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UBS Investor Watch 3Q 2013

Stocks in this article: UBS

UBS Wealth Management Americas (WMA) today released its fourth UBS Investor Watch revealing wealth is defined as being able to live one's life with no financial constraints, rather than reaching a specific asset level. That said, investors feel that it would take at least $5 million to be considered wealthy.

UBS Investor Watch 3Q 2013

UBS Investor Watch 3Q 2013

In addition, of those who have adult children, 80% are providing financial support for adult children, grandchildren or aging parents. This support ranges from funding education (42%), sharing their home (18%), helping them borrow (20%) and paying for large purchases (18%).

A cash cushion of more than 20% goes beyond providing cash for emergency needs and seems to give investors permission to invest other assets more aggressively. This level of cash has been consistent for three years, despite significant equity market gains during that time.

" Investors are telling us that wealth isn't just about money. It's about being able to do what you want to do when you want to do it," says Emily Pachuta, Head of Investor Insights, UBS Wealth Management Americas. "If you ask, 'what is wealthy?' we observe that it's about having no financial constraints, holding a lot of cash, taking care of family."

UBS Investor Watch is a quarterly publication analyzing the latest in investor sentiment and behavior. Dedicated to generating insights that help UBS Financial Advisors deliver exceptionally for their clients, UBS Investor Watch is the industry’s definitive guide to what’s on investors’ minds right now. www.ubs.com/investorwatch

Highlights from the July 2013 Investor Watch include:

  • What is wealthy: The survey of high net worth (HNW) and affluent investors found that nearly 70% of investors with more than $1 million in investable assets do not consider themselves wealthy. Investors define wealth as having no financial constraints (50%), as opposed to never having to work again (10%) or being able to afford a luxurious lifestyle (9%). Investors feel that it would take at least $5 million in personal wealth for them to be considered wealthy.
  • Providing financial help for adult children and enjoying it: While the ability to afford healthcare and long-term care remains the top personal concern (27%) for investors, their children’s and grandchildren’s financial situations rank second (20%), trumping the ability to afford retirement (14%) and the potential to outlive one’s assets (14%).The survey found that investors most enjoy financially helping their grandchildren (82%), followed by their adult children (76%) and their parents (59%). Two-thirds of investors with adult children ages 18-39 currently financially support their children. Thirty-six percent pay for minor expenses (e.g., clothes, phone bill), 31% fund/help fund their education, 17% pay for larger purchases and 16% provide a home (and this is generally at least in part financial necessity).
  • Cash is still king: Investors continue to hold high levels of cash (23%), and with large cash holdings use them as a way to reduce their overall risk level. Investors find it important to have cash because they know they are extremely unlikely to lose it and generally find peace of mind in holding a lot of cash.

"Investors are using significant cash holdings as a type of ‘security blanket’ to give themselves peace of mind, but also to allow them to feel comfortable getting out there and participating in the market again,” says Pachuta. "This has translated to a greater confidence – and faith – in the economy over the long term despite investors’ expectations of continued market volatility in the near term."

  • Redefining the "comprehensive financial plan": Investors are more confident when financial plans are dedicated to long-term healthcare expenses and to providing financial support across multiple generations. When a financial plan includes these two elements, confidence skyrockets to 85%, compared to 57% with a more traditional financial plan.
  • Investors control risk by bucketing money: Investor Watch found that 80% of investors think about their assets as different buckets, with varying risk/return profiles, based on their expected use (e.g., savings, necessary purchases and recreational spending).
  • Feeling on the Fed: Investors see the Fed ending stimulus as positive for the long term. More than half (51%) expect this change to have a negative short-term impact on the economy but will stabilize the economy in the long run. The majority of investors (59%) are not changing their investment strategy as a result of the Fed announcement.

Other key findings

  • 67% of investors believe the economy is strengthening and 60% say their long-term economic outlook is bright.
  • 56% of investors find the idea of a 5% constant return highly appealing for the next 12 months. A smaller but still significant portion (40%) find this highly appealing for the next 10 years, indicating long-term return expectations remain higher than 5%.
  • Long-term care planning; only 33% are highly prepared and 36% are not prepared.

We invite you to read the full report.

Notes to Editors

About UBS Wealth Management Americas

UBS Wealth Management Americas provides advice-based relationships through financial advisors who deliver a fully integrated set of products and services specifically designed to address the needs of ultra-high net worth, high net worth and core affluent individuals and families. It includes the Wealth Management U.S. business, the domestic Canadian business and the international business booked in the United States.

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