Stressed versus Less-Stressed Investors: How do you end up in the right group?
Recently, Fidelity released results from its annual Millionaire Outlook Study. The 2019 Fidelity Millionaire Outlook Study surveyed over 2,000 investors, including 1,102 millionaires.1 Respondents were screened for a minimum level of investable assets, age, and income levels.
Studies like this can provide us with a good idea of the actions, habits, and approach of those investors who have traveled their financial journey successfully. It can give you examples of what to do, as well as what not to do, and how you may stack up as you plan your financial future.
Study Findings
The study reported findings related to the sources of wealth, savings, and debt:
Wealth Type
82% of those millionaires surveyed reported having self-earned wealth, while 18% reported inheritance as their primary source.
A third of millionaire’s income is devoted to savings, and most have no debt. Of the debt they hold, the largest reported by type is mortgage (24%). Credit card debt is held by 16%, and auto loans are held by 13%.
A Financial Advisor’s Take
I concur with these findings. A vast majority of the families I work with amassed their net worth through work, not inheritance. Those who hire a financial advisor are intent on focusing their savings and investments efforts, and they value an objective view on financial decisions that I can provide them.
Goal Priorities of Millionaires
The goals of those millionaires surveyed vary over the long term, but a key focus is maintaining wealth. Of eleven goals surveyed, the top three are:
- Maintaining my household’s wealth (35%)
- Supporting my lifestyle in retirement (31%)
- Supporting my lifestyle today (30%).
The study also looked at saving and spending philosophy. Millionaires are big savers, not spenders. 52% agreed with the statement, “I often put off big-ticket items until I have enough cash to purchase in full.”
A Financial Advisor’s Take
The three goals that scored the highest suggest life balance to me. These individuals have one eye on the future, but also on eye on daily life, too. I like that—and I think it’s a successful approach. Too much focus on immediate gains, or too much sacrificing for tomorrow causes other issues. I find that I often help people articulate these goals and clarify the steps to take to achieve them.
Confidence Measures
After establishing the facts of their financial life, the study wanted to understand the respondents' feelings based on two confidence measures they track.
81% of millionaires surveyed reported that they were very satisfied with their life. Fidelity has been tracking its Economic Confidence Index for over ten years based on investor sentiment of five measures: economy, stock market, vale of real estate, consumer spending, and business spending. This year’s millionaires had the highest-ever Current Economic Index Confidence index. However, when the same question was asked looking out 12 months from now, the results were the lowest levels recorded since the survey began in 2006.
Fidelity also conducts a Personal Economic Confidence Index survey that consists of five measures: retirement savings level, debt management, value of real estate, level of income, and investment returns. In the Personal Index, there was a significant gap between respondents' Current average (68 out of 100) and their Future average (17 out of 100).
A Financial Advisor’s Take
It is the nature of this person to hope for the best and prepare for the worst. What I have learned is that for this type of investor, the gap will always be there. It is a psychological gap that allows them to spend within their means, keep their debt levels acceptable, maintain an appropriate level of risk, and focus on what they can control. I believe it is my role to help them perform scenario planning that encompasses probabilities for future outcomes—good and bad—so that we limit the impact of surprises.
Investor Stress
After learning the facts of millionaires' financial lives, their feelings concerning confidence in the economy, and their own situations, the study sought to learn more about investor stress. The survey asked about current stress levels in four areas: Health, Life, Work, and Financial.
Of the top five concerns of current millionaires, the first three are health-related (weight, health, family’s health), one was life-related (social life), and one was financial (paying for healthcare). When the same question was asked of those with under $1 million in investable assets, the answers were the same except their family’s health ranked higher as a stressor than their own health.
43% of millionaires scored their stress levels above average across multiple factors. The survey went on to call this cohort Stressed Millionaires and sought to understand the differences between Stressed and Less-Stressed Millionaires.
Stressed versus Less-Stressed Millionaires
To summarize some of the main differences between Stressed and Less-Stressed Millionaires:
- Less-Stressed millionaires feel far more confident about their health.
- Stressed Millionaires are two times more likely to have a disability or have a family member with a disability.
- When dealing with a health issue, Less-Stressed Millionaires are more likely to turn to a professional to help. They don’t want someone to take over, whereas Stressed Millionaires do tend to want someone to fully manage their health issues.
- Less-stressed Millionaires who are still working are more likely to take time off before retirement to pursue personal interests such as travel, family, volunteering, and education.
- Less-Stressed Millionaires are more likely to have a partner.
- Stressed Millionaires are three times more likely to feel behind in their financial goals.
- Stressed Millionaires who don’t plan to retire are more significantly likely to say it is because they cannot afford to.
- One in ten millionaires do not ever plan to retire. Those who are less-stressed appear to make this decision independent of their financial situation.
- Less-Stressed Millionaires have less income tied to fixed expenses (Stressed have 30% of their income tied to expenses).
- Less-Stressed Millionaires tend to hold less debt overall (1 in 5 Stressed Millionaires hold credit card debt).
- 6 in 10 Less-Stressed Millionaires enjoy investing and tend to make higher contributions of monthly income to investment savings.
- The convergence of health and wealth. Stressed Millionaires are 6x more concerned about paying for healthcare than their counterparts.
A Financial Advisor’s Take
If I can reach a deep understanding of a client (their history, family, priorities, fears, and stressors), I can guide and coach them on decision-making, which experience has show me reduces clients’ stress. Plus, if I can help clients be proactive about their health choices, focus on their values and passions, help them scenario plan life and work events, and support good investment behavior, I know they can live life as a “Low-Stress Millionaire,” and that should have a nice ring to it!
1The 2019 Fidelity Millionaire Outlook Study was conducted during the period August 6 through August 26, 2019. It surveyed a total of 2,026 investors, including 1,102 millionaires. The study was conducted via a 25-minute online survey, with the sample provided by Brookmark, a third-party firm not affiliated with Fidelity. Respondents were screened for a minimum level of investable assets (excluding retirement assets and primary residence), age, and income levels.
Author: David Jeter, CFP® | Partner and Financial Advisor | Allegheny Financial Group | February 2020
The information included herein was obtained from sources which we believe reliable. This report is being provided for informational purposes only. It does not represent any specific investment and is not intended to be an offer of sale of any kind. Past performance is not a guarantee of future results.
Allegheny Financial Group is a Registered Investment Advisor. Securities offered through Allegheny Investments, LTD, a registered Broker/Dealer. Member FINRA/SIPC.
