Spending Choices Among Wealthy Investors. A Spectrem Group White Paper

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2 It s a phrase spoken by millions of Americans daily: If I had the money, I would. Affluent investors do have the money, but they don t all go on regular spending sprees. Spectrem research shows that even among the wealthiest Americans, most of their expenditures are seemingly reasonable. Our research looks at expenditures in 2015 for three different wealth segments: Ultra High Net Worth investors with a net worth between $5 million and $25 million (not including primary residence), s with a net worth between $1 million and $5 million, and Mass Affluent investors with a net worth between $100,000 and $1 million. While the amounts differ based on net worth, the expectation that Ultra High Net Worth investors make huge purchases on luxury items is not always borne out. Boats Expensive purchases are often called large ticket items, and nothing says large ticket item more than the purchase of a boat. But while many investors may take boat trips, whether it be on a cruise or a sailing excursion, there is not a lot of money spent on the purchase of a personally owned boat. More than 90 percent of investors spent zero dollars on boats in the 12- month study period. Only a small percentage went big-time with the boat purchase of more than five digits. Boat purchases were more prevalent among the youngest investors, those under the age of 48. There was, however, a higher percentage of investors making boat purchases than investors, and a similar percentage of Mass Affluent investors put disposable income into the floating recreational vehicles. Zero $1 to $4,999 $5,000 and above Boat Expenditures in Last 12 Months 5% 6% 4% 0% 1% 2% 94% 91% 93% Mass Affluent 2

3 Automobiles Automobiles, on the other hand, have everyday uses and can provide luxury for every single trip an investor takes. While 37 percent of investors spent nothing on automobiles during the study period, 8 percent spent at least $50,000 on automobiles, and another 11 percent spent between $25,000 and $50,000. The spending was spread evenly among age groups. Again, s were more likely to spend on automobiles; only 36 percent said they spent zero dollars on cars in the 12-month period. Ten percent of s spent at least $25,000. Only 13 percent of Mass Affluent investors spent as much as $10,000 on cars but 51 percent spent up to $10,000. Automobile Expenditures in Last 12 Months Mass Affluent 35% 42% 9% 7% 6% 36% 37% 8% 9% 10% 37% 29% 7% 7% 22% Zero $1 to $4,999 $5,000 to $9,999 $10,000 to $24,999 $25,000 and above Jewelry What makes jewelry purchases unique is that they are often not for the purchaser, but aimed as a gift for someone else. There is not a great amount of high-end jewelry purchasing taking place, according to the investors. Only 6 percent of investors spent more than $5,000 on jewelry. Among s, only 4 percent spent more than $5,000, and 36 percent spent zero dollars on jewelry. Among Mass Affluent investors, almost half did not spend any money on jewelry. Jewelry Expenditures in Last 12 Months Mass Affluent 3 Zero $1 to $4,999 $5,000 +

4 Collectibles There is no more clear sign of disposable income than spending on collectibles. Coins, currency and art are big items among wealthy investors. But only 33 percent of investors spent any money on collectibles. Less than onequarter of Mass Affluent investors did so. Among investors, 8 percent spent more than $5,000 on items they collect. Mass Affluent Spending on Collectibles in Last 12 Months $1 - $4,999 $5, % 1% 26% 3% 25% 8% Entertainment the Arts In terms of participation, entertainment options like symphonies, museums and art shows was strong. Eighty-six percent of investors spent at least some money on the arts of that sort, and some Investors spent over $15,000 to enjoy that diversion. Among s, more than three-quarters spent some disposable income on the arts. Among young s (under 35), 21 percent spend at least $5,000 on the Arts. Zero 65% Spending on The Arts in Last 12 Months 73% 71% $1 - $4,999 $5, % 1% 23% 5% 14% 14% Mass Affluent 4

5 Entertainment Sports Some people like sports and others don t. Apparently, one-third of investors don t. Nine percent of investors spent at least $5,000 on sports-type entertainment in a 12-month period. Almost half of Mass Affluent investors did not spend a cent on sports entertainment. Again, 25 percent of young s spend at least $5,000 on sports events. Spending on Entertainment Sports in Last 12 Months Mass Affluent Zero $1 - $4,999 $5,000 + Vacation or Leisure Almost everyone with the money to do so takes a vacation. Among investors, the difference in vacation and leisure spending is widespread. While 24 percent spent less than $5,000 in a year, 29 percent spent at least $15,000. Among s, 42 percent spent less than $5,000 but 19 percent spent more than $15,000. Only 4 percent in each of those two wealthy segments spent no money on vacation or leisure travel. Vacation or Leisure Spending in the Last 12 Months Mass Affluent 9% 55% 26% 9% 4% 42% 31% 19% 4% 24% 24% 48% Zero $1 to $4,999 $5,000 to $9,999 $10,

6 Club Memberships Whether they are country clubs or social clubs, club membership is not a common expenditure for affluent investors. Less than half of investors spent anything on club memberships, and 37 percent spent less than $5,000 on memberships in a 12-month period. More than 5 percent did spend more than $10,000 on club memberships. Among Mass Affluent investors, only 35 percent spent anything on club memberships. Twenty percent of investors under the age of 55 spent at least $5,000 on club memberships. The younger age might lend one to believe that these memberships aren t all the old fashioned golf club memberships, but also likely to be including health club memberships. Zero $1 to $4,999 $5,000 and above Spending on Club Memberships 1% 4% 12% 34% 40% 37% 65% 58% 52% Mass Affluent Charitable Contributions Ninety-four percent of investors gave to charities. Almost half gave more than $5,000, and more than one-quarter gave at least $10,000. Five percent gave more than $50,000. Nine percent of s did not give to charity in the 12- month period, but 23 percent gave more than $5,000. Among Mass Affluent investors, 18 percent did not give to charity in the 12-month period, 67 percent gave up to $5,000 and 3 percent gave more than $10,000. Charitable Contributions in the Last 12 Months 67% 68% 46% 18% 11% 14% 9% 3% 4% 6% 20% 28% Mass Affluent Zero $1 - $4,999 $5,000 - $9,999 $10,

7 Zero 14% $10, % Zero 10% $10, % Zero 12% $10, % Spending Choices Among Political Contributions Activist billionaires reportedly fund political action committees, but wealthy investors in general do not make political contributions. Fifty-nine percent of investors reported no political contributions in the 12-month period, and 37 percent contributed less than $5,000. Among s, 72 percent made no political contributions, and only 1 percent contributed more than $5,000. Among Mass Affluent investors, 80 percent contributed zero dollars in the 12-month period. Political Contributions in Last 12 Months 20% 27% 1% 5% 80% 72% 37% 59% Mass Affluent Home Improvement Zero $1 - $4,999 $5,000 + It figures that the cost of home improvement for a bigger home would be higher, and the research bears that out. Less than 30 percent of Mass Affluent investors spent more than $5,000 on home improvement in the 12-month period, while 40 percent of s did so and 51 percent of spent at least $5,000. The percentages for spending are significantly higher than others in the high end of home improvement, with 12 percent spending at least $25,000 on home improvement in the study period. Home Improvement Expenditures in Last 12 Months Mass Affluent 7

8 Household Staff Obviously, wealth affects these percentages, although 43 percent of Mass Affluent investors did spend some amount on household staff. Only 1 percent of Mass Affluent investors spent more than $5,000. Among investors, 19 percent spent at least $5,000, and 5 percent spent more than $10,000 on household workers. Mass Affluent Household Staff Expenditures in the Last 12 Months 57% 41% 1% 48% 48% 4% 29% 53% 20% Zero $1 to $4,999 $5,000 + Gambling Investors don t gamble! Not many, anyway, and not much. This is one of the few cases where the least affluent the investor, the more likely he or she is to gamble. Almost one-third of Mass Affluent investors report some money spent on gambling in the 12-month period, while 28 percent of s gambled at least a bit and only 22 percent of investors spent something on gambling. Gambling Expenditures in the Last 12 Months Zero - 68% Zero - 74% Zero - 78% $1-$4,999 29% $1-$4,999 24% $1-$4,999 19% $5, % $5, % $5, % Mass Affluent 8

9 SUMMARY There are discretionary expenditures that come as a result of great wealth. As the research shows, the amount of disposable income spent on Household Staff, Automobiles, and Vacation and Leisure Travel corresponds to the wealth level of the affluent investor. But big-ticket items and extravagances are not as popular among the wealthy as might be expected. Even among investors, spending on Boats and Jewelry is reasonable, and a majority of affluent investors did not spend a cent in the 12-month period on Collectibles, Club Memberships or sports events. One standard image of affluent investors was quashed by the results of the study. Investors are very likely to contribute to charity, and in some cases, they contribute a great deal of money. At the same time, affluent investors are unlikely to contribute even a penny to political causes. Investors often state they reached their current wealth level through hard work. Some claim luck had something to do with their success, but a tiny percent of investors spend any money on actual gambling. The percentages of expenditures between Mass Affluent, and Ultra High Net Worth investors not only indicate the level of discretionary spending but also the difference between investors in the same wealth category. METHODOLOGY: This white paper is based on primarily on research conducted by Spectrem Group with High Net Worth* households across the U.S. during Each quarter, Spectrem interviews online approximately 1,500 Mass Affluent household, 1,000 households and 500 Ultra High Net Worth households. Net Worth, NIPR, includes all assets except primary residence, less all liabilities. We examine four distinct segments: Mass Affluent - $100,000 - $999,999 - $1,000,000 - $4,999,999 Ultra High Net Worth () - $5,000,000 - $25,000,000 Average Age Mass Affluent Ultra High Net Worth

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