Northwestern Mutual

Northwestern Mutual Research Reveals Distinct Shift in Americans’ Financial Expectations; Highly Conservative Attitudes Toward Money Take Hold

MILWAUKEE (BUSINESS WIRE), June 16, 2010 - More than 18 months after the height of the global financial crisis, Americans have embraced a distinctly more conservative approach to their financial planning, priorities and preferences, according to research commissioned by Northwestern Mutual. Most notably, 75 percent of people with financial goals have widened the time horizons in which they aim to accomplish them, and nearly three out of four favor financial strategies that are lower-risk, stable and steady versus those that carry higher risk in the pursuit of aggressive growth.

While the overall findings of the study suggest that Americans have had to reprioritize with an eye toward managing for the long term, the research also revealed that people across the country are simultaneously dealing with the near-term impacts of a down economic cycle – such as unemployment, investment losses, decreased savings, foreclosure, and more. While the vast majority of respondents have a strong desire to feel financially secure, only one in five people report having attained that feeling of security.

“There appears to be something of a fundamental shift in mindset taking hold in how Americans view and manage their finances,” said Greg Oberland, Northwestern Mutual executive vice president. “People have recalibrated their personal risk/reward meters, and are putting much greater value on achieving stable growth over longer timelines. Interestingly, this shift is occurring at a time when millions of Americans are contending with very serious near-term financial struggles. It’s as if people have come to accept those immediate realities, while also being able to see past them – and the prevailing consensus is that steady and slow will win the race.”

Financial Realities of Today

The research, called Financial Realities: Changing Timeframes, was conducted online by independent research firm Harris Interactive in March and April, and explored near- and long-term attitudes of Americans against the backdrop of a prolonged period of economic uncertainty.

According to the study, some of the most resounding financial realities of today include the following:

  • Americans have embraced highly conservative attitudes toward money. When asked about the attributes people seek most from financial products today, 75 percent said they prefer those that are safe, steady and secure over those that pursue aggressive growth; 75 percent favor products with a long-term outlook vs. those that are short-term; 67 percent prefer products with guarantees to those with potential; and 64 percent prefer products that are lower risk with the potential for lower returns as compared to those that are higher risk with the potential for higher returns.
  • 65% of respondents have experienced a significant financial challenge in the past 18 months. Still, despite these acute near-term realities, Americans appear to be prioritizing their financial decisions with a view toward the long-term – as indicated not only by their preference for safer product choices but also by a continued high rate of savings and an expectation of longer timeframes to meet financial goals.
  • The majority of Americans are widening their time horizons. Among people with financial goals, 75 percent say the financial crisis has impacted the timeframe within which they had originally planned to meet those goals. This shift is felt most strongly by those 35 and older, where eight in 10 say it will now take them longer to achieve their financial goals.
  • Saving will continue to outpace spending over the next 12 months, although at a lower rate than in 2009 – likely the result of a slowly recovering broad economy (33% expect to save much/somewhat more vs. 42% last year).
  • Young people are saving more. Interestingly, saving is generally more popular among 25-34 year olds than it is with people 55 and up, with 40 percent of the younger demographic at the high end of the anticipated savings scale, compared with 23 percent of those older.
  • Women are more conservative than men. While both genders favor stable lower risk products, women do so in larger numbers: “Safe, steady and secure” (82% women vs. 67% men); “Guarantees” (71% women vs. 63% men); “Lower risk” (72% women vs. 56% men).

Value Retention

When asked about the value of their assets, only 34 percent of survey respondents indicated that they are either “satisfied” or “very satisfied” with how their investments have held up over time; 37 percent said the same about their 401(k)s; and 41 percent indicated the same about their homes.

The asset that has retained the most value over time, according to survey respondents, is permanent life insurance, with 54 percent indicating high levels of satisfaction. Put another way, Americans are nearly 60 percent more satisfied with the long-term value of their permanent life insurance versus their investments.

“Permanent life insurance is by no means a new product, but once again its time has come,” said Mr. Oberland. “When you consider people’s opinion about how permanent life has held its value over time, and combine that with the more universal preferences today for low-risk stability, steady growth over time, and a desire for financial security, we believe we’ve reached something of a high water mark for relevance and timeliness. That said, our research also indicates that people don’t see permanent life insurance as a product that offers guaranteed growth and a great deal of flexibility. These are major misperceptions, so we – and others in the industry – have some educating to do.”

About the Research

Northwestern Mutual sponsored the Financial Realities: Changing Timeframes study to help provide insight into how Americans are responding to the current economic landscape, and to explore how attitudes and priorities may be changing regarding the way people approach their finances. Independent research firm Harris Interactive conducted the online survey of 1,057 Americans aged 25 or older between March 23 and April 26, 2010. Results were weighted as needed for age by gender, education, race/ethnicity, region and household income. Propensity score weighting was also used to adjust for respondents’ propensity to be online. No estimates of theoretical sampling error can be calculated; a full methodology is available.

About Northwestern Mutual

The Northwestern Mutual Life Insurance Company – Milwaukee, WI (Northwestern Mutual) has helped clients achieve financial security for more than 150 years. As a mutual company with $1.2 trillion of life insurance protection in force, Northwestern Mutual seeks to share its gains with policyowners and deliver consistent and dependable value to clients over time. Northwestern Mutual and its subsidiaries offer a holistic approach to financial security solutions including: life insurance, long-term care insurance, disability insurance, annuities, investment products, and advisory products and services. Subsidiaries include Northwestern Mutual Investment Services, LLC, broker-dealer, registered investment adviser, member FINRA and SIPC; the Northwestern Mutual Wealth Management Company, limited purpose federal savings bank; and Northwestern Long Term Care Insurance Company; and Russell Investments.

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6/16/2010 2:11:49 PM