SOURCE: AlixPartners

AlixPartners

October 14, 2009 09:00 ET

Half of Americans Have Stopped or Reduced Investing and a Quarter Don't Intend to Invest for at Least Three Years, According to a New AlixPartners Survey

Poll Indicates a Potential Contraction of Up to 26% in the Market for Financial Advisors, and Suggests That Retail Financial Investment Companies May Be Wasting Up to Half of Their Marketing Spending

NEW YORK, NY--(Marketwire - October 14, 2009) - Americans will be investing significantly less in the future, according to a new survey released today by AlixPartners LLP, the global business advisory firm, indicating that the financial crisis is likely to have a significant impact on investor behavior over the next several years. While the U.S. financial services industry is slowly recovering from its biggest losses in decades, investor confidence appears to be recuperating tepidly at best. A staggering 49% of people surveyed who identified themselves as "previous investors" reported either having stopped or reduced investing in stocks or mutual funds and 26% said they had no intention of investing in these bedrock financial vehicles in the next three years. The survey also found that among higher-income households, those earning more than $75,000 per annum, 21% of previous investors reported having stopped investing altogether in stocks or mutual funds. These results could point to a significant structural contraction in the market for financial services firms and financial advisors, while also suggesting that financial companies should be thinking about how to better focus their marketing dollars in today's uncertain market.

"Investors who had placed their trust in the investment industry are cross, cautious and confused," observed Clarence Hahn, AlixPartners' Financial Services practice co-lead. "And while the collective loss of wealth in the past year has had a deep impact psychologically as well as financially, the irony is that the lost wealth can only be rebuilt through participation in the markets. Financial-advisory firms therefore have two key challenges: to figure out who really is going to start investing again; and to win back trust by building into their offerings a level of oversight, due diligence and risk management that will eradicate the possibility of similar meltdowns in the future."

With Crisis, There's Also Opportunity

Drilling down into the findings, the survey found not only that 26% of former investors have no intention of investing for at least three years, but that an additional 27% are unsure whether they will invest in that same timeframe. "Investors have pulled out and don't know if they want to come back," said Pierre Buhler, co-lead of AlixPartners' Financial Services practice, "suggesting a market at a turning point. It remains to be seen which way these people will turn. But given the amount of money sitting on the sidelines, there lies the opportunity. A large proportion of investors, whether financially savvy or not, want professional advice. The role of the financial advisor is critical, and institutions that get this, and develop the customer propositions to reverse the tide, will ultimately gain from the fundamental shift we're seeing."

Better Allocation of Marketing Budgets Needed

The survey data also indicate the possibility that financial services companies are mis-spending up to half of their marketing dollars. Noted Hahn, "Financial services companies right now are selling into a whirlwind of a market. The old axiom of marketing, that half of it is always wasted, is not just a funny line but probably a truism in this industry today, given that a quarter of people say they won't invest at all and another quarter are saying they're unsure at best. In this kind of market, it would behoove financial services companies of all kinds to figure out for sure what part of their marketing is waste, and how to focus on finding and pleasing the true investors out there."

One way forward, he noted, could be to look at the gender gap right now in investing. In the AlixPartners survey, female investors said they are about 50% more likely not to invest over the next three years than male investors -- 32% for women versus only 21% for men.

"In general," observed Hahn, "financial institutions should be focused on further tailoring messages, products and channels to real investors only. Rifle shots, not scattershots, are what's needed right now."

About the Survey

AlixPartners' "Americans' Investing Outlook Post-Financial Meltdown" survey was conducted in late August 2009, with 1,000 people in the U.S. across all key demographics including gender, age, location, education, employment status, income level and ethnicity. Survey respondents were asked to 1) describe their investment behavior since the current financial crisis started; 2) comment on their likely investment behavior over the next three years; and 3) describe how they will make investment decisions if and when they invest. Highlights of the survey can be found at www.alixpartners.com.

About AlixPartners

AlixPartners is a global business advisory firm offering comprehensive services to improve corporate performance, execute corporate turnaround, and provide litigation consulting and forensic accounting services. The firm has more than 900 professionals in 14 offices across North America, Europe, and Asia, and is on the Web at www.alixpartners.com.

Contact Information

  • Media Contacts:

    Tim Yost
    (AlixPartners)
    +1.248.204.8689

    Meir Kahtan
    (Meir Kahtan Public Relations)
    +1.212.575.8188
    Email Contact