Wells Fargo Index: Investor Optimism Dips in Second Quarter, Driven By Retiree Concerns about Economy

  • Non-retirees bullish on investment technology, financial advice, but worried about having enough in retirement
  • Eight in 10 say “American Dream” is “Achievable”
  • Majority of investors not knowledgeable about market gains

ST. LOUIS--()--The Wells Fargo/Gallup Investor and Retirement Optimism Index slipped eight points in the second quarter to +29 from +37 in February, driven largely by a 17-point decline (from +41 to +24) in optimism among retired investors, whose view of inflation and economic growth deteriorated during the quarter.

“They said they’re pretty knowledgeable about investing, but they don’t seem to be aware of the market’s record growth over the last year and a half.”

The optimism of non-retirees remained essentially unchanged, at +31, versus +35 in February, according to the quarterly survey of 1,036 investors, aged 18 and older conducted June 27 through July 9, 2014.

Despite having ambivalence about the economy and investing, 84% of the investors surveyed said the American Dream is achievable. Their definition of the dream included the ability to afford a home (93%), living comfortably in retirement (92%) and having meaningful employment (92%). Least cited: having a standard of living surpassing that of their parents (76%).

Nearly nine out of 10 non-retired investors said they are optimistic they will achieve the American Dream versus 77% of retired investors, reflecting the overall optimism of non-retirees in the survey.

“The American Dream remains a pretty simple concept among investors: a home, a good job, and money to live on later in life,” said Joe Nadreau, head of Innovation and Strategy at Wells Fargo Advisors. “While retirement gives some investors pause, most still view the American Dream optimistically and are taking steps to realize it.”

Having Enough Money in Retirement Still a Concern

Though most saw a secure retirement as fundamental to realizing the American Dream, about half of the non-retired investors in the survey (47%) were either “extremely” or “somewhat” worried that they have not saved enough to be able to retire. About a third, (29%) were a “little worried,” while 24% were “not worried at all.”

Similarly, 46% of all investors – retired and non-retired – were worried they won’t have enough money to last throughout their retirement. This includes 19% who were “extremely worried.” By contrast, 20% were “a little worried,” and 29% were “not worried.”

“About half of investors worry about whether they’ll be able to retire, and if they do, whether they’ve saved enough to last through retirement,” said Nadreau. “Regardless of where they are in their lives and how much they make, investors can allay these concerns with a clear saving-and-investment strategy.”

Saving and Investing: What Would You Do With $10,000?

When asked what they would do with an extra $10,000 to save or invest, 41% of investors said they would invest money in the markets, while a majority (56%) said they would keep it as cash or saved in a CD.

The conservative response tracked with 59% of investors who said the financial market is a “fair” to “poor” place for average Americans to grow wealth, despite 2013’s historical market gains. This view was more widely held (69%) among investors with less than $100,000 in investable assets.

Two-thirds of investors (67%) said they are “highly knowledgeable” or “somewhat knowledgeable” about investing, about the same percentage that correctly answered that the stock market rose in 2013, when asked whether the markets increased, decreased, or stayed the same last year. However, just 7% of investors said they knew the markets had an average return of 30% in 2013, based on S&P 500 returns. Of those who knew the market rose in 2013 (37%), the majority thought the market increased only 10%, while another 17% thought it rose 20%.

“There’s a perception gap with investors,” Nadreau said. “They said they’re pretty knowledgeable about investing, but they don’t seem to be aware of the market’s record growth over the last year and a half.” Investors who put $10,000 in an investment based on the S&P 500 at the beginning of this year, would have gained $710*, compared to much lesser returns in non-equity/fixed income investments. “Knowledge truly is power, and in this case, security when building the American Dream.”

(*based on the total return for the S&P 500 Composite Index in first half of this year, which was 7.2%. In 2013, the S&P 500 Index returned 32.8% including dividends, however these returns do not account for investor fees and expenses. Investors cannot invest directly in an index.)

Advice Makes a Difference to All Investors – Regardless of Asset Level

While the survey’s knowledge findings could raise questions about investors’ abilities to assess risks and opportunities, it also showed most investors who own stocks were open to professional guidance, be it in person, on the phone, or collaboratively in the digital space. In fact, of the eight in 10 investors who reported owning individual stocks or mutual funds, 71% said they prefer consulting with someone who can give them expert or professional advice, compared to 27% who said they feel confident about investing in the market on their own.

Overall, roughly one-third of investors (32%) sought more financial advice in the last two to three years, and nearly 40% indicate they would increase the advice they seek in the next two to three years.

Investors overwhelmingly seek advice during major changes in their life. The top three reasons investors sought financial advice are retirement (71%), divorce (64%), and death of a close family member (52%). Only 35% of investors said they would seek financial advice upon getting married, followed by 34% seeking advice for changing jobs, and 32% seeking advice when everything is going well in their lives.

Non-Retirees Much More Confident About Technology

Investors were twice as likely to have a dedicated personal financial advisor as they were to use an online website (44% versus 20%). This was particularly the case with retired investors surveyed, who said they relied more heavily on a dedicated personal financial advisor than on technology (53% vs. 11% for non-retired investors).

By contrast, 40% of non-retired investors had a personal advisor and 24% used an online planning or investing website, a much smaller difference between the two strategies. Separately, the poll found high asset investors – those with $100,000 or more – were more likely to rely on advisors and technology, although they still relied much more heavily on a dedicated personal financial advisor than on technology, 53% vs. 23%.

Meanwhile, just 32% of investors with less than $100,000 in investable assets had a dedicated personal advisor and 18% used a financial planning or investing website.

Nevertheless, more than half of U.S. investors (57%) described themselves as “very” or “somewhat comfortable” using online and mobile technology for their investing or financial advice needs. Further, 31% of non-retirees said they expect to use more mobile and online technology for investment services, in the next few years. This topic may be worth watching for future indications, as 66% of non-retirees (compared with just 34% of retirees) said they were “very” or “somewhat” comfortable using technology in conjunction with their investing or finances.

“Technology is dramatically transforming the way investors – and their advisors – approach financial planning,” said Nadreau. “That the fastest-growing group of investors – non-retirees – is showing more signs of openness to technology is a strong indicator for the future of our industry.”

FOOTNOTE: For historical context, the overall index continues to register in the range of +25 to +43 seen since the start of 2013. By contrast, since its inception in 1996, the Investor Optimism Index has reached as high as +178 (in early 2000) and as low as -64 (in early 2009). Both groups, but especially retirees, are also broadly optimistic about the stock market, while they take a negative stance on unemployment and inflation.

About the Wells Fargo/Gallup Investor and Retirement Optimism Index

These findings are part of the Wells Fargo/Gallup Investor and Retirement Optimism Index, which was conducted June 27-July 9, 2014, by telephone. The sampling for the Index included 1,036 investors randomly selected from across the country with a margin of sampling error is +/- three percentage points. For this study, the American investor is defined as any person who is head of a household or a spouse in any household with total savings and investments of $10,000 or more. About two in five American households have at least $10,000 in savings and investments. The sample size is comprised of 71% non-retired and 29% retirees. Of total respondents, 61% had reported annual income of less than $90,000 and 39% of $90,000 or more. The Wells Fargo/Gallup Investor and Retirement Index is an enhanced version of Gallup’s Index of Investor Optimism that provides its historical data. The median age of the non-retired investor is 46 and the retiree is 68.

The Index had a baseline score of 124 when it was established in October 1996. It peaked at 178 in January 2000, at the height of the dot-com boom, and hit a low of negative 64 in February 2009.

About Wells Fargo Advisors

With $1.4 trillion in client assets as of June 30, 2014, Wells Fargo Advisors provides investment advice and guidance to clients through 15,189 full-service financial advisors and 3,472 licensed bankers. This vast network of advisors, one of the nation’s largest, serves investors through locations in all 50 states and the District of Columbia. Wells Fargo Advisors is the trade name used by two separate registered broker-dealers and non-bank affiliates of Wells Fargo & Company: Wells Fargo Advisors, LLC and Wells Fargo Advisors Financial Network, LLC (members SIPC). Statistics include other broker-dealers of Wells Fargo & Company. www.wellsfargoadvisors.com

Investment products and services are offered through Wells Fargo Advisors, LLC.

About Wells Fargo & Company (Twitter @WellsFargo)

Wells Fargo & Company (NYSE:WFC) is a nationwide, diversified, community-based financial services company with $1.6 trillion in assets. Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, insurance, investments, mortgage, and consumer and commercial finance through more than 9,000 locations, 12,500 ATMs, and the internet (wellsfargo.com), and has offices in 36 countries to support customers who conduct business in the global economy. With approximately 265,000 team members, Wells Fargo serves one in three households in the United States. Wells Fargo & Company was ranked No. 29 on Fortune’s 2014 rankings of America’s largest corporations. Wells Fargo’s vision is to satisfy all our customers’ financial needs and help them succeed financially. Wells Fargo perspectives are also available at Wells Fargo Blogs and Wells Fargo Stories.

About Gallup

For more than 70 years, Gallup has been a recognized leader in the measurement and analysis of people’s attitudes, opinions, and behavior. While best known for the Gallup Poll, founded in 1935, Gallup’s current activities consist largely of providing marketing and management research, advisory services and education to the world’s largest corporations and institutions.

Note: Complete survey results and a chart showing the index movement are available upon request.



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