments" jumped from 42% to 67%. When asked whether investment management is something they enjoy and don't want to give up, the number climbed more modestly from 43% to 53%.

Nonetheless, there are some striking contradictions in the way investors are reacting. Some providers of defined contribution plans reacted to the crisis by enhancing the online tools they offer 401(k) plan participants.

"Folks don't use them," Walper noted. Plan participants say they want more advice about their 401(k) investments, but they don't seem to turn to their provider, perhaps indicating that they want more personalized advice.

Still, contributions to 401(k) plans have remained surprisingly constant, even though many companies have curtailed their matching contributions. And while other monies fled the equity markets for money market funds, defined contribution plans' asset allocation levels haven't changed that dramatically.

By some measures, advisor satisfaction is lower than it has ever been, Walper said, adding that part of the reason is that client expectations are higher than ever. "But people aren't changing advisors-yet," he acknowledged. "It will take folks many years to decide what to do."

It may also take them years for their portfolios to get back to even. Between 2007 and the end of 2008, the number of mass affluent households with more than $100,000 in investable assets fell from 34 million to 24.5 million, according to research compiled by Spectrem. Among those with over $500,000 of net worth, which Spectrem defines as affluent, the number fell from 15.7 million to 11.3 million. And among those with more than $1 million in investable assets, it dropped from 5.98 million to 4.4 million.

First « 1 2 » Next