Merrill Lynch Affluent Insights Quarterly Market-by-Market Comparison Merrill Lynch Affluent Insights Quarterly is a Merrill Lynch Wealth Management survey focused on the values, financial priorities and concerns of affluent individuals. The latest in this series of quarterly surveys examines how affluent individuals views of their personal financial picture have evolved during the past year and explores their outlook for the year ahead. Braun Research conducted the survey by phone between September 13 and October 7, 2010 on behalf of Merrill Lynch Wealth Management. In addition to a nationally representative sample of 1,000 affluent Americans, the research also includes an oversampling of 300 affluent Americans in each of 14 local markets, including:, Ga.;, Mass.;, N.C.;, Ill.;, Texas;, Calif.;, Fla.;, Minn.;, Ariz.;, Calif. (Irvine, Laguna Hills and Newport Beach);, Pa.;, Calif.;, Mo.; Washington, D.C. Below please find national and local highlights from the Merrill Lynch Affluent Insights Quarterly. Key Findings Affluent Americans Divided over Outlook for U.S. Economy as they Struggle to Balance Financial Demands Forty-one percent of affluent Americans indicate being financially better off today than they were one year ago, with an additional 37% citing being in roughly the same place as they were one year ago. More than three out of four (78%) affluent Americans nationally are confident that their financial picture will improve in the year ahead. At the local level: Believe they are in a better financial position today than they were one year ago In roughly the same place as they were one year ago Confident that their financial picture will improve in the year ahead 41% 40% 47% 35% 34% 36% 35% 36% 35% 37% 36% 35% 33% 37% 25% 37% 37% 43% 44% 54% 43% 45% 41% 43% 42% 53% 47% 45% 44% 50% 78% 73% 82% 78% 86% 79% 82% 81% 75% 81% 87% 82% 78% 80% 75% Merrill Lynch Wealth Management makes available products and services offered by Merrill Lynch, Pierce, Fenner & Smith Incorporated (MLPF&S) and other subsidiaries of Bank of America Corporation. Investment products: Are Not FDIC Insured Are Not Bank Guaranteed May Lose Value MLPF&S is a registered broker-dealer, member Securities Investor Protection Corporation (SIPC) and a wholly owned subsidiary of Bank of America Corporation.
The latest survey found affluent Americans divided over their outlook for the U.S. economy, with a quarter (26%) optimistic that the economy will improve during 2011, and another 25% not optimistic, with the rest landing in the middle. At the local level: Optimistic that the U.S. economy will improve in the year ahead Not optimistic that the U.S. economy will improve in the year ahead 26% 19% 25% 19% 20% 17% 23% 13% 19% 20% 20% 27% 17% 26% 20% 25% 24% 21% 32% 13% 29% 37% 24% 28% 32% 25% 22% 30% 24% 26% Affluent Continue to Struggle with Balancing Near and Long-term Financial Demands During the last year alone, one in five (20%) affluent Americans nationally have had to tap into their long-term savings and investments to meet short-term financial demands. At the local level: Tapped into their long-term savings/investments to meet short-term financial needs 20% 17% 19% 18% 15% 15% 16% 19% 20% 22% 18% 18% 18% 15% 18% Affluent Americans nationally said their top three reasons for dipping into their nest egg were to cover regular monthly expenses (35%), pay down excess debt (27%) and/or compensate for a loss in income within their family (19%). At the local level: Cover monthly expenses 35% 39% 28% 34% 27% 43% 30% 35% 43% 48% 51% 43% 65% 27% 36% Pay down excess debt 27% 38% 13% 18% 11% 17% 14% 25% 28% 34% 18% 24% 23% 22% 27% Compensate for a loss in income within their family 19% 18% 18% 30% 10% 27% 25% 14% 12% 11% 2% 11% 45% 5% 31% ly, affluent Americans increasingly expect to retire later than they did one year ago, with 61% expecting to retire later than they had originally planned, compared to 29% at the beginning of the year. At the local level: Expect to retire later than they had originally planned (October 2010) Expect to retire later than they had originally planned (January 2010) 61% 64% 56% 50% 59% 50% 36% 57% 40% 51% 62% 43% 46% 45% 50% 29% 31% 26% 34% 29% 27% 19% 31% 31% 27% 23% 24% 20% N/A 32%
The survey found that the rising cost of health care (60%), ensuring retirement assets will last throughout their retirement (57%) and being able to afford the lifestyle they want to in retirement (51%) continue to be affluent Americans top financial concerns. At the local level: The rising cost of health care Ensuring retirement assets will last throughout their lifetime Being able to afford the lifestyle they want to in retirement 60% 63% 56% 62% 49% 52% 55% 63% 60% 66% 50% 67% 59% 56% 64% 57% 51% 55% 61% 52% 54% 41% 64% 56% 71% 52% 61% 59% 57% 61% 51% 45% 53% 57% 47% 43% 43% 54% 45% 61% 48% 56% 54% 46% 53% Affluent More Intent on Living within Their Means ly, the number one lesson the affluent have learned from the recent recession is to spend within their means (38%), more than creating an emergency fund for unexpected events (19%) or being a more diverse investor (10%). At the local level: Spend within their means 38% 44% 35% 42% 43% 33% 36% 33% 40% 41% 32% 37% 46% 39% 36% Creating an emergency fund for unexpected events Being a more diverse investor 19% 20% 19% 19% 29% 16% 15% 17% 14% 21% 24% 15% 12% 16% 14% 10% 4% 14% 8% 8% 13% 9% 11% 10% 11% 16% 10% 11% 6% 19% More than one-third (37%) of affluent Americans nationally indicate spending less than they did one year ago. At the local level: Currently spending less than they did a year ago 37% 42% 28% 39% 29% 34% 33% 39% 35% 35% 18% 32% 39% 27% 39%
When asked how their spending habits have changed in the past year, 27% of affluent Americans nationally indicated cutting back on luxury items/recreational activities, and 23% are spending less and/or more closely managing day-today expenses (e.g., groceries, clothing, energy costs, etc.). At the local level: Cutting back on luxury items/recreational activities Spending less and/or most closely managing day-to-day expenses (e.g., groceries, clothing, energy costs, etc.) 27% 31% 19% 27% 14% 26% 21% 27% 25% 27% 12% 23% 30% 17% 26% 23% 28% 18% 27% 23% 23% 23% 27% 23% 24% 8% 22% 23% 17% 27% Additionally, affluent parents nationally believe the best gift they could give their children this holiday season is a financial investment in their future, e.g., CD, IRA, 529 contribution (22%), or cash for today (20%); far greater than electronic gifts like an ipod or flat screen TV (9%), or luxury items such as a watch or designer clothes (10% nationally). At the local level: Financial investment in their future (e.g., CD, IRA, 22% 22% 17% 31% 18% 24% 20% 24% 17% 24% 20% 22% 17% 19% 21% 529 contribution) Cash gift for today 20% 31% 25% 16% 20% 23% 20% 22% 30% 24% 29% 21% 21% 24% 23% Electronic gifts like an ipod or flat screen TV 9% 9% 6% 10% 15% 8% 5% 9% 6% 6% 14% 12% 8% 3% 8% Luxury items such as a watch or designer clothes 10% 11% 13% 9% 7% 8% 10% 12% 6% 8% 12% 8% 13% 13% 11% Greater Reliance on Advice Breeds Confidence When asked about the most useful pieces of advice received from their financial advisor during the past year, affluent individuals nationally cited advice on how to leverage changes in the investment markets to my advantage (41%) followed by how possible tax reform impacts my financial picture (37%). At the local level: How to leverage changes in the investment markets to their advantage How possible tax reform impacts my financial picture How to better diversify the investments in my portfolio 41% 46% 56% 41% 55% 45% 46% 49% 38% 41% 43% 47% 43% 37% 47% 37% 42% 41% 37% 21% 38% 36% 38% 41% 35% 39% 49% 40% 28% 38% 35% 35% 35% 45% 30% 37% 23% 30% 42% 40% 31% 50% 32% 36% 37%
When asked what provides them with confidence about their current investment strategy, four in ten affluent Americans nationally chose a relationship with a financial advisor (42%), second only to being heavily involved in my financial decisions (48%). Top choices at the local level include: Being heavily involved in my financial decisions A relationship with a financial advisor Working with an established institution 48% 45% 48% 37% 43% 48% 42% 37% 43% 45% 32% 51% 44% 34% 38% 42% 39% 48% 33% 44% 45% 38% 46% 38% 42% 46% 47% 45% 49% 39% 37% 29% 42% 30% 33% 40% 29% 33% 38% 38% 33% 38% 38% 31% 42% The survey found that 84% of affluent Americans have remained with their wealth management firm during the last year, the number one reason for which has been their relationship with their financial advisor (64%) more than twice as important as positive investment performance (30%). At the local level: Stayed with their firm in the past year Because of their relationship with their advisor Positive investment performance 84% 81% 86% 91% 89% 86% 89% 83% 86% 85% 85% 88% 85% 85% 86% 64% 67% 65% 50% 64% 63% 56% 56% 62% 61% 58% 58% 54% 61% 67% 30% 31% 43% 37% 24% 41% 39% 27% 34% 34% 25% 34% 29% 32% 34% Methodology n Braun Research conducted the survey by phone between September 13 and October 7, 2010, on behalf of Merrill Lynch Wealth Management n The nationally representative sample consisted of 1,000 affluent Americans with investable assets in excess of $250,000 n Three hundred affluent Americans were oversampled in each of 14 target markets, including: n, GA n, MA n, NC n, IL n, TX n, CA n, FL n, MN n, PA n, AZ n, CA (Irvine, Laguna Hills and Newport Beach) n, CA n, MO n Washington, DC n The margin of error is +/- 3.1% for the national sample and +/- 5.7% for the oversample markets, with both reported at a 95% confidence level L-10-10 2010 Bank of America Corporation. All rights reserved. 225113 Code 433600PM-1010