The Wealthy Are Worried About ‘Going Back’

By Cyril Tuohy

The wealthiest Americans want to have their cake — and what a big cake it is — but they also want to eat lots of it too.

Yet the voracious expectations among the ultrawealthy betray deep insecurities about having enough, according to a new survey.

What a topsy-turvy world they live in, those rich Americans who find themselves in the ultrahigh net worth (UHNW) category — although perhaps many advisors already know that.

On the one hand, UHNW individuals expect their portfolios will grow 15.8 percent in the coming year, according to a survey by SEI and Scorpio Partnership — although that was before the recent 10.5 percent correction in the stock market.

At the same time, 59 percent of respondents said their biggest anxiety is running out of money or falling behind, according to the “Algorithms of Wealth” digital survey of 275 UHNW individuals with average financial assets of $18 million.

Jeff Ladouceur, director of SEI Private Wealth Management, called the results “incongruous” in a news release. SEI is an Oaks, Pa.-based company that helps advisors, retail and institutional investors manage wealth.

“Like many of us, successful individuals are worried about ‘going back,’" Ladouceur also said in an email to InsuranceNewsNet.

“I believe the response is less of a concern about losing money and more a concern about not being able to maintain their current lifestyle going forward while continuing to help family, start new businesses and give to charitable causes they care about,” he said.

Wealthy investors tend to be too optimistic in bull markets and beating benchmarks takes precedence over meeting goals and outcomes, he also said.

The stock market ended Thursday down 10.5 percent from its May peak after suffering big drops in August, which market watchers blamed on China’s slowing economy. Even so, the historical rate of return for stocks remains closer to 8 percent a year.

Perhaps the past two years — when the Standard & Poor's 500 index rose 11.4 percent last year and 29.6 percent in 2013 — have skewed return expectations.

UHNW respondents under the age of 40 said they expect their portfolio investments to grow 24 percent in the coming year. However, within the under-40 group, 44 percent report that running out of money is a top concern, the survey found.

Older survey participants, those in their 40s and 50s, were decidedly wiser and expected lower growth, yet were more likely than the under-40s to cite running out of money as their top financial concern, the survey showed.

The fact that older, wealthy individuals cite running out of money as a top concern should be read in the context that UHNW individuals don’t feel they have enough to meet all their goals. Many UHNW people are relatively upbeat about the economy.

“I don't think the expectation of increased spending is a testimonial to their view on the economy,” Ladouceur said. “I see individuals wanting to do more for their business, family and community.”

Many UHNW Americans take a do-it-yourself (DIY) approach to wealth management.

The survey found that more than 38 percent of respondents consider themselves self-directed investors and another 23 percent reported only using an advisor for guidance on more complex investments.

“Again, we see a noteworthy disconnect,” Ladouceur said.

The more wealth people accumulate, the greater the need for a holistic, “boardroom approach,” to managing wealth using the help of more than one advisor.

But many UHNW investors prefer a “complete opposite approach,” and take an individualistic, go-it-alone tack, he said.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].

Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].