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Recent Financial Hardship Inspires Mass Affluent Consumers to Tighten Wallets, Merrill Edge Report Finds

Mass Affluent Embracing New Financial Management Tools, but Still Seeking Guidance From Established Sources

Tuesday, November 29, 2011 2:00 pm EST

Dateline:

NEW YORK

Public Company Information:

NYSE:
BAC
"Even with online and mobile banking skyrocketing, many people are still seeking guidance from a trusted advisor"

NEW YORK--(BUSINESS WIRE)--Bank of America today released the Merrill Edge Report, a semi-annual study of the financial concerns and priorities of the mass affluent, consumers with $50,000-$250,000 in investable assets. The quantitative and qualitative research reveals that this group, which consists of approximately 28 million households in the United States, has taken proactive steps to improve their short-term financial situation, but continues to seek guidance from established sources to reach financial goals.

Despite concerns about long-term saving, many mass affluent consumers are learning from the recent recession and taking steps to secure their current financial situations. The study found that 57 percent believe it will be harder to save for the long-term five years from now compared to today, and 27 percent feel that it will be equally as difficult to save five years from now as it is today. As a result, one in five (21 percent) reported that they have increased their savings in the last year.

“In this uncertain environment, it’s more important than ever to stay in control of personal finances,” says Dean Athanasia, Preferred and Small Business executive at Bank of America. “While we cannot control what’s going on around us, we’re seeing that many mass affluent Americans are applying lessons they learned from the hardship of the recession to improve their financial management. The tools, resources, and guidance offered through Merrill Edge can help them to do even more with their money.”

Mass affluent continue to shore up their current financial situation

While half of mass affluent consumers feel that their financial situation is the same as it was a year ago, a quarter of this group (23 percent) believes their financial situation is better than it was a year ago. Those who experienced improved financial conditions attribute their success to:

  • Eliminating unnecessary expenses (42 percent).
  • Paying their bills on time (40 percent).
  • Sticking to a budget (37 percent).

As one respondent notes, “Every week, I have the bank automatically transfer cash from my checking account to my savings account. If I manage for a month without that money, I increase it the next month. I pay off my credit cards every single month so the full allotment is available in case of an emergency.”

Furthermore, the mass affluent plan to continue tracking and managing their money (67 percent) and paying down debt (47 percent) in the next six months. However, there were those (27 percent) who continued to tap their long-term savings to meet short-term needs. Among them, 26 percent did so to cover regular monthly living expenses such as bills or groceries.

Planning for retirement and children’s education

In spite of short-term financial recovery, the mass affluent continue to struggle with long-term goals such as retirement planning and college savings. Nearly half (47 percent) of non-retirees expect to retire later than they had planned a year ago, an increase from 42 percent in January. In fact, the number one financial regret among the mass affluent is not contributing enough to their 401(k) or retirement savings (17 percent). The top three concerns this segment has are similar to their top concerns in the January 2011 Merrill Edge Report. They include:

  • The rising cost of health care (83 percent).
  • Ensuring retirement assets last throughout their lifetime (73 percent).
  • Being able to afford the lifestyle they want in retirement (72 percent).

When it comes to saving for their children’s education, 44 percent of parents surveyed began saving before their child reached the age of six. However, 38 percent of parents who did so, wish they began saving earlier, nearly double the number of affluent parents (22 percent) who also wished they began saving earlier, as indicated by the August 2011 Merrill Lynch Affluent Insights Survey. Among those who wished they had started saving earlier, 41 percent noted that their everyday financial needs got in the way of saving for their children’s education, and 25 percent said that they underestimated the time they would need to save.

Despite regrets for not starting college savings earlier, only a third (32 percent) of parents plan to focus on college savings in the next six months.

Among parents who intend to cover a portion of their children’s college tuition, the majority (59 percent) plan to rely on their personal savings, even though they feel behind in the process.

“Representing one out of every four U.S. households, the mass affluent have tremendous financial potential,” adds John Thiel, head of U.S. Wealth Management for Merrill Lynch. “However, we know that their financial confidence is wavering and they still struggle to manage short- and long-term finances. Every day, our clients can take advantage of all Bank of America has to offer – from banking to investing and insights from BofA Merrill Lynch Global Research. We provide them with the necessary financial guidance and tools to enable them to reach their goals.”

Seeking trusted guidance but embracing new financial management tools

The mass affluent continue to seek financial information and guidance from established sources, such as a financial advisor (63 percent, up from 53 percent in January), friends and family (55 percent, from 45 percent), and their brokerage (37 percent, from 32 percent). In addition, the number one factor mass affluent Americans cite as increasing their confidence in their ability to meet their financial goals is receiving advice from a qualified financial advisor (50 percent).

Though the mass affluent still rely on traditional sources for financial information and guidance, this group is also quick to adopt emerging technology. Among the mass affluent, half (50 percent) are avid users of online banking and investing.

Surprisingly, this is significantly higher than those who say they’re avid users of text messaging (37 percent) and Facebook (36 percent), indicating a clear focus on personal finance and adoption of new technology. Even among 18- to 34-year-olds, 75 percent are avid users of online banking and investing, still slightly higher than the 72 percent who are avid users of Facebook. In addition, a quarter (25 percent) of mass affluent respondents say they are avid users of mobile banking. This group cites their top mobile banking activities as:

  • Checking account balances (81 percent).
  • Transferring funds (64 percent).
  • Paying bills (63 percent).
  • Researching investment or financial information/products (47 percent).

Along similar lines, mobile banking users believe the top benefits of mobile banking are:

  • The ability to view their accounts anywhere at any time (40 percent).
  • Helping them to stay in control of their finances (36 percent).
  • Access to real-time information (36 percent).

“Even with online and mobile banking skyrocketing, many people are still seeking guidance from a trusted advisor,” notes Alok Prasad, head of Merrill Edge. “With a wide variety of financial guidance and tools available, increasingly we are seeing clients choose a hybrid of tools to manage their finances. From access via mobile devices to stopping by banking centers, clients are able to feel a greater sense of control and security by using the resources that work best for them.”

Merrill Edge Report Methodology

Ketchum Global Research Network and Braun Research conducted the Bank of America Merrill Edge Report survey by phone between July 20 and Aug. 4, 2011 on behalf of Bank of America. Braun contacted a nationally representative sample of 1,004 Americans in the United States with investable assets between $50,000 and $249,999, and oversampled 300 mass affluent in San Francisco, Los Angeles, and Washington, D.C. The margin of error is +/- 3.1 percent for the national sample and +/- 5.7 percent for the oversample markets, with both reported at a 95 percent confidence level.

To help inform the Merrill Edge Report, Communispace conducted a series of qualitative studies including interactive conversations, surveys, and other dynamic and exploratory activities with its proprietary online community of 300 mass affluent consumers.

Bank of America

Bank of America is one of the world's largest financial institutions, serving individual consumers, small- and middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services. The company provides unmatched convenience in the United States, serving approximately 58 million consumer and small business relationships with approximately 5,700 retail banking offices and approximately 17,750 ATMs and award-winning online banking with 30 million active users. Bank of America is among the world's leading wealth management companies and is a global leader in corporate and investment banking and trading across a broad range of asset classes, serving corporations, governments, institutions and individuals around the world. Bank of America offers industry-leading support to approximately 4 million small business owners through a suite of innovative, easy-to-use online products and services. The company serves clients through operations in more than 40 countries. Bank of America Corporation stock (NYSE: BAC) is a component of the Dow Jones Industrial Average and is listed on the New York Stock Exchange.

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Merrill Edge is the marketing name for two businesses: Merrill Edge Advisory Center, which offers team-based advice and guidance brokerage services; and a self-directed online investing platform. Both are made available through Merrill Lynch, Pierce, Fenner & Smith Incorporated (MLPF&S).

MLPF&S is a registered broker-dealer, Member SIPC and a wholly owned subsidiary of Bank of America Corporation.

Investment products:

Are Not FDIC Insured   Are Not Bank Guaranteed   May Lose Value

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Reporters May Contact:
Don Vecchiarello, Bank of America, 1.980.387.4899
don.vecchiarello@bankofamerica.com