If Congress and the President can’t reach an agreement on the federal budget by the end of the year, the simultaneous increase in taxes and cuts to entitlement programs will send the U.S. over a so-called “fiscal cliff” at the start of 2013. The effects of such an occurrence will be stark and sweeping, and a distinct and cohesive group of wealthy Americans that has emerged in recent years is preparing for austerity and risk aversion. Given the potential impact the fiscal cliff may have on this group, coined as the Mass Affluent in a recent Nielsen report, many have educated themselves on the subject and taken their opinions to the Web to opine on this rapidly evolving drama.
The Mass Affluent, which now account for 11 percent of all U.S. households, generally believe the expiring tax measures, commensurate rate hikes and expected volatility in the marketplace associated with the fiscal cliff will have notable financial repercussions for them.
In preparation, this group may be modifying their financial portfolios and investment strategies–tactics that may shift preferences for financial products and services.
The volume of comments that this group made online regarding the fiscal cliff increased almost tenfold from October 2012 to November 2012 according to NM Incite, a Nielsen McKinsey company. To better understand the sentiment and reaction to the impending fiscal cliff, dubbed by some as the austerity crisis, NM Incite examined the types of comments made on websites that the Mass Affluent are likely to visit–particularly business and financial sites–and compared them to the types of comments made on social media websites as a whole.
The trends garnered from these comments are promising for the financial services and retail industries, as the Mass Affluent seem better informed on the implications of the fiscal cliff. They are also bit more prepared than the general public for coming austerity and, while concerned, do not share the same negative and more reactionary sentiment seen in the general population. As comment trends indicate, it is likely that many may heed the advice of investors and move their investments to those more conservative than stocks, like CDs and bonds.
The Mass Affluent tend to be better informed and sophisticated on the subject. For example:
- “Taxes are going to go up; everyone knows that. The question is ‘how much’, and when that is settled, there will probably be a relief rally in the stock market”
- “I am a regular investor, I am always looking at stocks and usually make 3-4 purchases a year based on my research. I am currently tracking a couple and was thinking even though there appears to be a good opportunity I may wait a while until the coming fiscal cliff gets settled.”
Fiscal Cliff Buzz on Mass Affluent Websites
The Mass Affluent also tend to be more rational and balanced in their concerns about the fiscal cliff, making comments such as:
- “Not only that, there really isn’t a cliff. It’s more like a curb or a hill. Some of the items that would change are a slow, gradual change. Some won’t have full effect for almost a year.”
The Mass Affluent are more apt to discuss international economic conditions in addition to domestic conditions, as key words such as “EUR,” “Spain,” “Italy” and “European” pop up in online conversation in a way not seen in the larger social media landscape.
However, more negative and fear-based sentiment reigns supreme among the larger social media landscape, with comments such as:
- “The fiscal cliff can’t be any worse than it is now.”
- “Falling down the fiscal cliff will SAVE America. Time for EVERYONE to make sacrifices!! NOW, NOT LATER!!”
Despite being more informed and less reactionary than the general public, the Mass Affluent is less likely to use fiscal cliff jargon, such as “Sequester cuts,” “Simpson-Bowles” and ”Gang of Six” in social discourse relative to the typical political blogosphere coverage. Linking quantity and quality of fiscal cliff buzz with resulting changes in investment patterns will help financial institutions better anticipate and design product offerings and portfolios (e.g., evaluate tax diversification of investments, rebalancing portfolios, better estate planning, etc.) for this essential market segment.
Highlights of the Mass Affluent:
- Amassed a wealth of investable assets between $250,000-$1,000,000
- In aggregate, Mass Affluent wealth totals more than $7.5 trillion
- Two-thirds are over 55 years old
- Typically couples without kids or empty nesters
- Own their homes and they likely have fixed mortgages
- Work in finance, business and management careers, or own their own business
- Avidly read newspapers, trade journals, travel and home-related magazines
- Possess multiple investment accounts including 401K, IRA and CDs
- Adopters of high-end technology like tablets, smartphones, digital recorders and video game consoles
- Tend to shop less frequently than other groups, but spend more per shopping trip
To read more about the Mass Affluent consumer audience, download the full report.