In the latest annual survey of Affluence & Wealth in America by American Express Publishing and Harrison Group, over 71 percent of America’s affluent and wealthy consumers said the real estate and banking crisis has affected their sense of financial security.
That represents 10 percent of American families. Among those considered affluent and wealthy, with a median annual income of $325,000, nearly six out of 10 surveyed said they are now worried about running out of money.
The respondents, mostly C-level executives, have between $100,000 to more than $1 million in discretionary spending dollars. The results were derived from interviews with 614 affluent individuals conducted Sept. 19 to 23, after September’s credit implosion, but before the House of Representatives’ initial rejection of the proposed $700 billion bailout package and the Senate and House’s subsequent approval of a revised version last week.
According to Jim Taylor, vice chairman of the Harrison Group, 59 percent of the respondents said they were worried they could at some point run out of money. Most had their principal income from wages. In the September survey, 64 percent of the “Bedrocks” — upper middle class and affluents, which the survey described as having between $100,000 to $149,000 in discretionary spending income for the upper middle class and between $150,000 and $249,000 for the affluents — said they could run out of money, up from 45 percent of respondents who were asked that question in April. Among the “Pinnacles” — the super affluent with $250,000 to $499,000 in discretionary income, and the wealthy, with over $500,000 — 48 percent in September were afraid of running out of money, compared with 35 percent of the respondents in April.
“The economic difficulties of the past year have begun to significantly change the way America’s most financially successful families view their future,” said Taylor. “The affluent and wealthy, who account for 50 percent of U.S. consumption, are becoming more thoughtful, getting on top of their spending and worrying more about the future of their children. Nearly half of our respondents are owners of or senior officers in American businesses, so we expect the growing caution to spill over into capital and human resources decisions.”
Cara David, senior vice president of strategic insights, marketing and sales at American Express Publishing, said total discretionary spending in the U.S. is $10 trillion, and that the income groups studied represented 50 percent of that total. She added that 75 percent said the country is in a recession. In addition, 50 percent believe the recession will last longer than a year.
Optimism among America’s wealthy has been on the decline. In 2005, over 90 percent were optimistic about their own future. In September’s survey, only 55 percent said they were optimistic about their future. The study also shows a shift in how consumers will shop for the holidays.
“It would appear that we are shifting from an ‘I want’ to ‘I need’ economy in which people are looking out for the interest of the people they love more than their own interests. If there is a silver lining in the current malaise, growing thoughtfulness in gift-giving and family purchasing may be it,” said Taylor.
Over 70 percent are looking more carefully at their spending on luxury categories to see where money can be saved, with 83 percent waiting for something to go on sale. Still, only 2 percent plan to eliminate spending on big-ticket items. Thus wealthy consumers are still spending on luxury goods, but purchasing fewer of them.
For holiday, most said they wanted a gift certificate, followed by a favorite book or video. Many said they planned to buy electronics, apparel, accessories and jewelry for those on their gift list.
The survey determined that in 2008 the affluent and wealthy will spend a total of $22 billion in holiday gift-giving, with the “Bedrock” upper middle class and affluent averaging $1,346 per household, or a total of $12.92 billion for the group, and the wealthier “Pinnacles” averaging $4,135 per household, representing a total of $9.1 billion for the super affluents and the wealthy.
There was a marked move away from specific party affiliation among respondents. In 2006, 46 percent said they were Republicans, with roughly 36 percent Democrats and 19 percent independents. In the September survey, about 34 percent classified themselves as Republicans, 27 percent as Democrats and 34 percent as independents.
Taylor said 20 percent of the respondents were still undecided about the upcoming election. Of those surveyed, 36 percent said if Sen. John McCain were elected, there would be no change to the economy, versus 36 percent who said the economy would improve. In comparison, if Sen. Barack Obama were elected, 29 percent believe there would be no change to the economy, versus 37 percent who said the economy would see some improvement.
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