How the wealthy keep their finances healthy

June 7, 2011
By
Some 82% of wealthy individuals aged 45 or under deliberately avoid information about how the market or their portfolio is performing – that's one of the quirkier findings to emerge from Risk and Rules: The Role of Control in Financial Decision Making, a survey commissioned by Barclays Wealth of 400 high net worth individuals in the UK and more than 2,000 across the globe.
 
Some 70% of wealthy investors in the  South West are content with their financial situation – just below the national average of 73%. Despite being satisfied, 30% of wealthy individuals in the region would like to have greater financial discipline. 
 
The region is also the second most conservative in the UK, with only 32% willing to pursue high-risk investment strategies in order to enjoy higher gains.

 
The report also considers the different financial personality traits that exist amongst wealthy investors, and the different self-imposed rules and strategies that they put in place to deal with these traits.  It shows that ‘emotional’ trading can cost investors nearly 20% in returns over a 10-year period while those who employ high strategy usage have on average 12% more wealth than those who do not use rules.

 
Some 43% of wealthy investors in the South West say that they attempt to strategically time the market when they trade, as opposed to adopting a buy and hold strategy.
The report shows that UK respondents use many types of decision-making strategies to control their decision-making process and use rules more in financial decision making (83%) than they do in everyday life (62%). The most popular include waiting before executing a financial decision (90%) and setting deadlines (87%).
 
Despite this, the use of rules is much less popular in Britain than across the globe, where 89% use rules in finance and 73% in their everyday life. The most popular rules globally include using cooling-off periods (92%) and setting deadlines (90%).
 

Vince Hopkins, head of Barclays Wealth in Bristol, said: "This report provides an in-depth study into the financial personalities of wealthy investors in the UK and the South West, giving us fascinating insight into their behaviour. When it comes to financial discipline, there is a desire for more control which presents an interesting challenge for the wealth management industry. Clearly, more needs to be done to help clients understand their financial personality and the benefits of using financial self-control strategies.”

 
Greg Davies, head of behavioural finance at Barclays Wealth, said: “You have to remember that with increased wealth comes an increased complexity of investment decisions. The key thing that investors need to consider is how these decisions might fit in with their overall investment strategy, and importantly, how they fit in with their individual requirements, both financial and emotional.”

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