America's Affluent: Satisfying Their Needs in an Era of Uncertainty 2002–03 Affluent MacroMonitor Report

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Introduction

The market events of the past two years have changed the financial landscape for institutions and consumers. This report examines the current state of the Affluent market and analyzes Affluent consumers' financial needs, behaviors, and attitudes in the context of a dynamic and rapidly changing environment. To be "Affluent" for inclusion in the MacroMonitor's segmentation requires that a household have either a total annual income of at least $100,000 or total assets, excluding the primary residence, of $500,000 or more. Our analyses are based on eight key populations within the overall Affluent group. Definitions of the two larger groups—Mass Affluent and Millionaires households—are based on total household net worth, with the dividing line at $1 million. The six smaller groups represent populations that we have defined consistently since 1992; they allow us to analyze the financial needs and attitudes of Affluent households in the United States that share fundamental wealth attributes that are predictive of financial needs and reflect a combination of preferences for certain types of assets and their wealth-accumulation/distribution status.

Figure 1 shows the present and recent past distribution of Mass Affluent and Millionaires households in the United States.




What are some of the forces that drove this dramatic shift in the composition of the Affluent market? How can we gain a better understanding of how consumers' reactions to those defining forces manifest themselves and change the shape of the Affluent population? What are the effects on the behaviors and attitudes of Affluent households as they react to new financial challenges and opportunities? To answer these and other important questions, while developing a meaningful context to advance our understanding of what affluence means in terms of the opportunity to provide financial services to this population, we look at the Affluent population also through the lens of our proprietary segmentation.

The Consumer Financial Decisions (CFD) Affluent Segmentation graphic illustrates and provides definitions for the Affluent population segments that we have been tracking and analyzing for the past decade.

THE CFD AFFLUENT SEGMENTATION The Consumer Financial Decisions (CFD) segmentation algorithm incorporates demographic, psychographic, life-stage, and behavioral variables to select, cluster, and assess household behavior. It focuses on households with total income equal to or greater than $100,000 or with assets of $500,000 or more (excluding the primary residence). At present, this upscale market comprises 16.5 million Affluent American households. The proprietary model divides the Affluent market into six mutually exclusive household types. We define retired households (under Wealthy Retired) and business owners (under Entrepreneurs) first. We then define the remaining segments on the basis of the value of their primary home and their financial assets. Balanced Builders are households with high levels of both real and financial assets. They have financial assets of $300,000 or more, and their home value is $200,000 or more. Focused Builders hold high financial assets equal to or greater than $300,000 but have home values lower than $200,000. Real Asset Builders invest primarily in real estate. Their real estate assets are worth $200,000 or more, but their financial assets total less than $300,000. The Emerging Affluent have both a low level of financial assets (less than $300,000) and low home values (less than $200,000). In Wealthy Retired households, the primary head of household either is retired or is 65 years old or older and works fewer than 20 hours per week. Entrepreneurs are households in which the household head's primary occupation is the ownership of or partnership in a business or professional practice.

Figure 2 shows how our Affluent segments are distributed in the Mass Affluent and Millionaires populations.




If one is focusing on the Mass Affluent market, the main focus will be on the households characterized by the Real Asset Builders, Focused Builders, and Emerging Affluent segments because more than 70% of the households in each segment fall into the Mass Affluent group. If, on the other hand, one is pursuing the Millionaires market, the Wealthy Retired, Balanced Builders, and Entrepreneurs segments represent 90% of households that have a net worth of $1 million or more. Those three segments are also well represented in the Mass Affluent population and may represent the best opportunity in terms of growing profitability by an acquisition and retention strategy. Figure 3 puts into perspective the relative shares of each segment that qualifies as Mass Affluent or Millionaires households.




The fact that all the segments represent opportunities within both the Mass Affluent and the Millionaires groups suggests the complex marketing challenge that the Affluent market represents. The key to unlocking the Affluent market opportunity is a thorough understanding of who these households are financially and how they react to changes in the overall market environment. The events of the past two years offer a unique opportunity for gaining meaningful insight into the behaviors and attitudes of the U.S. Affluent population.

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TABLE OF CONTENTS
Introduction				1
Executive Summary				6
	The Total Affluent Market			6
	The Mass Affluent Market			6
		Transactions		6
		Protection		7
		Savings and Investments		7
		Credit		7
		Information and Advice		8
	The Millionaires Market			8
		Transactions		9
		Protection		9
		Savings and Investments		9
		Credit		10
		Information and Advice		10
	The Mass Affluent and Millionaires Markets			11
	Mass Affluent Trend Analysis: 2000 versus 2002			16
		Financial Profile		16
		Financial Needs of the Mass Affluent		19
			Sizing and Segmenting the Market by Age Cohort and Life Stage	19
			The Role of Recent Life Events in Shaping the Mass Affluent Market	21
			Transactions	24
			Protection	28
			Savings and Investments	31
			Credit	35
			Information and Advice	38
	Millionaires Trend Analysis: 2000 versus 2002			42
		Financial Profile		42
		Financial Needs of the Millionaires Population		46
			Sizing and Segmenting the Market by Age Cohort and Life Stage	46
			Transactions	49
			Protection	54
			Savings and Investments	56
			Credit	60
			Information and Advice	64
Segment Profiles
Balanced Builders				68
	Highlights			68
		Demographics		68
		Savings and Investments		68
		Credit		68
		Protection		69
		Information and Advice		69
	Attitudinal Profile			75
	Demographics			77
	Savings and Investments			79
	Credit			81
	Protection			82
	Transactions			82
	Information and Advice			83
	Personal-Computer and Internet Use			83
	Trend Analysis: 2000 versus 2002			85
Focused Builders				92
	Highlights			92
		Demographics		92
		Savings and Investments		92
		Credit		92
		Protection		92
		Information and Advice		93
	Attitudinal Profile			99
	Demographics			101
	Savings and Investments			103
	Credit			104
	Protection			105
	Transactions			105
	Information and Advice			106
	Personal-Computer and Internet Use			108
	Trend Analysis: 2000 versus 2002			109
Real Asset Builders				117
	Highlights			117
		Demographics		117
		Savings and Investments		117
		Credit		117
		Protection		118
		Information and Advice		118
	Attitudinal Profile			124
	Demographics			127
	Savings and Investments			129
	Credit			132
	Protection			133
	Transactions			134
	Information and Advice			134
	Personal-Computer and Internet Use			135
	Trend Analysis: 2000 versus 2002			137
Emerging Affluent				144
	Highlights			144
		Demographics		144
		Savings and Investments		144
		Credit		144
		Protection		145
		Information and Advice		145
	Attitudinal Profile			150
	Demographics			155
	Savings and Investments			156
	Credit			158
	Protection			160
	Transactions			161
	Information and Advice			163
	Personal-Computer and Internet Use			165
	Trend Analysis: 2000 versus 2002			167
Wealthy Retired				175
	Highlights			175
		Demographics		175
		Savings and Investments		175
		Credit		175
		Protection		175
		Information and Advice		176
		Personal-Computer and Internet Use		176
	Attitudinal Profile			181
	Demographics			186
	Savings and Investments			188
	Credit			190
	Protection			190
	Transactions			191
	Information and Advice			192
	Personal-Computer and Internet Use			193
	Trend Analysis: 2000 versus 2002			195
Entrepreneurs				202
	Highlights			202
		Demographics		202
		Savings and Investments		202
		Credit		202
		Protection		202
		Information and Advice		203
		Personal-Computer and Internet Use		203
	Attitudinal Profile			209
	Demographics			212
	Savings and Investments			215
	Credit			216
	Protection			217
	Transactions			217
	Information and Advice			218
	Personal-Computer and Internet Use			220
	Trend Analysis: 2000 versus 2002			222
Tables
Mass Affluent
Market Size and Balance-Sheet Trends				16
Asset-Class Incidence and Balance Trends				17
Millionaires
Market Size and Balance-Sheet Trends				43
Asset-Class Incidence and Balance Trends				44
Balanced Builders
Demographic Profile				70
Balance Sheet				72
Insurance Product Ownership Profile				74
Balanced Builders: Market Size and Balance-Sheet Trends				85
Balanced Builders: Asset-Class Incidence and Balance Trends				87
Focused Builders
Demographic Profile				94
Balance Sheet				96
Insurance Product Ownership Profile				98
Focused Builders: Market Size and Balance-Sheet Trends				109
Focused Builders: Asset-Class Incidence and Balance Trends				112
Real Asset Builders
Demographic Profile				119
Balance Sheet				121
Insurance Product Ownership Profile				123
Real Asset Builders: Median Balances in Savings and Investment Products				131
Real Asset Builders: Market Size and Balance-Sheet Trends				138
Real Asset Builders: Asset-Class Incidence and Balance Trends				139
Emerging Affluent
Demographic Profile				146
Balance Sheet				148
Insurance Product Ownership Profile				150
Focused Builders: Market Size and Balance-Sheet Trends				168
Focused Builders: Asset-Class Incidence and Balance Trends				170
Wealthy Retired
Demographic Profile				177
Balance Sheet				179
Insurance Product Ownership Profile				181
Estimated Mean Number of Annual Financial Transactions				192
Wealthy Retired: Market Size and Balance-Sheet Trends				196
Wealthy Retired: Asset-Class Incidence and Balance Trends				197
Entrepreneurs
Demographic Profile				204
Balance Sheet				206
Insurance Product Ownership Profile				208
Entrepreneurs: Market Size and Balance-Sheet Trends				222
Entrepreneurs: Asset-Class Incidence and Balance Trends				223
Figures
Trend in Distribution of Mass Affluent and Millionaires Households				1
Distribution of Affluent Segments among Mass Affluent and Millionaires Populations				4
Proportion of Mass Affluent versus Millionaires Households within Each CFD-Proprietary Affluent Segment				5
A Slowdown in Affluent-Market Growth				11
Trend in Distribution of Mass Affluent and Millionaires Households				12
Trend in Relative Proportions of Mass Affluent versus Millionaires				13
Trend in Number of Mass Affluent versus Millionaires Households				13
Distribution of Affluent Households by Net Worth				14
Trend in Numbers of Households Qualifying as Affluent on the Basis of Income Only, Assets Only, or Both				14
Trend in Proportions of Households Qualifying as Affluent on the Basis of Income Only, Assets Only, or Both				15
Trend in Distribution of Incidence of Ownership and Average Assets for All Affluent and Mass Affluent Households				18
Distribution of the Mass Affluent by Age Cohort				19
Distribution of Mass Affluent Households by Life Stage				20
Trend in Incidence of Recent Life Events among Mass Affluent Households				23
Trend in Distribution of Financial Institutions Named as Primary among Mass Affluent Households				24
Trend in Distribution of Preferred Type of Primary Financial Institution among Mass Affluent Households				25
Trend in Incidence of Use of Key Types of Financial Transactions among Mass Affluent Households				26
Trend in the Average Number of Key Types of Financial Transactions among Mass Affluent Households				27
Trend in Incidence of Use of Online Financial Transactions among Mass Affluent Households				28
Trend in Incidence of Insurance Ownership for Major Categories of Insurance among Mass Affluent Households				29
Trend in Incidences of Types of Property and Casualty Insurance among Mass Affluent Households				29
Trend in Group versus Individual Life Insurance Ownership Incidences and Distribution of Individual Policies by Type among Mass Affluent Households				30
Trend in Ownership Incidences of Health and Disability Insurance among Mass Affluent Households				31
Trend in Incidences of Goals for Saving and Investing among Mass Affluent Households				32
Trend in Average Distribution of Household Savings and Investments by Type of Financial Institution among Mass Affluent Households				33
Trend in Incidences of Brokerage Accounts among Mass Affluent Households				34
Trend in Level of Securities Trading Activity among Mass Affluent Households				34
Trend in Purposes for Borrowing among Mass Affluent Households				35
Trend in Incidences of Loans on Primary Residence among Mass Affluent Households				36
Trend in Consumer Loans among Mass Affluent Households				36
Trend in Incidences of Credit-Card Ownership by Type among Mass Affluent Households				37
Trend in Method of Paying Monthly Credit-Card Bill among Mass Affluent Households				38
Trend in Household Financial Strategy among Mass Affluent Households				39
Trend in Level of Confidence Regarding Financial Matters among Mass Affluent Households				39
Trend in Types of Financial Advisors Used during the Past Two Years among Mass Affluent Households				40
Trend in Types of Professional Planners and Advisors That Households Are Likely to Use Next Year among Mass Affluent Households				41
Trend in Distribution of Incidence of Ownership and Average Assets for All Affluent and Millionaires Households				45
Distribution of Millionaires by Age Cohort				46
Distribution of Millionaires by Life Stage				48
Trend in Incidence of Recent Life Events among Millionaires Households				49
Trend in Distribution of Financial Institutions Named as Primary among Millionaires Households				50
Trend in Distribution of Preferred Type of Primary Financial Institution among Millionaires Households				51
Trend in Incidence of Use of Key Types of Financial Transactions among Millionaires Households				52
Trend in the Average Number of Key Types of Financial Transactions among Millionaires Households				52
Trend in Incidence of Use of Online Financial Transactions among Millionaires Households				53
Trend in Incidence of Insurance Ownership for Major Categories of Insurance among Millionaires Households				54
Trend in Incidence of Types of Property and Casualty Insurance among Millionaires Households				55
Trend in Group versus Individual Life Insurance Ownership Incidences and Distribution of Individual Policies by Type among Millionaires Households				55
Trend in Ownership Incidences of Health and Disability Insurance among Millionaires Households				56
Trend in Incidences of Goals for Saving and Investing among Millionaires Households				57
Trend in Average Distribution of Household Savings and Investments by Type of Financial Institution among Millionaires Households				58
Trend in Incidences of Brokerage Accounts among Millionaires Households				59
Trend in Level of Securities Trading Activity among Millionaires Households				60
Trend in Purposes for Borrowing among Millionaires Households				61
Trend in Incidences of Loans on Primary Residence among Millionaires Households				61
Trend in Incidences of Consumer Loans among Millionaires Households				62
Trend in Incidences of Credit-Card Ownership by Type among Millionaires Households				63
Trend in Method of Paying Monthly Credit-Card Bill among Millionaires Households				64
Trend in Household Financial Strategy among Millionaires Households				64
Trend in Level of Confidence Regarding Financial Matters among Millionaires Households				65
Trend in Types of Financial Advisors Used during the Past Two Years among Millionaires Households				66
Trend in Types of Professional Planners and Advisors That Households Are Likely to Use Next Year among Millionaires Households				67
Balanced Builders: Savings and Investment Orientation				75
Balanced Builders: Attitudes toward Financial Institutions and Delivery of Services				76
Balanced Builders: Attitudes toward Professional Financial Advice				77
Balanced Builders, by Age Cohort				78
Balanced Builders, by Life Stage				78
Balanced Builders: Millionaires versus Mass Affluent				79
Balanced Builders: Ownership of Investment Products				80
Balanced Builders: Ownership of Retirement Products				80
Balanced Builders: Median Balance in Retirement Products				81
Balanced Builders: Reliance on Professional Financial Advisors				83
Balanced Builders: Online Financial Activities Now Use				84
Balanced Builders: Use of Financial Services on the Internet				84
Balanced Builders: Trended Attitudinal Profile, 2000 versus 2002 Attitudes toward Savings and Investments				88
Balanced Builders: Trended Attitudinal Profile, 2000 versus 2002 Attitudes toward Financial Institutions and Delivery of Services				89
Balanced Builders: Trended Attitudinal Profile, 2000 versus 2002 Attitudes toward Professional Financial Advice				90
Focused Builders: Savings and Investment Orientation				99
Focused Builders: Attitudes toward Financial Institutions and Delivery of Services				100
Focused Builders: Attitudes toward Professional Financial Advice				101
Focused Builders, by Age Cohort				102
Focused Builders, by Life Stage				102
Focused Builders: Millionaires versus Mass Affluent				103
Focused Builders: Median Balance Held in Stocks and Mutual Funds				104
Focused Builders: Ownership of Stockbrokerage Accounts				106
Focused Builders: Incidence of Having Trust in Various Types of Financial Institutions				107
Focused Builders: Acceptance of Need for Financial Advice				108
Focused Builders: Use of Financial Services on the Internet				109
Focused Builders: Trended Attitudinal Profile, 2000 versus 2002 Attitudes toward Savings and Investments				113
Focused Builders: Trended Attitudinal Profile, 2000 versus 2002 Attitudes toward Financial Institutions and Delivery of Services				115
Focused Builders: Trended Attitudinal Profile, 2000 versus 2002 Attitudes toward Professional Financial Advice				116
Real Asset Builders: Savings and Investment Orientation				124
Real Asset Builders: Attitudes toward Financial Institutions and Delivery of Services				126
Real Asset Builders: Attitudes toward Professional Financial Advice				127
Real Asset Builders, by Age Cohort				128
Real Asset Builders, by Life Stage				128
Distribution of Mass Affluent Households, by Segment				129
Real Asset Builders: Ownership of Savings and Investment Products				130
Real Asset Builders: Likelihood of Making Retirement Account Transactions in the Next 12 Months				132
Real Asset Builders: Incidence of Liabilities				133
Real Asset Builders: Online Financial Activities Now Use				136
Real Asset Builders: Use of Financial Services on the Internet				136
Real Asset Builders: Trended Attitudinal Profile, 2000 versus 2002 Attitudes toward Savings and Investments				141
Real Asset Builders: Trended Attitudinal Profile, 2000 versus 2002 Attitudes toward Financial Institutions and Delivery of Services				142
Real Asset Builders: Trended Attitudinal Profile, 2000 versus 2002 Attitudes toward Professional Financial Advice				143
Emerging Affluent: Savings and Investment Orientation				151
Emerging Affluent: Attitudes toward Financial Institutions and Delivery of Services				153
Emerging Affluent: Attitudes toward Professional Financial Advice				154
Emerging Affluent, by Age Cohort				155
Emerging Affluent, by Life Stage				156
Emerging Affluent: Ownership of Savings and Investment Products				157
Emerging Affluent: Ownership of Retirement Products				157
Emerging Affluent: Risk Orientation				158
Emerging Affluent: Method of Paying Monthly Credit-Card Bills				159
Emerging Affluent: Credit Attitudes				160
Emerging Affluent: Incidence of Mortgage and Credit Insurance				160
Emerging Affluent: Life Insurance Attitudes				161
Emerging Affluent: Difference from Total Affluent in Average Number of Financial Transactions by Type				162
Emerging Affluent: Financial-Advice Attitudes				164
Emerging Affluent: Likelihood of Obtaining Professional Advice in the Next 12 Months				165
Emerging Affluent: Online Financial Activities Now Use				166
Emerging Affluent: Use of Financial Services on the Internet				167
Emerging Affluent: Trended Attitudinal Profile, 2000 versus 2002 Attitudes toward Savings and Investments				171
Emerging Affluent: Trended Attitudinal Profile, 2000 versus 2002 Attitudes toward Financial Institutions and Delivery of Services				173
Emerging Affluent: Trended Attitudinal Profile, 2000 versus 2002 Attitudes toward Professional Financial Advice				174
Wealthy Retired: Savings and Investment Orientation				182
Wealthy Retired: Attitudes toward Financial Institutions and Delivery of Services				184
Wealthy Retired: Attitudes toward Professional Financial Advice				185
Affluent Households with Female Head of Household Only, by Segment				186
Distribution of Affluent Female-Head-Only Households, by Segment				187
Wealthy Retired: Millionaires versus Mass Affluent				188
Wealthy Retired: Risk Orientation				189
Wealthy Retired: Ownership of Financial Assets				190
Wealthy Retired: Use of Professional Financial Advisors				193
Wealthy Retired: Online Financial Activities Now Use				194
Wealthy Retired: Use of Financial Services on the Internet				195
Wealthy Retired: Trended Attitudinal Profile, 2000 versus 2002 Attitudes toward Savings and Investments				199
Wealthy Retired: Trended Attitudinal Profile, 2000 versus 2002 Attitudes toward Financial Institutions and Delivery of Services				200
Wealthy Retired: Trended Attitudinal Profile, 2000 versus 2002 Attitudes toward Professional Financial Advice				201
Entrepreneurs: Savings and Investment Orientation				209
Entrepreneurs: Attitudes toward Financial Institutions and Delivery of Services				210
Entrepreneurs: Attitudes toward Professional Financial Advice				211
Entrepreneurs, by Age Cohort				212
Entrepreneurs, by Life Stage				213
Entrepreneurs: Millionaires versus Mass Affluent				214
Entrepreneurs: Primary Financial Decision Maker				214
Entrepreneurs: Ownership of Investment Products				215
Entrepreneurs: Participation in Traditional IRAs				216
Entrepreneurs: Use of Professional Financial Advisors				219
Entrepreneurs: Online Financial Activities Now Use				220
Entrepreneurs: Use of Financial Services on the Internet				221
Entrepreneurs: Trended Attitudinal Profile, 2000 versus 2002 Attitudes toward Savings and Investments				225
Entrepreneurs: Trended Attitudinal Profile, 2000 versus 2002 Attitudes toward Financial Institutions and Delivery of Services				227
Entrepreneurs: Trended Attitudinal Profile, 2000 versus 2002 Attitudes toward Professional Financial Advice				228
Boxes
The CFD Affluent Segmentation				2
Appendixes
A. MacroMonitor Survey Methodology				A-1
B. Survey Weighting Procedures				B-1
C. Affluent Segment Definitions				C-1