There are several economic signals that are flashing yellow. Gas prices are at an all-time high, more Americans are receiving food stamps than ever before, and real estate values continue to plummet. The average number of Americans filing for unemployment benefits reached its highest level in two years this February, construction spending fell for the fifth straight month, and manufacturing activity shrank to its lowest level in five years. The media has begun to liberally use the term recession, and have also begun to throw around the d-word; Depression. All of this is adding to pressure on the economic environment. That does not mean it is impolitic for the affluent to take this opportunity to look at their budgets, what they are spending and trim the fat.

When asked, a shocking 42% responded that it was likely or very likely that they will change how they budget and spend their money. The fact that over 40% are going to be looking at and reassessing their budget shows that this economic downturn and accompanying uncertainty is affecting even the wealthiest investors. The wealthy are also feeling this pressure in their professional lives. Thirty-one percent answered likely or very likely when asked if the company they work for or the business they own will be negatively affected. The 15% who cite their profession as Entrepreneur/Business Owner will most likely feel the recession most acutely, as business owners often have more of their personal wealth entwined with their business finances. Perhaps most shocking is the fact that 6% of wealthy investors believe they will lose their jobs as a direct results of the economic troubles the country is experiencing. Another 3% believe their spouse will lose their job. Though 11% of the Millionaires are physicians or dentists (professions that may be more recession- proof), which leaves a vast majority who are in professions that are susceptible to downsizing, revenue drops, budget cuts and the other pitfalls of working life.

The HNW investor has more insulation from the financial ups and downs of the market, and the daily trials an average investor might feel, the wealthy are still nervous. While they may have more of a cushion, more luxuries to cut from their budgets, they also have more to lose, especially those with more aggressive allocations. The Spectrem Millionaire Investor Index (SMII)® and Spectrem Affluent Investor Index (SAII)® both fell this month, pulled down by affluent investors staying out of the market and not investing. It is easy to predict this will continue.

The indices are usually good predictors of how the rest of the country will react, and these days, the wealthy are nervous and pulling back. It is not unreasonable to expect the rest of the marketplace to do the same.  

                                                                                                                                            Being sensitive to your client’s fears and suggesting measures that will help them weather the storm of recession may assuage some of their anxiety. Talk with them about the long view of what they might expect in the future, and provide them with options. Give them information that may take away some of the feeling of helplessness they are experiencing, and make it easier for you to manage them through this rocky time.

---