How The Rich Are Different:Recession Hits Investment Psyche

The rich are different than you or me, and it turns out that the ultrarich are different than the mere well-to-do, according to a survey that asked wealthy investors about the effects of the recession on their portfolios and prospects.

PNC Wealth Management polled 1,046 adults with annual incomes of $150,000 or above, at least $500,000 of investable assets or, if retired, at least $1 million of investable assets in September. PNC Wealth Management is part of PNC Financial Services Group Inc. (PNC).

Nearly 70% of investors with between $500,000 and $1 million in investable assets said the effect was negative; a sentiment shared by only half of those with more than $5 million to invest - a group PNC defines as ultra-high-net-worth for the purposes of its survey.

At the same time, these ultra-high-net-worth investors were less optimistic about stock-market returns through the next half year, and more pessimistic about the chance of an economic recovery in 2010.

The impact of the recession may well have been worse for mass-affluent investors than for those with $5 million or more. For one thing, they are likelier to have gone it into with more broadly diversified portfolios in aid of a financial plan geared to meet concrete life goals, according to Thomas Melcher, head of PNC Wealth Management's multifamily office, Hawthorn.

"The ultrawealthy were more conservatively positioned entering the financial crisis," says Melcher. And that, he adds, is because they were likelier than investors further down the wealth scale to have been served by wealth managers who recognized that, a few flush years in the middle of the decade aside, markets have been choppy since the tech bubble burst in 2000.

And Melcher says the greater pessimism about an economic recovery among $5 million-plus investors makes sense in light of national policy debates.

"The government has spent an awful lot of money to keep the economy on track, and the debates we're hearing about are all about health care and taxes and the budget, and so, if you happen to be high on the socioeconomic scale in this country, you're looking at a significant part of the bill for all this coming to you."

Hawthorn manages $16 billion for about 600 families.

- By Thomas Coyle, Dow Jones Newswires; 212-416-2245

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