Merrill Lynch Affluent Insights Quarterly Survey Reveals Complex Family Dynamics, Financial Concerns and Heightened Sensitivities to Risk Create Need for More Comprehensive Advice Across Multiple Generations

Survey Finds Affluent Parents Believe Imparting Financial Know-How to Be Twice as Important for Their Children as Choosing the Right Spouse

The latest findings from the Merrill Lynch Affluent Insights Quarterly were announced today. This quarter the survey, which analyzes the values, financial priorities and concerns of affluent Americans, illustrates the financial complexities within affluent families, and the advice they seek and impart onto their children to help address immediate financial responsibilities and long-term goals.

Many affluent families today are facing circumstances that create additional strain on the household. In fact, more than half (52 percent) of affluent individuals surveyed cited one or more family-related financial responsibilities keeping them up at night. Among this group, 42 percent are losing sleep over whether they can maintain their family’s standard of living, 40 percent over family health care costs, 37 percent over saving and investing for retirement, and 33 percent over daily and monthly family expenses.

Compounding the financial strain on these individuals is the fact that 36 percent indicate having additional responsibilities within their family, such as supporting at least one parent or elderly relative (45 percent), an adult-age child (36 percent) or grandchildren (16 percent). When affluent parents were asked why they are currently supporting their adult-age children, 40 percent indicated doing so because their child is still in school, 28 percent are trying to help maintain their child’s standard of living, 27 percent are helping their child pay off significant debt (e.g., college, credit cards), and 21 percent are helping to support a child who was unable to secure employment post-graduation.

“Affluent households are struggling with how to address the financial responsibilities they face today without compromising their family’s current quality of life or future plans,” said Sallie Krawcheck, president of Bank of America Global Wealth and Investment Management. “Additional family obligations, many of which are unforeseen, make it increasingly challenging to stay focused on or on track with their financial goals, such as saving and investing for their children’s education and their own retirement.”

According to the latest survey, 70 percent of affluent individuals do not think their retirement plan adequately takes into account the potential for unexpected family events (e.g., a serious illness of a family member, divorce, caring for aging parents), yet more than one-third (35 percent) admit to adjusting their financial priorities in light of such an event.

Adding to the complexity within families is the fact that half (51 percent) of affluent couples disagree with each other about one or more financial matters, including:

· Sticking to the family budget (45 percent).
· Purchasing luxury items, such as cars, boats, and second homes (33 percent).
· How to properly manage credit cards or pay off debt (28 percent).
· Making investment decisions (20 percent).
· How best to save and invest for their retirement (19 percent).
· Whether to send their children to private or public school (15 percent).

“The role of a financial advisor has evolved during the last couple of decades from one of only providing investment advice to being an orchestrator of solutions that address every aspect of our often complex financial lives,” said Lyle LaMothe, head of U.S. Wealth Management for Merrill Lynch Wealth Management. “These days, many individuals and couples are seeking relationships with advisors who understand how their personal and family values factor into their investment strategies, as well as those who can offer advice that may span multiple generations.”

Children’s Financial Education a Top Priority for Affluent Parents

When asked what life lessons they believe are most important to impart to their children, half (51 percent) of affluent parents cited “financial know-how” – nearly on par with those who cited “maintaining a close relationship with family” (54 percent), twice as many as those who cited “choosing the right spouse/partner” (26 percent) and considerably more than even “staying physically fit” (11 percent). With financial education being such a priority for affluent families today, it was not surprising to find that two out of five (39 percent) of these parents are spending more time speaking to their children about financial matters in light of the recent economic recession.

Many of these parents are taking advantage of their relationship with a financial advisor to better educate their children on financial matters. Among those parents who work with an advisor, 74 percent have shared with their children some form of advice received from their advisor. Such advice includes the importance of managing a budget (42 percent), investing for retirement at an early stage in life (32 percent), managing a checking/savings account (30 percent) and knowing how to properly pay down and manage debt (25 percent). When asked if they had ever invited their children and/or parents to participate in discussions with them and their financial advisor:

· 11 percent of affluent individuals age 50 and under say they have invited their parents to participate in such discussions.
· 17 percent of affluent parents age 51 and older say they have invited their child/children to participate in such discussions.
· 38 percent of all respondents who have not invited their child/children or parents to participate in discussions with their financial advisor would consider doing so.

“Cash and debt management, along with their children’s financial literacy, have become increasingly important to our clients as they juggle numerous and often competing financial demands while hoping to teach the next generation how to take control of and effectively manage their own money,” said Dean Athanasia, head of Bank of America Global Wealth and Investment Management (GWIM) Banking and Merrill Edge. “With the support of more than 750 wealth management bankers, our Merrill Lynch Financial Advisors are uniquely positioned to provide personalized banking, credit and liquidity solutions to families to help ensure that they are meeting responsibilities and achieving goals in the near-team while remaining on track with their longer-term financial plans.”

Younger Investors More Risk Averse

According to the survey, one out of every two (50 percent) affluent individuals describes themselves as having a low tolerance for risk, gravitating toward more conservative investment vehicles and strategies. A greater percentage of younger individuals ages 18 – 34 (mean age = 30) describes their risk tolerance as low (52 percent) than do investors ages 35 – 50 (45 percent) and those 51 – 64 (46 percent). The only age group with a comparable percentage to younger investors in terms of having a low risk tolerance are those ages 65 and older (55 percent), among whom 87 percent indicated that they are retired. The survey also found that, when investing, 46 percent of affluent individuals overall describe themselves as being more conservative today than they were one year ago. This jumps to 56 percent among younger investors ages 18 – 34, the highest percentage among all age groups.

“It is understandable that younger investors who have experienced or witnessed the market swings during the past decade and the impact they may have had on their family would be skeptical about more moderate or aggressive investment strategies,” said Krawcheck. “However, not investing at all or keeping to a more conservative approach at a younger age can be detrimental to asset growth sought over longer time horizons. It is our job as advisors and as an industry to help restore investor confidence so that risk aversion doesn’t leave the next generation of investors inadequately prepared for the future.”

Financial Concerns Grow Despite Signs of Recovery

According to the survey, the number of affluent Americans concerned about health care costs, funding retirement and the impact of the economy on their ability to meet their financial goals has increased since the beginning of 2010. Health care costs continue to be the number one financial concern overall (65 percent), followed by retirement assets lasting throughout their lifetime (62 percent) and being able to live the lifestyle they want to in retirement (53 percent). Regarding their children, 41 percent of affluent parents worry about the rising cost of college education, while many have also expressed growing concerns throughout the year about their ability to preserve an inheritance for their children (46 percent).

Facing such a wide range of financial concerns and challenges, affluent Americans increasingly expect to delay retirement, with 45 percent expecting to retire later than they had originally planned, compared to 31 percent one quarter ago and 29 percent in January 2010.

Affluent Continue to Seek Personalized Advice and More From Financial Advisors

When asked who they turn to for advice after making a financial mistake or financially irresponsible decision, affluent Americans turn to their financial advisor (57 percent) as frequently as they turn to their spouse/partner (57 percent), while significantly less turn to their parents (12 percent) and siblings (9 percent). Additionally, more than two out of five (42 percent) consult their financial advisor before making a significantly expensive purchase and another 13 percent haven’t but feel they should.

When choosing their financial advisor, 71 percent of affluent individuals look for credentials beyond financial expertise, such as the ability to explain things clearly or in plain language (42 percent), along with personality (38 percent), accessibility (36 percent) and an advisor who takes genuine interest in the personal and professional aspects of their lives (29 percent). When asked to indicate the importance of various financial advisory services, this quarter affluent Americans cited the following as their top priorities:

· Provide proactive updates about whether they’re on track with their financial goals (71 percent).
· Be proactive with investment advice (69 percent).
· Offer advice on how to maximize a 401(k) (68 percent).
· Understand the role their personal values play in their financial goals (67percent).
· Provide holistic financial advice (66 percent).
· Help with ensuring necessary cash flow and liquidity (63 percent).
· Provide support with decisions regarding Social Security, Medicare, long-term care, etc. (60 percent).

“Be it investment strategies, managing risk or seeing to it that day-to-day cash flow and liquidity needs are being met, from one generation to the next our experienced Financial Advisors work closely with clients to help them minimize complexity and capitalize on opportunity, leveraging a broad array of solutions and resources from across our enterprise to deliver more holistic advice,” added LaMothe.

Affluent Insights Quarterly Methodology
Braun Research conducted the Merrill Lynch Affluent Insights Quarterly survey by phone between June 11 and June 29, 2010 on behalf of Merrill Lynch Global Wealth Management. Braun contacted a nationally representative sample of 1,000 affluent Americans with investable assets in excess of $250,000, and oversampled 300 affluent Americans in each of 14 target markets including Atlanta; Boston; Charlotte; Chicago; Dallas; Los Angeles; Miami; Minneapolis; Orange County, Calif. (Irvine, Laguna Hills and Newport Beach); Philadelphia; Phoenix; San Francisco; St. Louis; and Washington, D.C. The margin of error is +/- 3.1 percent for the national sample and +/- 5.7 percent for the oversample markets, with both reported at a 95 percent confidence level.

Bank of America
Bank of America is one of the world's largest financial institutions, serving individual consumers, small- and middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services. The company provides unmatched convenience in the United States, serving approximately 57 million consumer and small business relationships with 5,900 retail banking offices, more than 18,000 ATMs and award-winning online banking with 29 million active users. Bank of America is among the world's leading wealth management companies and is a global leader in corporate and investment banking and trading across a broad range of asset classes, serving corporations, governments, institutions and individuals around the world. Bank of America offers industry-leading support to approximately 4 million small business owners through a suite of innovative, easy-to-use online products and services. The company serves clients through operations in more than 40 countries. Bank of America Corporation stock (NYSE: BAC) is a component of the Dow Jones Industrial Average and is listed on the New York Stock Exchange.

Bank of America 28-07-2010

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