Wealthy Investors in U.S. Expect Portfolios to Meet/Exceed Growth in '07  :  Published March 2007 All Rights Reserved


Wealthy Investors in U.S. Expect Portfolios to Meet/Exceed Growth in '07

Twenty-five percent of all households in the United States hold at least $100,000 in financial assets -- excluding real estate and retirement plans -- according to Citigroup Smith Barney.

Citi conducts a monthly poll (Citi Smith Barney Working Wealth Investor Poll) of affluent investors of which 44 percent of those polled held $1 million or more in assets.

“Affluent investors remain cautiously optimistic about the nation's investment climate in spite of recent market volatility,” said Craig Pfeiffer, executive vice president of Smith Barney.

For the March poll (results from February 2007,) half of affluent investors said the climate for investing was better than it was one year ago. In support of their feedback, the Dow Industrial Average for the past 12 months (as of close of business 23 March 2007) was up approximately 10.5 percent.

Millionaires, however, may have been more affected by February’s dramatic stock market drop according to the Citi poll. Among those with at least $1 million in investable assets, positive assessments of the current environment have decreased by 8 percentage points compared with January's numbers.

Despite Wall Street jitters though, the outlook for the future remains strong. Three out of four believe that their personal portfolio will meet or exceed their expectations before September 2007, and as many expect the investment climate to be as good or better a year from now.
Nearly 80 percent felt that higher energy prices would return and three out of four believe that energy prices will have a negative impact on the economy in the coming months. Part of this fear comes from impact of higher energy prices on lower wage workers, and thus the lower-end's ability to spend on consumer goods falls as energy prices rise.

Affluent investors told Citi that the federal government should work towards reducing dependence upon foreign oil, reduce the federal budget deficit, and enact immigration reform.

The affluent also felt the government could use a bit of ethical reform.

Taxes are too high, according to the wealthy, and the proportion of millionaires affected by the alternative minimum tax has increased from 8 percent in 1999 to 31 percent in 2005. Lowering individual income taxes tops the list of eleven potential tax reforms, followed closely by raising the threshold at which taxpayers are subject to the alternative minimum tax.

Affluent investors widely prefer returning to a 39.6 percent individual income tax rate for those with incomes of $500,000 or more. About half as many (or 24 percent) favored raising the corporate income tax rate to generate replacement revenue. Among the working wealthy with more than $1 million in investable assets, 46 percent prefer the return to 39.6 percent as the individual income tax rate for those with $500,000 or more in income and 25 percent prefer raising the corporate income tax.

Greenwald & Associates and Synovate conducted the Citi Smith Barney Working Wealth Poll between 14-18 February 2007. Interviewing was conducted online with 577 investors who are members of the Synovate Consumer Opinion Panel. In order to qualify for participation, panel members had to have at least $100,000 in financial assets (excluding real estate and employer retirement plans.) Survey results include 167 interviews with households that have $100,000 to $499,999 in savings and investments, 156 interviews with those in the $500,000 to $999,999 asset range, and 254 interviews with investors who have $1 million or more.

Survey results have been weighted by age and asset level to reflect national population norms. The results of the Citi Smith Barney Working Wealth Poll have a maximum margin of sampling error (at the 95 percent confidence level) of +/- 4 percentage points.


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