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America's Affluent: On the Threshold of the New Millennium 1998-99 Affluent MacroMonitor Report Executive Summary Table of Contents Download the executive summary Download the complete report Executive Summary Affluent households in the United States—during these times of economic vigor, technological revolution, and relative worldwide political stability—are a growing market of unprecedented opportunity. However, significant challenges face any institution that seeks to serve and profit from this market. Products and services that were merely adequate to meet the needs of Affluent households in the past will no longer fit their needs in the future. And because advances in the Affluent's capabilities (assets, education, health, and enabling technologies) will continue to grow, the speed with which the Affluent's needs will change will accelerate. As the Affluent change, institutions that do not evolve with them will wither and die. On the basis of our analysis of the current and previous waves of the MacroMonitor's survey of Affluent households—combined with continuous conversations among the leading financial institutions, associations, government agencies, universities, and consultants and balanced with what the media report–we believe that the following five factors will have the most profound impact on the future of financial services for the Affluent: Mass affluence Penetration of PC ownership and growth of the Web Longer life expectancy Women in the workforce and beyond Changing nature of retirement. MASS AFFLUENCE Something wonderful is happening. The United States has more Affluent households than ever before. And the reason is not just population growth or wage inflation. Some of the explanation is the natural occurrence of an economy that has grown virtually uninterruptedly for nearly a decade. Part of it is attributable to enhanced productivity and the gains from shifting from an industrial and merchandise to an information and service society. Enhancing the situation is an (irrationally?) exuberant stock market that has grown twentyfold in nearly two decades. Finally, economic benefits come from people's living longer, healthier lives. Figure ES-1 Pyramid to Diamond (Millions of Households) Whatever the causes, the effect is that in the United States more households have more resources. This change translates into higher levels of education, more jobs, more forms of entertainment and other diversions, more affluent (calculated by income or net worth per capita), and more millionaires. The danger for a financial institution seeking to serve these households is in making the assumption that they are all alike. As this group grows, so do the variations that make a difference. Treating today's Affluent as a homogeneous group can only provide misunderstanding based on stereotypes and other measures of centrality that drown out the critical distinctions. What is necessary is an effective way in which to separate the Affluent into distinct, cohesive groups, each of which is easy to identify and market to. The CART (Computer Aided Regression Trees) segmentation, which MacroMonitor used initially in 1992 to segment Affluent households and comparably implemented in the three waves of the MacroMonitor since, is such a method. Figure ES-2 The Affluent Segmentation The growth and movement that we have seen among the various Affluent segments is readily explainable by the changes in the economy and the stock markets and the natural evolution of standard demographics. The three segments that have historically had the most exposure to the equity markets—the Wealthy Retireds, the Balanced Builders, and the Focused Builders—have all increased significantly in the past two years. The other segment most likely to have equities—the Capables—has not increased significantly because as its financial assets have grown, the Capables have migrated into the Balanced and Focused Builder segments. Conversely, if a major correction occurred in the stock markets, this segmentation suggests that the three segments most affected would be the Wealthy Retireds and the Balanced and the Focused Builders. CONTENTS EXECUTIVE SUMMARY i BACKGROUND 1 THE AFFLUENTS: PRIME TARGETS FOR FINANCIAL PRODUCTS AND SERVICES 1 THE CFD AFFLUENT SEGMENTATION 2   The Balance Sheet 3   Empowerment of the Affluent in the New Millennium 9   The Internet and Electronic Finance 11   The Economic Environment 12 SEGMENT PROFILES 14 BALANCED BUILDER HOUSEHOLDS 15   Highlights 15   Demographic Profile 16   Balance Sheet 18   Financial Attitudes 20   Demographics 21   Savings and Investments 22   Credit 23   Protection 23   Transactions 23   Information and Advice 23   Personal-Computer and Internet Use 25   Marketing Implications 25 FOCUSED BUILDER HOUSEHOLDS 26   Highlights 26   Demographic Profile 27   Balance Sheet 29   Financial Attitudes 31   Demographics 32   Savings and Investments 32   Credit 33   Protection 34   Transactions 34   Information and Advice 34   Personal-Computer and Internet Use 35   Marketing Implications 36 REAL ASSET BUILDER HOUSEHOLDS 37   Highlights 37   Demographic Profile 38   Balance Sheet 40   Financial Attitudes 42   Demographics 43   Savings and Investments 44   Credit 44   Protection 45   Transactions 45   Information and Advice 46   Personal-Computer and Internet Use 46   Marketing Implications 47 CAPABLE HOUSEHOLDS 48   Highlights 48   Demographic Profile 49   Balance Sheet 51   Financial Attitudes 53   Demographics 54   Savings and Investments 56   Credit 57   Protection 57   Transactions 57   Information and Advice 58   Personal-Computer and Internet Use 58   Marketing Implications 59 BORDERLINE HOUSEHOLDS 60   Highlights 60   Demographic Profile 61   Balance Sheet 63   Financial Attitudes 65   Demographics 66   Savings and Investments 66   Credit 67   Protection 68   Transactions 68   Information and Advice 68   Personal-Computer and Internet Use 69   Marketing Implications 69 WEALTHY RETIRED HOUSEHOLDS 70   Highlights 70   Demographic Profile 71   Balance Sheet 73   Financial Attitudes 75   Demographics 76   Savings and Investments 77   Credit 77   Protection 78   Transactions 78   Information and Advice 78   Personal-Computer and Internet Use 79   Marketing Implications 79 ENTREPRENEUR HOUSEHOLDS 80   Highlights 80   Demographic Profile 81   Balance Sheet 83   Financial Attitudes 85   Demographics 86   Savings and Investments 87   Credit 88   Protection 88   Transactions 88   Information and Advice 89   Personal-Computer and Internet Use 89   Marketing Implications 90   Tables Assets 4 Liabilities 5 Net Worth 5 Net Worth Excluding Primary Residence 6 Financial Assets 6 Investable Assets 7 Liquid Assets 8 Home Equity 8 Savings 9 Balanced Builders: Sources of Income 22 Capables: Sources of Income 56 Wealthy Retireds: Sources of Income 76   Figures Pyramid to Diamond ii The Affluent Segmentation iii PC Use by Affluent Segments iv PC Banking by Affluent Segments and PC Investing by Affluent Segments v Working Women by Affluent Segments vii Marital Status among the Affluent viii Trend and Projection of Life Stages ix Percent Distribution of American Affluent Households 2 Balance Sheet for America’s Affluent 3 Average Household Income per Affluent Segment 9 Discount Brokerage Penetration of American Affluent Segments 13 Balanced Builders: Education of Primary Head of Household 21 Balanced Builders: Median Household Income 21 Balanced Builders: Financial Decision Maker 24 Balanced Builders: Computer Use and Online Access at Home 25 Focused Builders: Education of Primary Head of Household 32 Focused Builders: Financial Decision Maker 35 Focused Builders: Computer Use and Online Access at Home 36 Real Asset Builders: Education of Primary Head of Household 43 Real Asset Builders: Median Household Income 44 Real Asset Builders: Computer Use and Online Access at Home 47 Capables: Median Household Income 54 Capables: Median Age of Head of Household 54 Capables: Marital Status 55 Capables: Education of Primary Head of Household 55 Capables: Computer Use and Online Access at Home 58 Borderlines: Education of Primary Head of Household 66 Borderlines: Computer Use and Online Access at Home 69 Wealthy Retireds: Computer Use and Online Access at Home 79 Entrepreneurs: Education of Primary Head of Household 86 Entrepreneurs: Financial Decision Maker 87 Entrepreneurs: Computer Use and Online Access at Home 89   Appendixes A. MacroMonitor Survey Methodology A-1 B. Survey Weighting Procedures B-1 C. Affluent Segment Definitions C-1

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