See Table of Contents for Tiburon's Consumer Wealth Research Report

Tiburon Strategic Advisors, a market research & strategy consulting firm serving a wide variety of financial institutions and investment managers, is pleased to announce the release of its new research report on Consumer Wealth. This research release summarizes some of the report's key findings.

The purpose of this report is to provide readers with a comprehensive understanding of the vast amount of consumer wealth, the perceived Baby Boomer savings crisis (or retirement income challenge), and Baby Boomers’ likely pending liquidation. The report outlines the numbers of consumers & consumer households, summarizes their financial concerns & savings goals, and analyzes the case made for Baby Boomers’ perceived savings crisis, including the decline in pension plans, the challenges of Social Security & Medicare, and the low consumer savings rate. The report also addresses the key pending liquidation, whereby Baby Boomers will likely roll over retirement plan balances, cash in stock options & restricted shares, downsize houses, and sell private businesses. This is the fourth draft of Tiburon’s research on this topic.

Tiburon’s first draft of this report was published in 2005; that draft consolidated prior Tiburon research into one report and was combined with Tiburon’s financial advisor sales & marketing research report. It outlined the number of consumers, their wealth, potential target markets, and sales & marketing strategies.

Tiburon’s second draft of this report was published in 2007; that draft was unbundled from Tiburon’s equally good financial advisor sales & marketing research report. That version also updated all of the consumer wealth data using the first quarter 2007 Federal Reserve Flow of Funds report and outlined Tiburon’s refined views on the perceived savings crisis and the pending liquidation.

Tiburon’s third draft of this report was published in 2008; that draft updated all of the consumer wealth data using the fourth quarter 2007 Federal Reserve Flow of Funds report, tightened the storyline, incorporated substantially more specific analyses, and fleshed out the specific challenge posed by the decline in the stock market and Baby Boomers’ home equity.

This is Tiburon’s fourth draft of this report; this draft updates all of the consumer wealth data using the fourth quarter 2008 Federal Reserve Flow of Funds report and also streamlines the appendix.

Key Findings
This report has a long list of interesting facts to share:

Evolution of Consumers & their Savings Objectives
This section outlines consumers & their savings objectives:

Consumers & Consumer Households

  • The number of consumers grows by one person every ten seconds, almost 50% faster than the 14.5 seconds in 1967
  • The worldwide consumer population is 6.5 billion, up almost 100% since 1967
  • China & India account for 37% of worldwide consumers
    First mortgage home defaults reached 2.7 million in 2008 & 2009, up 1,000% since 2007 and 300% since 2000 to 200

Financial Concerns & Saving Goals

  • 65 year old couples retiring in 2008 will need $225,000 to cover medical costs in retirement, up 40% since 2002
  • One-third of consumers believe that health care costs are a major retirement concern

Baby Boomers & the Perceived Baby Boomer Savings Crisis
This chapter outlines Baby Boomer and summarizes the case for their pending saving crisis:

  • The number of consumers between 55 and 64 years old is expected to grow the fastest at about 4% per year
  • 76 million Baby Boomers will retire in the next two decade

Concentration of Consumer Wealth

  • Consumer households’ net worth is $56.4 trillion, up 40% since 2002 but down 18% in 2007
    General Electric and Citigroup insure $36.9 billion and $29.5 billion in credit card debt, exposing themselves to large risk as delinquencies rise

Decline in Pension Plans & Retiree Benefits

  • The number of defined benefit plans has declined rapidly to 32,000, down two-thirds since 1985

Social Security & Medicare Challenges

  • The number of consumers collecting Social Security reached 47 million in 2007

Stagnant Savings Rate

  • Consumer households’ disposable personal income has increased over 40% since 2001 to $10.6 trillion
  • The US personal savings rate has been decreasing in recent years, but increased to 2.9% in 2008

Lack of Significant World War II Generation Wealth Transfer

  • Boomer and people in Generation X and Generation Y.
  • Less than one-quarter of all Baby Boomers have received an inheritance
  • The median value of a Baby Boomer’s inheritance is $48,000

Longer Life Expectancies

  • Consumer life expectancies have been increasing, reaching 70 in 1960 and 75 in 1990

The Real Situation: Facts About Consumer Wealth
This section addresses the flow of funds within households and provides the real facts on the state of consumer wealth:

  • Consumer households have over $20 trillion of investable assets, over $60 trillion of total assets, and over $50 trillion of net worth

Investable Assets

  • Consumers households have $23.0 trillion in investable assets, an increase of over 40% since 2002, but a decrease of almost 20% since 2007
  • Consumers households assets held in brokerage accounts is $14.0 trillion, a decrease of almost 30% since its peak in 2007
  • Consumer households have $3.9 trillion in bonds, an increase of almost 50% since 2002
  • Mutual funds & unit investment trusts assets under management total $12.7 trillion
  • Consumer households have $4.7 trillion in IRA accounts, up 800% since 1990 and 15% since 2006

Financial Assets

  • There are 8.9 million consumer households with $1.0 million or more in financial assets, up 32% since 2003
  • Consumers have $10.3 trillion in retirement plan assets, an increase of 25% since 2002 but a decrease of 20% since 2007
  • Consumer households have $1.6 trillion in annuities, an increase of 60% since 2001
  • Consumer households have over $40 trillion in financial assets, an increase of 70% since 2002, but a decrease of almost 20% since 2007

Household Assets

  • Consumer households have $25 trillion in personal assets, an increase of almost 40% since 2002
  • Consumers households have $7.9 trillion in real estate equity, a decrease of 20% since 2007

Household Liabilities

  • Consumers have $14.2 trillion of household liabilities, an increase of over 60% since 2002, but down slightly since a peak of $14.3 trillion in 2007
  • The average credit card balance is $8,000, up from $3,000 in 1990

Household Net Worth

  • Consumer households have over $50 trillion in net worth, an increase of almost 33% since 2002, but decreasing almost 20% since its peak in 2007

Future Predictions
This chapter outlines the future predictions of consumer wealth:

Consumer & Consumer Households Growth

  • The number of consumers is expected to grow to over 400 million by 2043, up 100 million since 2007

Continued Low Consumer Savings Rate

  • The consumer savings rate will likely continue to be near 0.1% until 2012

Baby Boomers Liquidations

  • Consumer household investable assets will increase to over $30 trillion by 2012 as baby boomers liquefy their retirement, personal, and illiquid assets as they retire
  • Consumer household assets will increase to almost $80 trillion by 2012
  • Consumer household liabilities will increase to over $17 trillion by 2012 as Generation X consumers continue to take out debt to purchase personal and illiquid assets
  • Consumer household net worth will increase over 30% to $63 trillion by 2012
  • The IRA rollover market will increase from $314 to $393 billion in assets under management by 2013, after taking a dip in 2009
  • Consumer household IRA assets will grow steadily to $6.3 trillion by 2013
  • Baby Boomers’ homes are worth $27.5 trillion, up 5% in 2007
  • The average Baby Boomers’ median home equity stake is $100,000
  • The sale of residential real estate frees up $1.4 trillion in consumer household assets and is expected to increase through 2012 as Baby Boomers sell their homes in larger numbers

Substantial Immigrant Impacts

  • The number of consumers will include 46.4 million immigrants by 2013, up 33% since 2006
  • Mexico will continue to be the greatest contributor of consumer immigrants through 2013
  • Taxes paid by illegal immigrants will close about 15% of Social Security’s long-term deficit

To better understand the developments for Consumer Wealth, executives can purchase Tiburon's Consumer Wealth, Liquidation, & the Retirement Income Challenge: The Impact of the Credit Crisis & the Decline in Home Equity research report where the key findings highlighted above are covered in greater detail. Please contact Sarah Sage at SSage@TiburonAdvisors.Com or 415-789-2540.