Ten Years After...

Ten Years After the Financial Crisis, the Economy Has Recovered but Attitudes Have Not

While fear and mistrust of Wall Street still abound, those who lost in the financial crisis remain the most optimistic and confident in staying the course

NEW YORK, Sept. 11, 2018 /PRNewswire/ — It’s been 10 years since the collapse of Lehman Brothers which triggered a massive financial crisis that reshaped the world we live in. A decade later, corporate profits are at record highs, the economy is logging its best performance in nearly four years and the stock market has more than quadrupled in value. However for millions of consumers the scars are still raw, with 65 percent of respondents saying they have yet to fully recover financially, and the large majority reporting they remain distrustful of Wall Street.

In a new report, “Betterment Consumer Financial Perspectives Report: 10 Years After the Crash,” Betterment, the largest, independent online financial advisor, details the findings from 2,000 U.S. respondents on the effect the financial crisis had not only on their stock market portfolios, but also their trust in Wall Street and their attitudes toward saving and investing.

Key findings of the report include:

People don’t understand what caused the financial crisis, remain in the dark about performance:

  • 79% say they don’t fully understand what happened during or caused the financial crisis
  • Roughly half of people think the S&P 500 has not gone up at all in the past 10 years, and 18% think it’s actually gone down since 2008
  • Despite this lack of understanding, Wall Street’s reputation took a hit: 83% don’t think Wall Street is any more ethical than it was in 2008

The crisis has had a lasting impact on financial behavior

  • The average reported loss was less than $5,000, but the hit may have lasting effects on saving and investing habits
  • More than 1 in 4 people stopped saving for retirement or contributing to their 401(k)
  • 2 in 3 say they invest less today than they did in 2008
  • 29% of respondents said they are making a concerted effort to save more today than they were in 2008

Those who invested and lost are the most likely to feel recovered and optimistic

  • 80% of people investing in 2008 lost money, but feel more recovered than their non-investing counterparts: 41% feel fully recovered
  • Half are investing as much or more than they did 10 years ago, and nearly a quarter consider themselves even more risk tolerant

“The data reinforced a lot of what we already feel and see on Wall Street: people are slow to trust big banks again, and understandably worried this will happen again. But what we find extremely hopeful is the staying power of those who rode the wave and came out on the other side,” said Dan Egan, VP of Behavioral Finance and Investments at Betterment. “People who were investing in 2008 felt the losses, but also witnessed the recovery.They know another dip is inevitable, but know that as long as they don’t get greedy or fearful, the rewards outweigh the costs.”

Excerpts from ‘Betterment Consumer Financial Perspectives Report: 10 Years After the Crash’

It’s been 10 years since the collapse of Lehman Brothers triggered a chain reaction that produced a major recession

In 2008 after decades of steady upward growth in the economy and asset prices, America suddenly faced the worst financial crisis in 70 years. Starting in October of 2007 the S&P 500 dropped 56% over 516 days, bottoming out in March of 2009. It then took 1,011 days, until March 2013 to bounce back to pre-recession levels. In October and November of 2008 the federal government implemented the Troubled Asset Relief Program to reduce the chance of bank failures, and started Quantitative Easing to encourage investment.

Since March 2013, the S&P 500 has grown 80% or 11.5% per year on average. If you include dividends, that increases to 106% or 14.3% per year. In a new report, Betterment examines how the 2008 financial crisis is still relevant to consumers today, affecting everything from their attitudes toward finances and the financial industry to their hopes for a secure financial future. Regardless of age, income and gender, the research finds that the scars of 2008 are still very raw for millions of people today.

Ten years after the crisis, most consumers remain deeply distrustful of Wall Street and are still working to recover financially. But there’s hope in the youth: despite graduating into one of the toughest job markets in decades and seeing the real-time effects of the crisis, as well as being first-time or new voters amid controversial government involvement in bank bailouts, younger generations are the most trusting of and optimistic about Wall Street’s future. While the effects of the financial crisis went far beyond investment account balances, the data reinforces the power of staying the course. Roughly half of survey participants were already investing in 2008, and nearly all of them lost money as a result. Yet, those who saw those effects on their portfolio and still rode out the storm are more than twice as likely to report feeling like they’ve fully recovered, and are investing and saving more than their non-investing counterparts.

The data reinforced a lot of what we already feel and see on Wall Street: people are slow to trust big banks again, and understandably worried this will happen again...

People largely don’t understand what caused the financial crisis; fail to understand where markets are today

The fear surrounding markets is clouding the facts: stock market indices are largely much stronger than they were 10 years ago, but most people have no idea. The pain of the financial crisis is reflected in the inflated housing markets, delayed retirements and anti-Wall Street sentiment among many Americans. But for all the media coverage, books written and political debates dedicated to making sense of the crash, very few people actually understand what happened.

Of respondents 18 and over in 2008, 79% say they don’t fully understand what caused or happened during the financial crisis, and nearly a quarter say they don’t understand at all. Most people blame big banks and mortgage lenders (30%) and political leaders and policies in place in 2008 (21%) for the crash. However, there is divergence depending on income level, with higher earners more likely to blame financial institutions and respondents with lower income more likely to blame the government.

Those making $100,000 or more a year

– 54% blamed big banks and mortgage lenders above all else

– 15% think political leaders are most at fault

Those making $50,000 or less

– 42% blamed big banks and mortgage lenders above all else

– 22% think political leaders are most at fault

Read or download the full report here.

 

 

 

METHODOLOGY
An online survey was conducted with a panel of potential respondents from July 31 to August 6, 2018. A total of 2,000 respondents 18 years and older, living in the United States completed the survey, 1,602 of whom were at least 18 during the financial crisis in 2008.
The sample was provided by Market Cube, a research panel company. Panel respondents were invited to take the survey via an email invitation, and they were incentivized to participate due to the panel’s established reward points program.
ABOUT BETTERMENT
Betterment is the largest independent online financial advisor with more than $15 billion in assets under management. The service is designed to help increase customers’ long-term returns and lower taxes for retirement planning, building wealth, and other financial goals. Betterment takes advanced investment strategies and uses technology to deliver them to more than 380,000 customers across its three business lines: direct-to-consumer, Betterment for Advisors, and Betterment for Business. Learn more.
Investing in securities involves risks, and there is always the potential of losing money when you invest in securities. Determination of largest independent robo-advisor reflects Betterment LLC’s distinction of having highest number of assets under management, based on Betterment’s review of assets self-reported in the SEC’s Form ADV, across Betterment’s survey of independent robo-advisor investing services as of August 20, 2018. As used here, “independent” means that a robo-advisor has no affiliation with the financial products it recommends to its clients. If you also have a 401(k) account through Betterment For Business, that account is subject to a separate fee schedule and is not included in your balance for determining eligibility for the fee tiers or subject to the fee cap mentioned above.