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America's Affluent: On the Threshold of the New Millennium 1998–99 Affluent MacroMonitor Report

Executive Summary
Table of Contents
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Executive Summary

Affluent households in the United States—during these times of economic vigor, technological revolution, and relative worldwide political stability—are a growing market of unprecedented opportunity. However, significant challenges face any institution that seeks to serve and profit from this market. Products and services that were merely adequate to meet the needs of Affluent households in the past will no longer fit their needs in the future. And because advances in the Affluent's capabilities (assets, education, health, and enabling technologies) will continue to grow, the speed with which the Affluent's needs will change will accelerate. As the Affluent change, institutions that do not evolve with them will wither and die.

On the basis of our analysis of the current and previous waves of the MacroMonitor's survey of Affluent households—combined with continuous conversations among the leading financial institutions, associations, government agencies, universities, and consultants and balanced with what the media report–we believe that the following five factors will have the most profound impact on the future of financial services for the Affluent:
  • Mass affluence
  • Penetration of PC ownership and growth of the Web
  • Longer life expectancy
  • Women in the workforce and beyond
  • Changing nature of retirement.

Something wonderful is happening. The United States has more Affluent households than ever before. And the reason is not just population growth or wage inflation. Some of the explanation is the natural occurrence of an economy that has grown virtually uninterruptedly for nearly a decade. Part of it is attributable to enhanced productivity and the gains from shifting from an industrial and merchandise to an information and service society. Enhancing the situation is an (irrationally?) exuberant stock market that has grown twentyfold in nearly two decades. Finally, economic benefits come from people's living longer, healthier lives.

Figure ES-1
Pyramid to Diamond
(Millions of Households)

Whatever the causes, the effect is that in the United States more households have more resources. This change translates into higher levels of education, more jobs, more forms of entertainment and other diversions, more affluent (calculated by income or net worth per capita), and more millionaires. The danger for a financial institution seeking to serve these households is in making the assumption that they are all alike. As this group grows, so do the variations that make a difference. Treating today's Affluent as a homogeneous group can only provide misunderstanding based on stereotypes and other measures of centrality that drown out the critical distinctions. What is necessary is an effective way in which to separate the Affluent into distinct, cohesive groups, each of which is easy to identify and market to. The CART (Computer Aided Regression Trees) segmentation, which MacroMonitor used initially in 1992 to segment Affluent households and comparably implemented in the three waves of the MacroMonitor since, is such a method.

Figure ES-2
The Affluent Segmentation

The growth and movement that we have seen among the various Affluent segments is readily explainable by the changes in the economy and the stock markets and the natural evolution of standard demographics. The three segments that have historically had the most exposure to the equity markets—the Wealthy Retireds, the Balanced Builders, and the Focused Builders—have all increased significantly in the past two years. The other segment most likely to have equities—the Capables—has not increased significantly because as its financial assets have grown, the Capables have migrated into the Balanced and Focused Builder segments. Conversely, if a major correction occurred in the stock markets, this segmentation suggests that the three segments most affected would be the Wealthy Retireds and the Balanced and the Focused Builders.

  The Balance Sheet 3
  Empowerment of the Affluent in the New Millennium 9
  The Internet and Electronic Finance 11
  The Economic Environment 12
  Highlights 15
  Demographic Profile 16
  Balance Sheet 18
  Financial Attitudes 20
  Demographics 21
  Savings and Investments 22
  Credit 23
  Protection 23
  Transactions 23
  Information and Advice 23
  Personal-Computer and Internet Use 25
  Marketing Implications 25
  Highlights 26
  Demographic Profile 27
  Balance Sheet 29
  Financial Attitudes 31
  Demographics 32
  Savings and Investments 32
  Credit 33
  Protection 34
  Transactions 34
  Information and Advice 34
  Personal-Computer and Internet Use 35
  Marketing Implications 36
  Highlights 37
  Demographic Profile 38
  Balance Sheet 40
  Financial Attitudes 42
  Demographics 43
  Savings and Investments 44
  Credit 44
  Protection 45
  Transactions 45
  Information and Advice 46
  Personal-Computer and Internet Use 46
  Marketing Implications 47
  Highlights 48
  Demographic Profile 49
  Balance Sheet 51
  Financial Attitudes 53
  Demographics 54
  Savings and Investments 56
  Credit 57
  Protection 57
  Transactions 57
  Information and Advice 58
  Personal-Computer and Internet Use 58
  Marketing Implications 59
  Highlights 60
  Demographic Profile 61
  Balance Sheet 63
  Financial Attitudes 65
  Demographics 66
  Savings and Investments 66
  Credit 67
  Protection 68
  Transactions 68
  Information and Advice 68
  Personal-Computer and Internet Use 69
  Marketing Implications 69
  Highlights 70
  Demographic Profile 71
  Balance Sheet 73
  Financial Attitudes 75
  Demographics 76
  Savings and Investments 77
  Credit 77
  Protection 78
  Transactions 78
  Information and Advice 78
  Personal-Computer and Internet Use 79
  Marketing Implications 79
  Highlights 80
  Demographic Profile 81
  Balance Sheet 83
  Financial Attitudes 85
  Demographics 86
  Savings and Investments 87
  Credit 88
  Protection 88
  Transactions 88
  Information and Advice 89
  Personal-Computer and Internet Use 89
  Marketing Implications 90
Assets 4
Liabilities 5
Net Worth 5
Net Worth Excluding Primary Residence 6
Financial Assets 6
Investable Assets 7
Liquid Assets 8
Home Equity 8
Savings 9
Balanced Builders: Sources of Income 22
Capables: Sources of Income 56
Wealthy Retireds: Sources of Income 76
Pyramid to Diamond ii
The Affluent Segmentation iii
PC Use by Affluent Segments iv
PC Banking by Affluent Segments and PC Investing by Affluent Segments v
Working Women by Affluent Segments vii
Marital Status among the Affluent viii
Trend and Projection of Life Stages ix
Percent Distribution of American Affluent Households 2
Balance Sheet for America’s Affluent 3
Average Household Income per Affluent Segment 9
Discount Brokerage Penetration of American Affluent Segments 13
Balanced Builders: Education of Primary Head of Household 21
Balanced Builders: Median Household Income 21
Balanced Builders: Financial Decision Maker 24
Balanced Builders: Computer Use and Online Access at Home 25
Focused Builders: Education of Primary Head of Household 32
Focused Builders: Financial Decision Maker 35
Focused Builders: Computer Use and Online Access at Home 36
Real Asset Builders: Education of Primary Head of Household 43
Real Asset Builders: Median Household Income 44
Real Asset Builders: Computer Use and Online Access at Home 47
Capables: Median Household Income 54
Capables: Median Age of Head of Household 54
Capables: Marital Status 55
Capables: Education of Primary Head of Household 55
Capables: Computer Use and Online Access at Home 58
Borderlines: Education of Primary Head of Household 66
Borderlines: Computer Use and Online Access at Home 69
Wealthy Retireds: Computer Use and Online Access at Home 79
Entrepreneurs: Education of Primary Head of Household 86
Entrepreneurs: Financial Decision Maker 87
Entrepreneurs: Computer Use and Online Access at Home 89
A. MacroMonitor Survey Methodology A-1
B. Survey Weighting Procedures B-1
C. Affluent Segment Definitions C-1