New Research from Edelman Financial Engines Explores the Mindset Around Wealth in America
BOSTON–(BUSINESS WIRE)–To better understand how Americans perceive wealth in relation to the world around them, Edelman Financial Engines (EFE) the nation’s top independent wealth planning and investment advisory firm1, today released findings from a new report titled Everyday Wealth in America. The research explores critical areas at the intersection of life and money and how people form opinions and make decisions relative to their own financial values and goals.
“At a time when inflation and stress levels are up, and markets and portfolios are down, our research exposes a stark contrast between being wealthy and feeling wealthy,” said Jason Van de Loo, head of Wealth Planning and Marketing, Edelman Financial Engines. “For many people, worries about money can override basic facts, which can often lead to confusion and frustration. We went deep to uncover the beliefs and behaviors around the concept of wealth, and to use those insights to inform the support and action we provide – especially for those who have worked hard and may be doing many of the right things financially, yet still feel like it’s not quite enough.”
The research is based on a consumer survey2 of more than 2,000 Americans from all wealth brackets reflecting the general population as well as an oversampling of affluent, upper middle-class respondents (ages 45 to 70 with household assets between $500K and $3M). The questions covered various aspects related to wealth, such as attitudes and emotions about finances, relationships and communication issues, family dynamics, legacy planning, retirement goals, working with a financial professional, and more.
Few people feel wealthy and financially secure today
The research found that very few people consider themselves wealthy in the current climate – this is true even for those with at least $1 million in assets. Many respondents stated that when they were younger, they thought they would be more financially comfortable than they are today.
- Only 12% of total respondents and less than one third (29%) of millionaires felt “wealthy.”
- Less than one quarter (23%) of total respondents and fewer than half of all millionaires (44%) felt “very comfortable” about their finances.
- A majority (61%) admitted to feeling less “financially secure” than they hoped to be at their current stage of life, and roughly four-in-ten (41%) affluent respondents said the same.
- Most respondents (57%) said they would feel wealthy with $1 million in the bank, while more than half (53%) of affluent respondents said they would need over $3 million, and one third (33%) would require over $5 million.
Regardless of net worth, inflation and macro-issues are causing the most financial worry
The research revealed that macro-issues such as inflation, the fear of a recession, and politics topped the list of financial concerns for everyone, with inflation causing the greatest worry. As a result, people are changing their spending and saving strategies, and making trade-offs. They may also be more prone to making investment decisions based on emotions – which can easily derail them from their long-term plan and goals.
- An overwhelming majority (80%) have had to adjust to rising prices and impacted portfolios, including buying fewer things for themselves (49%), cutting back on recreation and entertainment (46%), and reducing what they spend on food (42%).
- Affluent respondents have also tightened their belts – three quarters (75%) were making some type of financial sacrifice, and 17% saved less into retirement accounts.
- Nearly seven in ten (69%) felt like all of their money is now going to what they need to spend it on versus what they want to spend it on, while half (50%) of affluent respondents agreed.
- More than six in ten (63%) overall – and slightly more affluent (65%) – said they’d made financial decisions based on emotions. Roughly one third (35%) who did this say they regretted it.
Couples will always argue about money, but many find that open discourse on the subject can make their relationships stronger
While money issues are a known source of conflict in relationships, talking about finances can be even more challenging in light of current events and heightened anxiety levels. The research confirmed that people across all ages and wealth brackets argue over money matters. At the same time, some are avoiding important financial conversations altogether with their partners and families. This reinforces that having open, healthy discussions about finances can prevent further troubles down the road.
- Nearly half (46%) of all respondents admitted that they fought with their partners about money; more than one quarter (27%) have also fought about money with other family members.
- Few couples (37%) are having detailed discussions about their financial goals, and 36% of those in their 60’s don’t consistently agree on their retirement dreams or share them with each other.
- Communication is key. Almost four in ten (38%) of all couples – and the same number of affluent couples – wished they talked more about financial matters with their spouse or partner.
- Those who discussed their finances in detail were twice as likely to say their relationship was stronger than ever.
Affluent parents are sending mixed signals about financial autonomy to their adult children
Parents with adult children claim to emphasize fiscal independence, yet many are still providing financial assistance. This is especially true for the affluent demographic. Upbringing plays a significant role – those who received support from their parents are almost three times as likely to do the same with their kids.
- While 85% of all parents with adult children claimed to emphasize the value of financial independence with their kids, 40% are supporting them financially.
- Among affluent parents, 93% emphasize independence, with 50% still providing financial support.
- The most common forms of support are assistance with general living expenses, covering the cell phone bill, and helping with special purchases.
- While 45% said they like being able to help their adult children financially, more than half (51%) believe it’s necessary at the moment, and nearly one third (30%) admit it’s frustrating that their kids aren’t more independent.
Working with a financial professional can help ease the emotional burden
Despite the many reasons to want or need professional guidance – especially in today’s climate – only about one third (35%) of all respondents currently work with a financial professional.
- Roughly eight in ten (81%) of all respondents and almost as many (76%) affluent said that the current economy has made it more challenging to stay on track with their financial goals.
- The vast majority (83%) of those who work with a financial professional said they’re less stressed because of the help they receive; 70% believed their advisors help them and their families address difficult and emotional money topics.
- For all respondents the three most overwhelming money tasks to tackle on their own were financial planning (35%), minimizing taxes (33%), and handling investments (31%). For affluent investors, nearly half (47%) said minimize their taxes was the most overwhelming.
“No matter how you feel or where you are in your wealth-building journey, an advisor can help navigate complexities, alleviate stress, and provide that extra support to go further with your goals, which is even more important in periods of uncertainty,” added Van de Loo. “The bottom line is that open discourse and deliberate planning with an expert can go a long way in helping to move your financial life forward.”
For more information on the Everyday Wealth in America survey, visit edelmanfinancialengines.com/wealth-in-america-2022/.
About Edelman Financial Engines
Since 1986, Edelman Financial Engines has been committed to always acting in the best interests of our clients. We were founded on the belief that all investors deserve access to personal, integrated financial planning and investment advice. Today, we are America’s top independent financial planning and investment advisory firm, as recognized by Barron’s for five consecutive years,1 with 145+ offices3 across the country and entrusted by more than 1.3 million clients to manage $241 billion in assets.4 Our unique approach to serving clients combines our advanced methodology and proprietary technology with the attention of a dedicated personal financial planner. Every client’s situation and goals are unique, and the powerful fusion of high-tech and high touch allows Edelman Financial Engines to deliver the personal plan and financial confidence that everyone deserves. For more information, please visit EdelmanFinancialEngines.com.
1 The Barron’s 2022 Top 100 RIA Firms list, a seven-year ranking of independent advisory firms, is qualitative and quantitative, including assets managed by the firms, technology spending, staff diversity, succession planning and other metrics. Firms elect to participate but do not pay to be included in the ranking. Ranking awarded each September based on data within a 12-month period. Compensation is paid for use and distribution of the rating. Investor experience and returns are not considered. The 2018 ranking refers to Edelman Financial Services, LLC, which combined its advisory business in its entirety with Financial Engines Advisors L.L.C. (FEA) in November 2018. For the same survey, FEA received a pre-combination ranking of 12th.
2 The Everyday Wealth in America research was conducted for Edelman Financial Engines by Greenwald Research. Information was gathered through an online survey of 2,011 Americans who were at least 30 years old, from Aug. 30 to Sept. 7, 2022. The total sample included an oversample of 1,003 “affluent” respondents between the ages of 45-70, with household assets between $500K-$3M, and currently working with a financial professional or open to doing so. Data was weighted to correct for the affluent oversample and was also weighted by household assets, age, gender, race, and education to reflect the broader national population. If randomly conducted, the survey would have a margin of error (at the 95% confidence level) of plus or minus 2 percentage points.
3 Edelman Financial Engines data, as of Dec. 31, 2021.
4 Edelman Financial Engines data, as of June 30, 2022.
© 2022 Edelman Financial Engines, LLC. Edelman Financial Engines® is a registered trademark of Edelman Financial Engines, LLC. All advisory services provided by Financial Engines Advisors L.L.C., a federally registered investment advisor. Results are not guaranteed. See EdelmanFinancialEngines.com/patent-information for patent information. AM2583280
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