A look at what the powerful worry about

0 Comments | Insight on the News, August 5, 2002 | by John Elvin

There weren't any pink clouds in Ernest Hemingway's world. When F. Scott Fitzgerald, who was fixated on people with fancy cars and mansions, remarked that "the rich are not as we are," Hemingway retorted: "No. They have more money." Beyond that cool assessment, are the rich and powerful really different from you and me?

Well, here are some clues courtesy of U.S. Trust, a wealth-management firm that conducts an annual survey of the top 1 percent of rich Americans to determine their concerns and attitudes. This year, the survey showed that our wealthiest citizens are most worried about terrorism and its possible negative effect on the economy and security markets.

The study, titled the U.S. Trust Survey of Affluent Americans, also found confidence shaken in the face of events surrounding Enron and other corporate bankruptcies. Also, according to Susan Traver, managing director of the firm, the bear market has continued to have a major effect on the concerns and attitudes of the rich.

"Eighty-five percent of those surveyed have seen their investment portfolios decline in value since March 2000," she said in a statement accompanying the survey. "On average, their portfolios have declined by 17 percent." Nonetheless, most are "staying on course" with regard to lifestyle and investment behavior, she noted.

With regard to the Enron case and other corporate bankruptcies, the survey found that 85 percent of affluent investors now favor tighter regulation regarding financial disclosure by publicly traded companies. Also, 76 percent now question the reliability of corporate financial statements. But only 22 percent shifted assets out of stocks as a result of the Enron situation.

Among other concerns:

* Seventy-three percent are worried that the next generation will have a more difficult time financially.

* Sixty-eight percent fear that stock-market gains will be lower than in recent years.

* Sixty-three percent are worried about threats to personal security due to the terrorism situation, and about 40 percent gave more to charity in the aftermath of the Sept. 11 attacks.

But let's cut to the bottom line. Into which investment areas are the rich planning to put their loot in the days ahead?

Seventy-eight percent will target health care, pharmaceuticals and biotechnology; the same number favor defense and aerospace; 66 percent are banking on real estate; 63 percent will look to consumer products; and 56 percent point to energy and natural resources.

However, money isn't everything. Forty-one percent of those surveyed said that they will simplify their lives in the aftermath of the Sept. 11 attacks, and 40 percent said that they will spend more time with their children. Almost as many plan to spend more time with their spouses, reconnect with relatives and devote more attention to friends.