where do we stand in America's wealth spectrum ?
(snip)"
We live in a country that once celebrated itself as egalitarian, yet 1 percent of the population -- nearly 3 million people -- currently has as much money as the 100 million people at the bottom of the ramp.
Yet when I ask those at the top of the ramp how they feel about the future, whether their fortunate place on the ramp gives them a measure of confidence about it, they shake their heads. They give me a look that says, "What planet do you park on?"
You and your broker
If you're not parked near the top of the ramp, you're of little or no interest to financial services firms and financial advisers. There's no money to be made at these levels. Last year, a handful of Wall Street firms told their brokers they would no longer receive commissions on accounts holding less than $50,000. This effectively tells people with nano-Numbers to get lost. But for the Wall Street firms, there's gold on the floors above. The greater the household assets, the more fees and transaction costs can be extracted from an account. The result is a flood of advertising that captures a lifestyle so gloriously affluent it's enough to make everybody feel poor.
Those who manage Numbers break customers down into innumerable segments to better target them through their marketing efforts. These segments take into consideration all the usual demographic characteristics, such as age, income and net worth. Other segmentation models define you according to psychographic qualities: personal interests, leisure-time activities, whether you are active or passive when it comes to managing your affairs -- including, for instance, how comfortable you are using a computer. Once a financial services company figures it has your Number, it will use what it thinks are the most effective channels to get its hands on it. It will place advertising in the magazines and newspapers you read and the television shows and Web sites you browse. And it will probe you incessantly through the mailbox, testing or selling financial products and services.
The Number industry divides people on the top floors of the garage into three broad segments of wealth, each of which is nicely profitable.
The biggest and broadest affluent segment consists of people with investable assets of between $200,000 and $1 million to $2 million. This group is sometimes referred to as mass affluent, and it would be fair to think of it as the meat and potatoes of the financial services business. If you're at the lower end of that range -- if you have, say, $300,000 in your accounts -- you're definitely of prime interest to the brokers and customer reps at Merrill Lynch, Smith Barney, Vanguard and the rest. But they need to be careful lest you cost them money.
To assign a real live broker (oops, financial consultant) to a client who keeps too low a Number is tantamount to Safeway assigning a personal shopper to anyone who comes in to buy a quart of milk. Still, there are profitable ways for financial services firms to serve smaller customers: the telephone, assuming they can keep the calls short and to the point and, better still, the online channel, where self-service is highly cost-effective. This is not to say that firms aren't happy to see you walk into their investment centers for a quick hello and a fill-out-the-papers session. They'll shake your hand, put an arm around your shoulder, even pour you a cup of coffee. After that, the more you manage your own modest Number, the better for them and the more cost-effective for you.
The next segment up from mass affluent is where the action gets white hot. This parking level belongs to those designated as high net worth individuals (or HNWIs). There are no universal criteria here. Generally, HNWIs have invested assets of at least $1 million, although some companies also target younger households with healthy six-figure incomes, knowing that their net worth is likely to reach target levels in the near future. Right now there are well over 7 million high net worth households in the United States, with a forecasted growth rate of 16 percent a year and projected assets of $32 trillion. Yum."(snip)
... of the rich, by the rich, for the rich !!!
Re: where do we stand in America's wealth spectrum ?
:spin: I recall a recent USA Today Money Section article mentioning definition of wealthy(rich) individual today is one who has 5.7M in "investable assets".
2?'s on that:
1) Where would such an individual fall in on the scale? Top 1/10%, top 1%, or other?
2) What exactly is meant by "investable assets"? Obviously, cash, stocks, bonds, and mutual funds. Probably rental property. Guessing probably not ones primary residence. (Can you picture someone selling 7 figure mansion, and living in a pup tent- investing proceeds in stocks, commodities, etc)
As a relatively new poster, just curious if you have links to a site that would show where people with particular incomes/assets would fall out on wealth chart? (eg, top or bottom 25%, etc).
Re: where do we stand in America's wealth spectrum ?
Quote:
Originally Posted by
Melonie
... of the rich, by the rich, for the rich !!!
So true. That's why smart people like Melonie work so hard toestablish themselves as 'haves' rather than 'have nots.'
Re: where do we stand in America's wealth spectrum ?
^^^ the more telling point of the article was that if an investor has $50k or less to work with, the big brokerage houses now consider these 'penny ante' accounts to be more of a liability than an asset. For sure a big brokerage house is not going to steer any important investment info (i.p.o. shares, latest research etc.) towards 'penny ante' account holders.
Quote:
just curious if you have links to a site that would show where people with particular incomes/assets would fall out on wealth chart?
this is old data from 2001 ... you can probably multiply the amounts by 1.5 for something close to current ...
Net worth parking ramp
Net worth (percentile) Median net worth (rounded)
Level VI (90 to 100) $833,600
Level V (80 to 89.9) $263,100
Level IV (60 to 79.9) $141,500
Level III (40 to 59.9) $62,500
Level II (20 to 39.9) $37,200
Level I (less than 20) $7,900
Source: Family Net Worth, 2001 Federal Reserve Board Survey
if you subtract out the value of a house and the value of a retirement fund, basically only levels 5 and 6 have any serious money in brokered investments
as to incomes that go along with those 2001 net worth numbers (again you're probably looking at a 1.5 multiplier for something close to current)
Annual income parking ramp
Income level (percentile) Median income (rounded)
Level VI (90 to 100) $170,000
Level V (80 to 89.9) $99,000
Level IV (60 to 79.9) $65,000
Level III (40 to 59.9) $40,000
Level II (20 to 39.9) $24,000
Level I (less than 20) $10,000
Source: Before-Tax Family Income, 2001 Federal Reserve Board Survey
thus to be considered any sort of a serious investor, you're probably looking at people with an income level of $150k per year today, which probably corresponds to the top 5% of American households. It's tough to really tell though since the IRS stats lag by at least 2 years.
Another key point to keep in mind is that the stock ownership of people at level 1 through 4 is primarily a result of indirect investments through their 401k mutual funds ... which are usually not actively managed in any sort of a timely manner, and which are typically severely restricted in terms of permissible types of funds (i.e. corporate 401k plans typically NEVER include a contrary investment option). This corporate 401k structure virtually guarantees that fresh money will be invested in US stock markets / index stocks on a regular basis whether the underlying company stocks are still a good investment or not. This also virtually guarantees that the average joe corporate 401k balance is going to take a huge haircut before joe wakes up. In comparison, the very rich will not only be getting the latest research from their brokerage firm, but they'll also be in a position to bail as soon as a downtrend is confirmed.
Re: where do we stand in America's wealth spectrum ?
Quote:
Originally Posted by
Melonie
the very rich will not only be getting the latest research from their brokerage firm, but they'll also be in a position to bail as soon as a downtrend is confirmed.
You think any of the World's greatest investors read any of the research reports written by these Research firms?
Do you even know who writes these Research reports?. Usually a lowly paid analyst who doesn't have a clue, but is on a deadline to put something pretty and having lots of charts. Hmmm What shall I put for growth rates. 4%? Well that makes the stock target price $50. What if the growth is really 4.5%, then the stock is worth $90. I think this company will grow at 5% because it is a nice number and the Stocks new target is $140. Alright lets put some pretty graphs here, preferably a hockey stick where the company gets everyone and their future born as a customer.
All right research report is done. Of course I can never put a negative research out there because that would piss a lot of people. I get paid my usual salary and bonus whether my report is true. Really Why do I care about the accuracy of these things?
Re: where do we stand in America's wealth spectrum ?
^^^ the depth, accuracy and 'creativity' of such financial research is directly proportional to the intended audience. Obviously the best research (thus best investing advice) is saved for the 'whale' investors rather than being wasted on Joe Sixpack. After all, investing in stocks is a zero sum game i.e. for every stock trade winner there must be a corresponding loser. It is the job and primary focus of financial advisors serving the 'whale' investors to make sure that THEIR clients are the winners and that Joe Sixpack's 401k accounts are the loser !
Re: where do we stand in America's wealth spectrum ?
But what does Joe Sixpack do then?
Re: where do we stand in America's wealth spectrum ?
^^^ what do sheep do ??? What do lemmings do ??? ... in human terms, Joe Sixpack opens his 4th quarter IRA / 401k statement and discovers that he's lost 10% of his retirement nest egg ! He then listens to the 'dollar cost averaging' crowd, increases his IRA / 401k contributions, opens his 1st quarter IRA / 401k statement and discovers that he's lost another 10% !!!
The unfortunate truth of the situation is that probably 50% of 401k account holders can't read a quarterly statement and actually figure out that their investments lost money versus their own contributions and their employer's contributions. As long as the total dollar number went up most won't worry in the least !