U.S. economic woes and stock market volatility have prompted changes in the investment and social behaviors of high-net-worth Americans, according to a new survey of CPA Personal Financial Specialists conducted by the American Institute of Certified Public Accountants.
Lyle K. Benson, Jr., CPA/PFS, founder of L.K. Benson & Company, Baltimore, MD, said the behavioral changes in wealthier Americans illustrate the need for a greater emphasis in financial planning. "We are reassessing our clients' risk tolerance and when necessary reallocating their current portfolio assets," Benson said.
CPA Personal Financial Specialists are advising clients to rebalance their portfolios, reassess their tax planning, and control their expenses and cash flow. What that means for individual choices about asset classes and portfolio decisions depends on what the individual's investment goals are, what their risk tolerance is, and how much of their net worth is available for investment, according to Benson.
Eighty percent of CPA financial advisors surveyed are strongly recommending their clients move toward a mix of growth and income securities, according to the survey. Sixty-five percent are also recommending more fixed-income securities. A significant number of CPA financial planners - 40 percent – are strongly recommending that their clients hold larger cash positions. Thirty percent are recommending commodities such as gold and precious metals.
"Now more than ever, our clients are seeking our financial expertise to guide them through these uncertain economic times," said Benson.
In anticipation of future tax increases, 67 percent of CPA financial advisers said their clients are accelerating capital gains, according to the survey. Half of clients are increasing contributions to qualified retirement plans, such as 401(k)s and IRAs. In terms of wealth transfer, nearly 60 percent of CPA financial planners are recommending paying medical and / or education bills directly for family members and 50 percent of CPA financial planners are recommending gifting devalued assets.
Sixty-four percent of personal financial specialists foresee a small increase in the benchmark Standard & Poor's 500 over the next six months. Slightly more than half, 53 percent expect a small increase in bond yields, while 62 percent anticipate a small decrease or no change in commercial real estate values.
Clients are saying that they're dining out less frequently and ordering less expensive wines and premium liquor brands. Many are having items repaired rather than purchasing new ones, and they're taking fewer or less expensive vacations.
Ninety-one percent of the CPA financial planner survey respondents serve individual clients with a net worth valued up to $5 million.
During the last six months, 57 percent of CPA/PFS clients are reviewing their portfolios more frequently, according to the survey.
Methodology / Background Information
The survey was conducted April 22 to June 4 via an online questionnaire emailed to members of the AICPA Financial Planning Membership Section. Of the 529 respondents, 57 percent work with individual clients with a net worth of $1 million to $5 million; 34 percent work with individual clients with a net worth of less than $1 million; three percent of their individual clients have a net worth of over $15 million; five percent have individual clients with an average net worth of $6 million – $10 million; and one percent manage individual clients with a net worth of $11 million – $15 million. The average client age range is between 56 to 64 years old, 52 percent. The margin of error was plus or minus four percentage points.
You can view a PowerPoint presentation of the full poll results.