The wealthy are worried

The wealthy are worried. The current economy has produced such an unusually high level of concern among well-heeled investors that many are re-evaluating their financial circumstances and cutting back on spending, according to a special WealthTrends report based on insights from the Dow Jones Wealth Management Advisory Council. The Council is a group of top wealth managers dedicated to promoting the practice of wealth management, facilitating industry discussion and representing the needs and concerns of the profession.

Like their counterparts in the middle class, wealthy Americans are taking a fresh look at their investments, reducing cash outlays and changing vacation plans, according to the survey respondents. And, many investors are using the current economic downturn to educate their children about the importance of having - and keeping - money during times of uncertainty, Council members say. As a result of this trend, respondents are using the downturn as an opportunity to reach out to clients and reassure them.

“We’ve had to do a lot more hand-holding lately,” said James A. Covell, Sr. Vice President and Financial Consultant at RBC Wealth Management. “I’m spending a lot more time talking to my clients about who we are, and what my team and I can do for them. We’re using this as an opportunity to demonstrate how we pay attention to our clients’ needs and focus on the client relationship.”

“Sometimes, when things are going smoothly, it is difficult to get people to re-visit their portfolios,” said Joseph W. Montgomery, Managing Director of Investments for Wachovia Securities. “It is a lot easier to do it when the pendulum swings over to the ‘fear’ side, which it definitely has. So during the last quarter, we used the current turmoil in the markets as an opportunity to re-evaluate investments, to remind clients why they are invested as they are.”

“The current markets have forced us to look at things more tactically,” said George Schietinger, Director, Credit Suisse Private Banking USA. “Cash is very important to many people right now – they want ‘sleep-at-night’ money. Many of my clients are looking for investments with principle protection.”

Council members agree that the economy has caused their wealthy clients to be more guarded about their situations and to cut back on spending as a result.

“Wealthy clients are definitely re-evaluating their positions,” said Patricia Bell, Senior Vice President of Investments for Merrill Lynch. “In New Jersey, I am seeing the numbers for the summer rental market, such as in Spring Lake and Sea Girt, down pretty dramatically. I also have a client who decided not to renew a jet lease agreement because he felt it was a waste of money. People are just being more cautious.”

As a result, some wealthy families are engaging in discussions about discretionary spending and preserving wealth.

“We are seeing a number of high net worth clients using this market to teach lessons in their family, to teach their kids to be more responsible and to take note of how things can change and how family wealth may not be permanent,” said Robert Burke, Managing Director, Professional Development at Nuveen Investments.

Council members also noted that investors around the country are watching the value of their real estate holdings diminish, with the exception of New York City, where European investments are bolstering the market.