A new survey sheds light on how wealthy investors perceive and assess inflation and interest-rate risks
High-net-worth investors are alive to the vulnerability of their investment income to inflation and interest-rate risks — but they might not have a firm grasp on how such economic changes can actually impact them.
This was revealed in a poll of 1,010 US adults with at least US$100,000 in assets commissioned by investment manager Nuveen, reported ThinkAdvisor. The respondents were at least 21 years old, were sole or shared financial decision-makers for themselves or their family, and were working with a financial advisor.
“The new survey results showed that three-quarters of investors trusted their personal experience of inflation more than statistics calculated by the Labor Department,” noted ThinkAdvisor. Most participants said they keep a close eye on inflation, and around seven in 10 correctly recognized that current inflation levels were low.
But when asked what the current US inflation rate was, 60% incorrectly thought it was at least 5% or admitted they weren’t sure. Just 32% got close to the correct number of 2% to 3%.
Moving on to questions of interest rates, 86% said they had experienced high rates in their lifetime, including 79% of millennial respondents. But a question on what happens to bond values after rate hikes by the Federal Reserve revealed that many were not aware:
- 40% believed bond values will increase;
- 30% stated that they’ll decrease;
- 30% thought bond values would stay as is or did not know
Some 48% of respondents said they’d be very or totally unlikely to make a change to their investments after a Fed rate hike. The remaining 52% said they’re inclined to make a change; among millennials, the percentage rose to 81%.
When asked about their preferences in income strategies, the vast majority expressed interest in strategies that keep up with inflation. The desire for information on generating income in retirement was consistent across age groups, as was the desire for an advisor to help them understand how cash income could come from their portfolio.
Seventy-seven per cent reportedly relied on their financial advisor to a moderate or great extent when it comes to retirement income planning. Fifty-six per cent of the respondents added that in the next six months, consulting an advisor on a portfolio that can generate steady cash income while preserving capital was also a priority.