UBS Investor Watch Finds Confidence Improves as Investors Redefine Risk

  UBS Investor Watch Finds Confidence Improves as Investors Redefine Risk

    Report also finds long-term care trumps retirement as top concern for
                            investors of all ages

Business Wire

NEW YORK -- April 18, 2013

UBS Wealth Management Americas today released its third UBS Investor Watch
report, revealing a pragmatic investor embracing the “new normal”. The survey
of high net worth and affluent investors found 64% of investors say their
financial situation is “excellent” or “very good”, up considerably from six
months ago (44%). This optimism and confidence is coupled with a pragmatism
and a new outlook that redefines risk. The survey found 41% of investors
define risk as permanent portfolio loss. This is very different from how the
financial services industry has historically defined risk – using terms like
volatility, standard deviation and other jargon.

“After the 2008 financial crisis, there was much discussion about the ‘new
normal’ - a more reasoned and grounded approach among American investors. Many
wondered how long this would last, particularly as investors historically
displayed tendencies towards amnesia, forgetting about past losses when
markets rebounded. However, based on the latest insights from UBS Investor
Watch, it appears that the ‘new normal’ is here to stay,” said Emily Pachuta,
Head of Investor Insights. "Even as they see the economy and their own
financial situation improving, today's investor remains focused on avoiding
risk as a way to help achieve their financial goals – and this holds true even
for younger investors."

Optimistic, Pragmatic and Avoiding Risk

The survey found the majority (52%) of investors feel their finances are
better than a year ago, up significantly from 40% in January. Despite greater
optimism and key indices closing at record levels, investors are not rushing
back to the markets: they are content with current and significant cash
positions (22% on average), and few investors (26%) say they plan to reduce
the cash they have. Asked about portfolio risk, 70% of investors say they are
more concerned about avoiding losses than missing out on market gains (30%).

Top Concern: Long-term Care

Being able to afford the health care and the support needed in old age remains
the top personal concern (31%, up from 26% in January) for investors of all
ages. Interestingly, long-term care remains a greater concern than retirement
(16%). Asked what was most important to them as they age, 44% investors said
remaining self-reliant, followed by 38% who are focused on preserving their
quality of life.

Despite their concerns, a majority of investors are not prepared for managing
their long-term care needs. Only 37% feel highly prepared regarding their
long-term care needs, compared with 64% who feel highly prepared with their
retirement planning. “While the ‘new normal’ mindset should help investors
deal with this growing issue, long-term care appears to be the next challenge
many will need to face,” said Pachuta. The survey found that 39% of investors
aged 25-49 are looking for guidance relating to funding long-term care.

“Good Debt” vs “Bad Debt”

With both individuals and the government needing to reduce debt levels in the
wake of the financial crisis, a significant portion of investors have become
more averse to borrowing (29%). However, most investors are similarly
pragmatic in their views on personal borrowing – believing there is "good
debt" and "bad debt."

"Good debt" is associated with making a sound investment, such as a mortgage
on a primary home, paying for education or short-term borrowing to avoid
selling an asset that is expected to appreciate or to avoid realizing a large
capital gain. Investors indicate they view “bad debt" to be a sign of living
beyond one's means or borrowing for luxuries, such as not paying off a credit
card balance, borrowing from friends and family, having a second mortgage on
one’s home and even having a mortgage on a second or vacation home.

The Gender Difference

Longer lives create unique challenges for women, particularly relating to
long-term care, retirement and the future of government provided social
services. The survey found that women are more concerned about the future of
Social Security (44% compared with 30% for men), being able to afford
long-term care (37% compared with 27% for men), having someone to care for
them in their old age (25% compared with 13% for men) and outliving their
assets (22% compared with 12% for men). Women are considerably more worried
about the sequester overall (32% highly concerned compared with 23% of men),
the sequester’s automatic cuts to Medicare and other non-defense programs (55%
compared with 41% of men), possible changes to Medicare (55% compared with 44%
of men) and Social Security (54% compared with 40% of men), and a potential
negative impact of the sequester on their ability to achieve their goals (30%
compared with 22% of men).

Highlights from the April 2013 UBS Investor Watch report include:

  *Washington worries: U.S. political/economic issues dominated investors’
    concerns with 73% saying they were extremely/very worried about the
    political environment in Washington. Rising health care costs (64%) and
    the size of the U.S. national debt (60%) followed respectively, with
    Middle East unrest (44%) and increase in taxes (43%) rounding out the top
    five.
  *Paying down the national debt burden: Seven in ten (70%) investors feel
    the tax increases in the “'fiscal cliff” deal were about right or should
    have been higher, and nearly six in ten (59%) expect there will eventually
    be more tax increases to help address the national debt issue.
    Surprisingly, older investors are more willing to pay additional taxes to
    reduce the debt burden for future generations (35% agree while 25%
    disagree), likely because they have been less impacted by the recent tax
    policy changes, while younger investors are less willing (27% agree while
    34% disagree).
  *Age and outlook: Investors under 50 are less optimistic about the
    short-term outlook (40% compared with 49% for investors over 60) and are
    less likely to believe the U.S. economy is strengthening (32% compared
    with 43%). Younger investors are also more worried about financial markets
    (32% compared with 20%), continuing market volatility (34% compared with
    22%) and real estate prices (23% compared with 12%). Younger investors
    also feel the impact of the recent tax policy changes and are more worried
    about future tax increases. Over half (51%) of investors under 50 are
    highly concerned about more tax increases, compared with 39% of investors
    over 60.

To read the full April first-quarter 2013 UBS Investor Watch report, please
visit:
http://financialservicesinc.ubs.com/staticfiles/pws/adobe/Investor_Watch_2Q13.pdf

About UBS Wealth Management Americas

UBS Wealth Management Americas provides advice-based relationships through
financial advisors who deliver a fully integrated set of products and services
specifically designed to address the needs of ultra-high net worth, high net
worth and core affluent individuals and families. It includes the Wealth
Management US business, the domestic Canadian business and the international
business booked in the United States.

About UBS

UBS draws on its 150-year heritage to serve private, institutional and
corporate clients worldwide, as well as retail clients in Switzerland. Its
business strategy is centered on its pre-eminent global wealth management
businesses and its universal bank in Switzerland. Together with a
client-focused Investment Bank and a strong, well-diversified Global Asset
Management business, UBS will expand its premier wealth management franchise
and drive further growth across the Group.

UBS is present in all major financial centers worldwide. It has offices in
more than 50 countries, with about 35% of its employees working in the
Americas, 36% in Switzerland, 17% in the rest of Europe, the Middle East and
Africa and 12% in Asia Pacific. UBS employs about 64,000 people around the
world. Its shares are listed on the SIX Swiss Exchange and the New York Stock
Exchange (NYSE).

Contact:

UBS
Gregg Rosenberg, 212-713-8842
gregg.rosenberg@ubs.com
 
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