Wealth insulates most high net worth individuals from the retirement concerns expressed by less affluent investors, but extreme affluence poses a host of other financial management challenges for America’s wealthiest citizens.
High net worth individuals – who have investable assets of $5 million to $25 million – are more worried about possible tax increases than less affluent investors. Seventy percent of high net worth investors participating in Millionaire Corner’s latest quarterly study said they were worried about a possible tax hike, and 40 percent said they will change some of their investment strategies in anticipation of potential increases.
Our research shows that high net worth investors are most likely to take advantage of tax-advantaged investment opportunities, including a 401(k) or other employer sponsored- retirement plan, an Individual Retirement Account, a 529 College Savings Plan and annuity products.
High net worth investments also express the greatest sensitivity to global events, according to our attitudinal study completed in the first quarter of 2012. The vast majority – 70 percent – said they believe that the global situation is having a greater impact on their wealth. As a result, the high net worth are paying more attention to the global situation. A smaller share of less affluent Millionaire (65 percent) and non-Millionaire (56 percent) investors report awareness of and concern over the world economy.
High net worth investors also have access to a world of complex investments off-limits to non-Millionaires because the high net worth are “accredited investors” in the eyes of the U.S. Securities and Exchange Commission. According to federal law, an accredited investor has a net worth of more than $1 million, excluding the value of his or her primary home. An investor may also be considered accredited if he or she has had income exceeding $200,000 in the past two most recent years and a reasonable expectation of the same income level in the current year. Accredited investors may purchase shares of private companies, hedge funds and other high-risk, low-transparency products considered suitable only for “sophisticated” investors with enough financial resources to withstand a large investment loss.
High net worth investors – who most likely to be retired - are also highly concerned with protecting their wealth in the current financial environment. The prolonged economic downturn worries 77 percent of the high net worth, while 82 percent expresses concern about the national debt. The majority – 55 percent – feels that at present it is more important to protect their principal than to grow their wealth.
Estate planning issues take on a greater significance for high net worth investors, who express high levels of concern about the financial situation facing their children and grandchildren, and are seeking efficient ways to transfer their wealth from one generation to the next. High net worth individuals are also preoccupied with using their wealth to help others and, to do so, must plan a charitable giving strategy. The high net worth know that with great wealth comes great responsibility.
