JGFR’s Mass Affluent Financial Well Being Index+ gained 18 points in June to 62, its third consecutive quarterly rise since the low of 12 reached last September. It is 36 points higher than a year ago (26).
The 4-quarter moving average rose for the first quarter since December 2006 to 39.5, up from a series low of 30.5 in March 2009. A year ago the 4-quarter moving average was 74.6.
Overall the JGFR quarterly Financial Well Being Index worsened in the quarter – down 3 points to –68 from –65 in March – but up from –77 a year ago. On a 4-quarter moving average basis it rose to -70.8 from -73.1 in March, its first rise since June 2006.
An improvement across all measures of financial wellbeing lifted the Mass Affluent index higher in March. Personal finances and spending confidence rose strongly to their highest levels since March 2008.
Housing market confidence slipped slightly following a strong rise in March and remains historically weak.
Behind the decline in the overall financial wellbeing index on the quarter is a worsening of households financial position and of spending and housing market confidence suggesting a summer of generally weak spending activity, although with better prospects among the mass affluent.
Financial activity holding up well, particularly life and pensions
93% of the mass affluent expect to be financially active in the coming 6 months (save, invest, borrow or repay debt) compared to 75% overall**. This compares with 94% and 74% a year ago and 95% and 77% in March.
Far more of the mass affluent (38% up from 36% in March) intend to repay debt in the coming few months. This compares to a decline in expected debt repayment among the general population, down from 29% in March to 25% in June.
Fewer of the mass affluent intend to make cash savings, down to 50% from an average of 56% over the past 5 quarters. This contrasts with a rise in cash savings intentions among all adults, up from 33% to 36% on the quarter – possibly because of rising savings rates, ongoing economic uncertainty and tight credit.
While slightly more people overall intend to save/invest in the coming months (some 66% of adults), there is a slight drop in the very high proportion of high earners intending to save/invest, down from 90% to 89%.
Despite much commentary about a loss of trust and confidence in financial services providers, the proportion of people intending to save or invest compared to a year ago is unchanged.
Equity investment sentiment picked up among the mass affluent in June. 28% of higher earners intend to invest in equities either directly or through unit trusts compared to 22% in March when the market was very weak.
17% of the mass affluent intends to invest in government or corporate bonds, down from a peak of 25% in December, but up from 13% a year ago.
A noticeable trend during the recession is for people trying to maintain life & pension contributions – with strong expected inflows of lump sum contributions.
Among the mass affluent the proportion who intend to contribute to a life and/or a pension scheme has averaged 68% during the past 5 quarters, the same as the current measure.
Borrowing intentions among the mass affluent are weaker than in March, down from 27% to 23%, in line with a general decline in borrowing intentions in the quarter, down from 20% to 17%.
Demand is down in mortgages, personal loans and credit cards, is unchanged in overdrafts and is higher in car finance plans, possibly boosted by the car scrappage scheme.
Continuing high level of engagement among the mass affluent – HSBC, Lloyds TSB and Barclays leading main financial services providers to this segment
Higher earners are more financially active with 54% intending to undertake 4 or more savings, investment, borrowing or debt repayment activities in the coming 6 months. This is down slightly on 57% in March and little changed on a year ago. Overall 26% of adults expect to undertake 4 or more activities (29% March and 27% a year ago).
With great emphasis among the major banks on increasing sales of products to both existing and new customers, JGFR asks consumers who they regard as their main financial services provider each quarter.
Overall the Lloyds TSB and Barclays brands are pulling away as overall main financial services providers; among the mass affluent HSBC, Lloyds TSB and Barclays are vying for market leadership.
Commented John Gilbert, Chief Executive of JGFR:
“Over the past year the impact of recession has been felt across all income levels. Financial wellbeing has fallen steeply. In the latest survey there is emerging evidence that the ongoing impact of the recession is hitting lower income groups harder, with the pick up in financial wellbeing falling back among the overall population but rising among the mass affluent. This reversal in overall financial wellbeing is likely to be reflected in deferred spending and a preference for saving. Among the mass affluent, who have greater spending and housing market confidence, a larger proportion of this group intend to repay debt in the coming months”
+ Covers consumers personal financial position, household saving, spending confidence and property purchase intentions.
*Mass affluent households are defined as the top 12-15% of households in the population earning over £50,000
** Source: Financial activity survey of 2,000 adults aged 16+ carried out by GfK NOP for JGFR asking about savings, investment and borrowing activities in the next 6 months
The 30th JGFR (Summer) Financial Activity Bulletin examines the mood and financial activity of consumers and was published on July 15th. Charts are available of the mass affluent survey findings.
JGFR Ltd Specialists in financial and business research
London - 22 July 2009