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(Intro music plays)
Hello and thank you for joining us. My name is Dean Athanasia and I’m the President
of Preferred and Small Business Banking at Bank of America. I’m here to share key findings
from the latest Merrill Edge Report.
As you may know, Merrill Edge is an online investing platform which offers the convenience
of Bank of America banking and the investment insights of Merrill Lynch. Since 2010 we’ve
been surveying mass affluent consumers to understand their key concerns regarding personal
finance issues.
Today, we’re going to explore four key findings from the Fall Merrill Edge Report including:
The mass affluent’s continued worry about the cost of their children’s education,
and the uncertainty about the return on investment.
Concerns around health care and cost of retirement as the mass affluent continue to push back
their retirement date.
Frequency of financial communication among couples and how much it actually impacts confidence
in their financial future.
The control mass affluent clients are taking over their finances, and for what financial
tasks they are seeking out help.
As the cost of college continues to rise, we’re seeing concern among the mass affluent
rise too.
Half of respondents with children wish they had started saving for their first child’s
college education earlier, up from 38 percent last year. But, only 32 percent are actually
saving differently for their second child’s education than they did for their first.
It’s clear that the mass affluent are challenged by the cost of education but have not been
able to course correct.
Interestingly, saving for children’s education is one of the least discussed items among
mass affluent couples, 12 percent of whom say they talk about their children’s college
education more than their finances, and interestingly one in five, or 19 percent, don’t believe
that college is even worth the investment today. Married mass affluent with young children
are more optimistic about their children’s college education. Three-quarters believe
that college education is worth the return on investment.
Although the rising cost of college education remains a concern for 40 percent of the mass
affluent, they do continue to support their children’s education.
Nearly three in five or 58 percent of parents are dipping into their own personal savings
to fund their children’s college education.
And, nearly half or 47 percent of mass affluent parents plan to, at least partially, pay their
child’s student loans back.
A trend we’ve continued to see year-over-year is the mass affluent pushing their retirement
back.
More than half of respondents are planning on retiring later than they were one year
ago at 56 percent, a steady year-over-year increase of 19 percent from the same period
last year.
Among mass affluent who are married with young children, a surprising 63 percent are already
planning to retire later than they had expected a year ago.
When looking at concerns among the mass affluent it’s no surprise they are pushing back their
retirement date – the majority are concerned about the rising cost of health care at 84
percent, that their retirement assets will not last throughout their lifetime at 73 percent,
and that they won’t be able to afford the lifestyle they desire during retirement.
More than half or 52 percent of mass affluent have saved less than $250 thousand for retirement.
However, more than one-third or 34 percent have not changed the way they save for retirement.
Which, unfortunately, means those concerns will likely remain.
Those who are saving for retirement differently are looking both short-term, by reevaluating
their day-to-day spending to trim costs at about 28 percent and paying more attention
to the markets and financial news at 17 percent, as well as long-term by working with a financial
advisor to help them plan at 16 percent.
More than half or 60 percent of mass affluent are planning to fund their retirement through
personal savings and public sector programs such as Social Security or Medicare. According
to the Social Security Administration, these programs are depleting more rapidly than planned
for.
The concerns mass affluent Americans have in what threatens the life they want to live
during their retirement years is largely driven by the increased cost of living and health
care both at 24 percent, followed by global economic crises and uncertainties at 14 percent
and political change, or lack of political change at 9 percent.
One of the most prominent findings in the Fall Report is how important it is for spouses
to discuss their finances – having both situational conversation and talks about future
financial goals.
Seventy percent of mass affluent American couples are discussing their finances at least
a few times per month, and 64 percent believe that these ongoing conversations with their
loved one will help them pursue their financial goals.
In some homes, financial conversation really takes priority. It’s possible the current
economic environment is inspiring this, but 34 percent of married mass affluent Americans
are discussing their finances even more than their own sex life.
Other important life moments and tasks are taking a back seat too, with nearly four in
ten couples discussing their finances more than the upcoming election at 38 percent and
their own home improvement projects at 37 percent.
Couples aren’t just talking about large life purchases, such as a home or a car, they’re
discussing the small day-to-day buys, like groceries, just as much. This shows that they’re
taking into consideration both short- and long-term needs, which is important in maintaining
and mapping out their financial future.
The mass affluent generally are seeking control when it comes to their finances, and are often
looking for information, resources and guidance on how to plan for the long-term. They want
to be confident in pursuing their financial goals.
In recent years, this segment has taken on a lot of financial responsibility, and that
will likely only continue to grow.
When we asked what financial tasks they have taken more responsibility for now than they
have in the past, respondents cited managing their investments and planning for their retirement
as the two top tasks, closely followed by setting up an emergency fund and managing
debt.
However, nearly eight in ten or 76 percent mass affluent Americans are seeking some guidance
to help them manage important financial tasks including properly allocating their investment
portfolio, creating an overall financial strategy and saving for their own retirement.
Interestingly, only about one in ten are consulting a financial advisor for less complex tasks
such as setting up an emergency fund at 12 percent, and investing for children’s college
education at 11 percent. Meaning, this segment is seeking out guidance for more complicated
tasks, and is handling some of the less complex financial planning themselves.
As they are seeking out guidance on the more complex financial items, they are consequently
more confident in pursuing those specific financial goals.
Not surprisingly, more than six in ten responded that they are confident they will meet their
goals for tasks in which they are seeking out guidance including properly allocating
their investment portfolio at 63 percent, creating an overall financial plan also at
63 percent and saving for retirement at 62 percent.
I’d like to leave the presentation looking ahead at the mass affluent plans for the future.
Over the next six months, the mass affluent are focused on protecting their current funds,
while saving for the long-term by tracking and managing their money or budgeting at 77
percent, saving for retirement at 65 percent, balancing short- and long-term financial needs
at 61 percent, ensuring their investment portfolio is properly allocated at 56 percent, managing
or paying down debt such as car payments, mortgage payments or credit cards at 55 percent,
and finally, creating an emergency fund at 47 percent.
To quickly recap what we’ve covered today, the mass affluent: continue to support their
children’s education, but debate the value of today’s return on the investment, are
concerned about health care and retirement costs, resulting in many pushing back their
retirement years, they’re communicating about finances with their significant other,
which is actually leading to greater confidence in their financial future, and finally, the
mass affluent are taking control over their finances, but find that consulting a financial
advisor for long-term needs gives them greater direction in their financial future.
What we’ve discussed here is only the beginning. For a complete, in-depth look at the mass
affluent segment, we invite you to view the full Merrill Edge Report, which can be found
through the on-screen link, or by going to Merrill Edge.com/Report. Thank you.
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