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Guest column – Time to tap the promise

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By Sue Cole

Every year, my firm surveys the top 1 percent wealthiest Americans on a variety of issues.

Their concerns and opinions about the economy are a bellwether for our wealth management clients and others interested in seeing their investments grow.

This year more than last, the affluent are anxious.

Eighty-six percent worry that terrorism will have a negative effect on the economy and the securities markets — up from 76 percent last year.

Eighty-two percent worry that their children will have a harder time financially than they have had — up from 73 percent.

And 77 percent worry that there are greater threats to personal security since 9/11 — up from 63 percent a year ago.

As a result of the most recent bear market, 48 percent of respondents will need to live on a lower retirement income.

One-third of those not already retired say they will have to delay their retirement, and more than half expect to work at least five years longer than planned.

More than 80 percent of affluent Americans believe there is an inherent conflict of interest in a firm that provides investment-banking services to corporations, and investment advice to individuals.

Seventy-nine percent question both the reliability of corporate financial statements and the recommendations of equity analysts. Overwhelmingly, respondents call for increased vigilance by corporate boards, high-profile prosecutions and more stringent laws and regulations governing accounting firms, public corporations and Wall Street.

Despite their increased anxiety, our respondents are optimistic about the stock market. Sixty-nine percent say their portfolios have increased in value over the past year, and they believe the U.S. stock market is less risky than it was a year ago.

Twenty-one percent say they are investing more in the stock market, projecting annualized returns of 8 percent in 2004 and 10 percent over the next three to 10 years. They also plan to increase their spending next year.

More than half say they will take an expensive vacation, make capital improvements to their homes or purchase big-ticket items such as furniture or electronics.

Clearly, the affluent believe the bear market is over and expect steady market gains in the period just ahead.

We share their optimism and are encouraging our clients to put aside their fears and take advantage of the investment opportunities in the burgeoning economic recovery.

Though we live in a dangerous world, this year it is also a world of greater promise.


Sue W. Cole is regional chief executive officer for the Mid-Atlantic Region of U.S. Trust Company, a wholly- owned subsidiary of The Charles Schwab Corporation.

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