Wealthy in U.S. Prioritize Gains Over Safety, BofA Says

Millionaires have reversed their priorities in the past year to focus on making money rather than preserving it as they wait to move their cash into stocks.

About 60 percent of individuals with at least $3 million in investable assets said asset growth is a higher priority than preservation, according to an annual survey by Bank of America Corp.’s U.S. Trust unit being released tomorrow. In 2012, 58 percent of respondents said protecting their wealth was more important than seeking higher returns in riskier investments.

The attitude change hasn’t translated into action by most, said Keith Banks, president of U.S. Trust. More than half of those surveyed, or 56 percent, said they hold a large amount of money in cash accounts. Sixteen percent said they plan to move the money in the next couple of months.

“People are recognizing the equity market is back,” Banks said in an interview at Bloomberg’s New York headquarters. “Their mindset has shifted but they’re not connecting the dots.”

Affluent investors will shift more cash into equities once they gain more confidence in the economy and job growth, Banks said.

Last year, the wealthy pointed to uncertainties about European debt and the U.S. presidential election as reasons for avoiding stocks, Banks said. While they’ve talked less about those issues in 2013, some families haven’t invested their cash after gains in the stock market, he said.

“Now people are saying: ‘I missed it,’” Banks said.

Market Rally

The Standard & Poor’s 500 Index of stocks returned 31 percent in the 12 months ended May 17. Investors poured money into bond funds and cash accounts after the 2008 global financial crisis, when the S&P 500 dropped 38 percent during the year.

While U.S. stock mutual funds attracted $21.5 billion in the three months ended March 31, the most in a quarter since 2004, fixed income continued to lead asset classes, according to Morningstar Inc. Taxable-bond funds saw deposits of $69.1 billion in the first quarter, the Chicago-based researcher said.

Wealthy investors have become less risk averse, Banks said. About 37 percent this year said pursuing a higher return even with more risk is a priority, compared with 30 percent in 2012.

Fifty-two percent of those surveyed said they don’t consider themselves more financially secure today than five years ago, in part because of a sense that their situation could change at any time. Eighty-six percent said a long-term buy-and-hold approach is the best investment strategy and about 40 percent said they plan to gradually invest their cash holdings over 12 to 24 months. The survey didn’t ask respondents to give a value or percentage of their holdings in cash.

Generation Y

Investors ages 18 to 32, known as Generation Y, were among the wariest in terms of equities, survey data show. About half said investing in the stock market is overrated, compared with 19 percent of Baby Boomers ages 49 to 67.

The U.S. Trust survey was based on responses from 711 non-U.S. Trust clients over age 18, each of whom said they had $3 million or more in assets not including the value of their primary residence. About one-third of respondents had $5 million to $10 million and another third had more than $10 million. It was conducted online by research firm Phoenix Marketing International in February and March.

U.S. Trust is part of the global wealth and investment management unit of Charlotte, North Carolina-based Bank of America. It oversees about $332 billion in client balances and serves those who usually have at least $3 million in investable assets.

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