Client Service July 21, 2017

A Closer Look at How Americans Define Wealth

Some define it in monetary terms, and others as a state of well-being.
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A recent study Charles Schwab finds that Americans have very different views of what wealth means. Their definitions of the term range from a specific amount of money to a specific state of being.

When it comes to a monetary definition, the firm found that Americans set the bar high. Asked how much money is needed to be wealthy, Americans on average reported $2.4 million or 30 times the actual median net worth of U.S. households. This is of particular concern for advisers considering the common notion that financial advice is an option only available for the wealthy. However, research indicates several Americans desire advice about saving and investing.

“Wealth is often thought of as a lofty, unattainable number that doesn’t apply to most of us, but that’s an old-fashioned notion that needs to be retired,” said Terri Kallsen, executive vice president and head of Schwab Investor Services. “It doesn’t matter whether you have a lot or a little—what matters is that you think about the money you have as your wealth, and that you pay attention to it. Being engaged is the only way to reach your personal goals.”

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However, Kallsen believes the industry as a whole could improve its efforts to erase the misconception.

“Not every investment firm is built to encourage this level of engagement across investors of all types and sizes, Kallsen explains.” We’ve watched as many firms set their account minimums high and their fees higher, making it difficult for people to access professional planning and advice. As Americans’ definition of wealth evolves, the industry needs to modernize its approach to find new ways to deliver good value and a great experience to a broader population.” 

But even though the top answer respondents picked when asked to define wealth was having a lot of money (27%), the survey found Americans also associate wealth with a state of being or a state of mind. 

The next top answers were enjoying life’s experiences (24%),being able to afford anything they want (22%), living stress-free and having peace of mind (19%), and having loving relationships with family and friends (12%).

These results were generated from Charles Schwab’s “Modern Wealth Index.” The annual study aims to gauge how Americans across the wealth spectrum are planning, managing, and engaging with their wealth.

The study also found that written financial plans help Americans make good choices.

Additional findings from the 2017 Modern Wealth Index can be found at aboutschwab.com. 

The Markets July 21, 2017

2017 Mid-Year Market Outlook from Bob Doll

Nuveen’s lead equity strategist Bob Doll suggests one of the “biggest U.S. economic wildcards” is the political backdrop, but other crucial factors are at play behind the headlines. 
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Inflationary pressures remain low, and the latest Federal Reserve Beige Book showed most of the 12 Fed districts reporting moderate economic expansion, according to Bob Doll, chief equity strategist at Nuveen Asset Management.

Doll recently released a mid-year update to his recurring “10 Predictions” research series. Now that more than half of 2017 has elapsed, Doll still expects slow growth to continue and believes U.S. gross domestic product growth is likely to increase to only 2.0% this year.

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“In 2018, we expect growth will climb to near 2.5% if fiscal stimulus measures actually pass,” he says. “Beyond that timeframe, however, we may see additional signs of economic stress.”

Important for the retirement planning market, Doll observes the Federal Reserve has “already raised rates twice this year, and is firmly in hiking mode.”

“Despite persistent inflation weakness, the central bank also indicated that one more increase was likely later this year,” he warns. “The Fed also laid out a plan to slowly normalize its balance sheet. We expect these moves will put upward pressure on bond yields. But with rates still near historical lows, slowing rising rates are unlikely to derail equity markets.”

Doll suggests that one of the “biggest U.S. economic wildcards is obviously the political backdrop.”

“U.S. political risks are escalating and a comprehensive tax reform bill seems unlikely in 2017,” he argues. “The Trump administration has yet to produce specifics about its tax goals and health care reform is taking much longer than anticipated. At the same time, ongoing investigations into the White House are, at a minimum, creating serious distractions. Investors still expect a tax bill, but the odds are diminishing of anything comprehensive being passed this year.”

Overall Doll still expects “growth-friendly fiscal stimulus measures” to be enacted in the coming months, noting the “best-case scenario would be for fiscal policy to become easier just as the tailwinds from easier monetary policy are fading.”

Interestingly, Doll points out that U.S. equity markets have experienced “notable leadership shifts” over the past 18 months, and he expect the gyrations to continue.

“In the first half of 2016, growth stocks and defensive sectors led the way as investors worried about recession and deflation risks,” he says. “This changed dramatically in the second half of 2016 as growth firmed and sentiment improved, resulting in a strong surge for value and cyclical areas of the market. So far, 2017 has looked more like the first half of last year. In the closing weeks of the quarter, however, markets began experiencing a rotation out of growth areas (marked most notably by some sharp sell-offs in technology).”

Doll predicts this rotation will continue and that a “broader leadership change from growth to value styles and from defensive toward cyclical sectors.”

The full analysis is available for download here. 

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