Millionaires also feeling economic squeeze: survey

Source : Business Times - 30 Apr 2008

They are optimistic that things will improve next year

EVEN millionaires are feeling the economic squeeze, with many saying that they don’t even ‘feel’ wealthy. But as a group, they are optimistic that things will improve in the next year.

The Fidelity Millionaire Outlook, a survey of 1,000 people with at least US$1 million in assets to invest, found that you don’t have to be a laid-off worker to have a negative view of the US economy.

Using a scale ranging from minus 100 as the worst to 100 as the best, the survey found that high net-worth individuals have a minus 50, or ‘very weak’ view of the economy right now. But when asked where things will be next January, the grade rises to a positive 18.

That could mean that millionaires see ‘today’s problem as tomorrow’s opportunity’, said Jack Callahan, president of Fidelity Institutional Wealth Services, the unit that sponsored the survey, which was conducted by an independent research firm.

People with more than US$10 million to invest other than their home and retirement savings - what Fidelity called ‘deca-millionaires’ - have a more pessimistic view than those with less than US$2.5 million.

Tellingly, about 19 per cent of the people surveyed do not consider themselves wealthy, even though they have on average US$3 million to invest and earn at least US$270,000 a year.

Mr Callahan suggested that reflects that people in this category are struggling to maintain a lifestyle which their income cannot support. ‘It says these folks are spending beyond their means,’ he said.

Overall, 31 per cent of those surveyed intend to put more money in the next year into fixed-income vehicles - typically bonds or preferred stocks that carry lower risk and guaranteed returns. Some 27 per cent plan to buy more individual stocks, with about half that, 14 per cent, planning to increase real estate investments.

‘As they look at the future and look at the markets, they see fixed-income as the best,’ Mr Callahan said. While fixed-income investments are usually considered safer, he noted that many have lost value in the last year because of the sub-prime housing crisis and credit crunch. Three-quarters of those surveyed said that the sub-prime fallout hurt their investments, with 42 per cent saying that the effect has been at least moderate.

The 2008 survey, conducted in January by Burke Inc, did not identify Fidelity as the sponsor. It has a margin of error of plus or minus 3 percentage points. – AP