The Corporate Executive Market Is Ready For Service
By Walter H. Zultwoski
After three years of a bear market, the economy appears to be improving and the equity markets are heading north, which represents great news for advisors to the high net worth.
Like all investors, members of this market have been struggling with preserving their assets these past several years. Many suffered significant losses to their portfolios. The recent improving conditions, buttressed by economic indicators and forecasts by some of the nations most respected economists, makes it likely that wealthy investors will be back in the market for financial advice and services.
Since 1999, my company has been conducting annual surveys, focus groups, and has had constant interaction with advisors working with the high-net-worth market, which we define as clients with a net worth of more than $1 million, exclusive of their primary residence.
The attitudes of the nations wealthy have changed markedly during the three-year bear market. In 2000, the Phoenix Wealth Management Survey found the high net worth full of confidence, looking forward to continuing good times. Reflective of those heady times, many millionaires did not think they were wealthy, and they felt the threshold for achieving wealth was $5 million.
In 2002, in the continuing midst of the difficult equity markets and flat-lined economy, our surveys found the nations wealthy were more cautious and the bar for "perceived wealth" had dropped slightly.
As I write this, we are nearing completion of our 2003 wealth survey. The preliminary data show that members of the high-net-worth market are gaining more confidence in todays economy. Of course, the high net worth are not all alike. We have identified distinct markets–business owners, wealthy families and corporate executives–and all look for slightly different solutions at different times.
Based on everything we have seen, it seems clear the corporate executive market segment will be among the most aggressive in looking for service. Corporate executives, by a higher margin than the full survey population, agreed with the statement, "It is important to me to get a substantial return on my capital, even if it means taking risks" (57% for corporate executives vs. 41% of the survey). Why? Consider the demographics of these executives.
For the most part, corporate executives are the youngest and best educated of the high net worth. They have gained their wealth largely through compensation paid by their employers, or in the heady days of the 1990s, through stock options and other corporate compensation plans. In fact, 60% of this group listed compensation as the major contributor to their wealth, vs. 48% of the full survey group.
While the difficult economy of the past three years has made them nervous and insecure, based on the data, it seems their natural inclination is to be aggressive–at least when it comes to financial planning. In answer to the question, "I need the constant thrill of competition," corporate executives agreed at a rate of 60%, vs. 32% of the survey population.
