Merrill Lynch Affluent Insights Survey Finds Families Cautiously Optimistic, Regaining Control of Th

Merrill Lynch Affluent Insights Survey Finds Families Cautiously Optimistic, Regaining Control of Their Financial Lives

Study Finds Many Lowering Debt and Redefining Their Investment Approach

NEW YORK--(BUSINESS WIRE)-- Today, Merrill Lynch Wealth Management released findings from its Merrill Lynch Affluent Insights Survey, a report examining the values, financial priorities and concerns of affluent Americans. The latest findings from this research series, which began in 2009, focus on two areas:

  • Adjusting to the "new normal" - Forty-four percent of affluent Americans view today's economic uncertainty as a new reality, and many are taking steps to gain greater control of their financial lives in this environment, including reining in spending and lowering debt. The survey also finds a notable shift toward less conservative investing.

  • Greatest future and family concerns- While health care costs and funding retirement remain their greatest sources of concern, many families have the added challenge of financially supporting a parent or adult-age child.

A new normal

The vast majority of respondents (94 percent) who believe we are in a new normal environment also believe they are better prepared today to cope with economic uncertainty. In fact, despite ongoing uncertainty, more than half (58 percent) feel a greater sense of stability in their financial lives today than they did one year ago. However, concerns about the unemployment rate and impact of the economy on their ability to meet their financial goals remain.

As for what they can control, within affluent families one-third (33 percent) of couples have felt more in control of their financial lives during the last year, while half (50 percent) have taken steps to gain greater control, including more vigilantly sticking to a budget (32 percent), making more joint investment decisions (29 percent) and setting tangible goals for their future (28 percent). Similarly, 33 percent of respondents said they are living more within their means.

Cautious optimism

Affluent Americans' outlook on 2013 can best be described as cautiously optimistic - with 30 percent feeling optimistic and 45 percent feeling hopeful about their financial situation during the year ahead. When asked how they anticipate their financial situation may change during 2013, 35 percent believe it will improve while 41 percent expect it to remain about the same. Additionally, men (43 percent) are more likely than women (28 percent) to believe their financial situation will improve next year, and among all age groups, those ages 18 to 34 have the most positive outlook, with nearly two-thirds (62 percent) believing that their financial situations will improve.

"At a time when stability around the world is harder to find, it is encouraging to see investor sentiment and personal outlooks improving," says John Thiel, head of U.S. Wealth Management and the Private Banking and Investment Group for Merrill Lynch Wealth Management. "Having a handle of one's financial life and a feeling that economic uncertainty can be weathered are important steps toward increasing confidence and financial security."

Among respondents with a positive outlook on 2013, 45 percent cite the ability to take advantage of investment opportunities as the top reason they believe their financial situation will improve next year. Additional reasons include:

  • Greater discipline in their spending habits (36 percent).

  • Having less or lowered their debt (32 percent).

  • Opportunities for career advancement (26 percent).

Conversely, among those who believe their financial situation will not improve in 2013, 61 percent cite the impact of ongoing market volatility on their investments as a key barrier (54 percent of men, 68 of percent women), followed by the fact that their dependents, be they children, parents or other family members, continue to be a drain on their finances (23 percent).

Fewer define their investment approach as conservative

When asked to define their tolerance for risk, 30 percent describe themselves as conservative investors, gravitating toward lower risk investments and savings vehicles, such as mutual funds, bonds, and savings and money market accounts. This is down from 36 percent of investors who identified themselves as conservative a year ago, and down further from 50 percent two years ago (July 2010). This shift toward less conservative investing can be seen most among affluent investors under the age of 50. Today, 23 percent of younger investors ages 18 to 34 describe themselves as conservative, compared to 52 percent two years ago; while 23 percent of those ages 35 to 50 describe themselves this way, compared to 45 percent two years ago.

Health care costs believed to pose the greatest threat to retirement

For three years, health care costs have remained a top financial concern. Today more than three-quarters of affluent respondents (77 percent) are highly concerned in this area, with this jumping to 83 percent among those over the age of 65. Respondents' second and third greatest financial concerns relate to retirement and include ensuring their assets will last throughout their lifetime (68 percent) and being able to afford the lifestyle they want later in life (55 percent). When asked what they believe to be the greatest threat to the life they want to live in retirement, 44 percent cited the rising cost of health care (36 percent of men, 51 percent of women).

Four out of five (80 percent) respondents worry that they just won't be able to accomplish certain financial goals before they retire, including:

  • Having saved enough to sustain their lifestyle during retirement (42 percent).

  • Having the inheritance in place for their children they had hoped to (26 percent).

  • Being able to pay off or invest more in their current home (27 percent), or being able afford a home they always dreamed of having (24 percent).

Related to these top concerns, half (50 percent) of affluent Americans cite the need for help in addressing specific areas of their financial lives, including:

  • Structuring their investment portfolio to generate the income they'll need to live on during retirement (45 percent).

  • Determining the level of investment risk appropriate for each of their financial goals (36 percent).

  • Prioritizing their goals (24 percent) and devising a plan to achieve them (29 percent).

"When providing financial advice, it's important that the conversation start with someone's goals rather than focus first on numbers or allocation of investments," said Andy Sieg, head of Global Wealth and Retirement Solutions for Bank of America Merrill Lynch. "Having a more meaningful discussion about concerns and aspirations also inspires trust and helps to achieve desired outcomes today and in the future."

Financial matters more present in everyday conversations

One in four (25 percent) affluent Americans have found that their family and friends are speaking with them more openly about their financial situation today than they did before the recession, especially those ages 18 to 34 (49 percent). In addition to discussing financial matters among a trusted network becoming less of a faux pas, decisions about them at home are becoming more of a team effort. Today, nine out of 10 married couples (89 percent) involve their spouse in financial decisions. One-third (34 percent) consult with their spouse or partner about all financial decisions, including everyday expenses and purchases; 24 percent consult with them only about purchases over $1,000; and 21 percent only consult with them about major expenses or purchases, such as a new car or affording a vacation.

Weighing commitments to helping adult children and parents

This study finds respondents are often turned to by family members for financial support, with 27 percent of affluent Americans supporting either an adult child or a parent. This reality is exacerbated today with many parents living longer than ever before, and younger generations facing a difficult job market. As people continue to live longer, the affluent are worried about having to care for a parent in their later years (35 percent). And some parents are equally concerned, with 27 percent of women citing becoming a financial burden on their children as their greatest concern with regard to their retirement.

Among parents financially supporting adult-age children, 48 percent are willing to do so for as long as they need. However, only 38 percent of parents today paid for or plan to pay for the full cost of their children's college education - down from 48 percent just one year ago. When asked about their ability to fund their children's college education, 16 percent of parents say that there was a time when they planned to pay for more but their financial situation kept or will likely keep them from doing so, while 19 percent say that they chose not to pay for the full amount so that their children would appreciate their education more.

One thing that hasn't change is parents' high expectations for their children's future. When asked if they expect their children to reach a higher level of financial success than they did, 60 percent of parents say they already have or they will. Still, not all parents are so optimistic, with one out of five (21 percent) confident that their children will never reach a higher level of success than they did.

For more information about the Merrill Lynch Affluent Insights Survey, and for a report of its complete findings, visit


The survey was conducted via phone by Braun Research in August 2012 on behalf of Merrill Lynch Wealth Management. The nationally representative sample consisted of 1,000 affluent Americans (ages 18+) with investable assets in excess of $250,000. At least 300 affluent Americans were also oversampled in five target markets including Atlanta, Chicago, Dallas, Detroit and South Florida. The margin of error is +/- 3.1 percent for the national sample and +/- 5.7 percent for the oversampled markets, with both reported at a 95 percent confidence level.

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