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Advisors know that high-net-worth (HNW) and ultra-high-net-worth are different breeds and with their lofty financial positions, they’re apt to have different views on the economy, markets and personal finances than “the rest of us.”
When considering that and adding in the assumed financial sophistication of some in the HNW cohort, it’s not a stretch to say these clients can, in some instances, be accurate gauges of broader economic sentiment and trends. That makes sense because these folks are defined by regulators as having $750,000 in investable assets or at minimum net worth of $1.5 million – rarefied territories to be sure.
Recent data indicate that while many folks that are middle to upper middle class are pessimistic about the broader economic outlook, the opposite is true of the HNW crowd. Sure, it’s easier to be chipper when one is well-heeled, but that’s not territory in which advisors should dwell. Rather, the point of emphasis should be data suggesting affluent clients are constructive in their outlooks and that’s particularly true of those in the ultra-high-net-worth camp.
Acknowledge Affluent Clients’ Viewpoints
A good advisor acknowledges all points of view from clients and makes them feel heard. It’s not about validation. It’s about attention. Related, advisors should examine details from the latest WSJ Intelligence survey of wealthy readers of Barron’s and the Wall Street Journal.
One interesting take point from the research is that 53% of those queried with $5 million or more in assets under management feel they’re better off financially today than they were a year ago compared with 38% with less than $5 million in assets feeling the same way. Those surveyed had investable assets ranging from $5 million to beyond $25 million.
“Among those with at least US$5 million, 38% of respondents said they were more likely to invest in secondary or vacation homes in the current economy, down eight points from 46% of those in this group who said the same in the previous quarterly survey,” reports Abby Schultz for Barron’s. “Only 21% of those with assets of less than US$5 million responded that they are more likely to invest in a second home, the same percentage as last quarter, the survey said.”
There are some similarities between HNWs and “ordinary” clients. Namely, some of the issues that are concerning to folks in middle income brackets are shared by their wealthy counterparts. Those include inflation. Point is advisors have already been addressing inflation with a variety of clients and the approach doesn’t need to differ much based on income.
“In this latest survey, 83% of respondents overall cited inflation as their primary concern, up 23 points from a quarter before, followed by geopolitical tensions (61%), down 14 points,” according to Barron’s.
Favored Asset Classes of the Wealthy
The wealthy continue to be fond of unique investable asset classes, including art and wine, and that’s something for advisors to keep in mind. In terms of more traditional asset classes, HNWs are bullish on stocks and commodities.
A couple of interesting points. First, the WSJ Intelligence poll indicates affluent clients are increasingly bullish on commodities – 47% in the latest survey, up from 37% in the prior poll. Second, they’re keen on international stocks – a corner of the equity market that in aggregate, has lagged U.S. stocks for years.
“Wealthier readers preferred international stocks, with 46% saying they were bullish on this sector compared to 37% of those with assets below US$5 million,” observes Barron’s.