The Affluentialist

In previous blog installments I’ve noted how the financial services industry, particularly the investment advisor, is capitalizing on the worldwide trend towards mass affluence. I also find it useful to keep an eye on other kinds of businesses that have come to the same conclusion as advisors have worldwide; specifically, that we are in the midst of a “wealth boom.” A profound experiment in this arena seems to have escaped my attention until recently.

Plum TV, which has been broadcasting in some markets since 2004, is a new television network available only in tony resort areas such as Aspen, the Hamptons, and Nantucket. Why is this important? Two reasons.

First, conventional wisdom has it that mass media, such as television, is not the appropriate vehicle to target affluence. After all, what self-respecting high-net-worth individual is going to take any kind of advice—lifestyle, financial or otherwise—from the boob tube? If there’s ever been a medium that was considered “high-end,” it is the magazine industry (titles such as Town and Country, Departures, Fortune, and Forbes are a few such examples).

But Plum TV circumvents the conventional wisdom by adding a twist: if you can’t get the affluent to watch mass media, bring mass media to the affluent by broadcasting in and about the towns and regions where they come together to party, hobnob, and let their hair down.

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Floyd Norris, a business columnist for The New York Times, recently got into a friendly disagreement with Steve Leuthold of Minneapolis. Leuthold, founder of the Leuthold Group, an “independent, quantitative and contrarian institutional research firm” was describing swank nightclub life in New York, with its $1,600 bottles of champagne and an average table liquor bill of $3,500. Lamenting the modern state of the world of wealth, he found it “reprehensible.”

Norris, a thoughtful writer with a firm grasp of the ironic, suggested that the wealthy were merely spending the money they’ve earned and—as income tax rates have dropped over the years for top wage earners—kept. Therefore, an overpriced bottle of Cristal was simply a new form of self-imposed taxation, leading to a redistribution of wealth for the waiters and busboys, not to mention the nightclub impresarios who labor mightily to create a home for such profligacy.

Whether or not the private sector is better at redistributing wealth than the government, I will leave to others to comment on. But the economy that has sprung up around wealth over the past ten years has a more important role to play than just overpriced booze.

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Parental income of college freshmen in 2005 was 60% above the national average, according to a study by UCLA’s Cooperative Institutional Research Program released on April 2, 2007. The longitudinal study has surveyed incoming college freshmen since 1966. In 1975, the income of families of college freshmen was 46% above the national average.

Some are concerned that this is further evidence of the growing gap between the “haves” and the “have-nots” in America. To be sure, recent evidence points to the fact that the children of college-educated parents are more likely to go to college than the children of non-college-educated parents. Further, there’s overwhelming evidence that having a college education leads to higher incomes. This is a predictable cycle and probably the intended outcome of higher education to begin with—more education leads to higher incomes and better educated parents both prioritize education and are able to provide the funds to support that priority for their children.

The best colleges in the nation could easily fill their classes with these better educated, more affluent high school students across America and there’d still be plenty of superstar students left over. However, education policy makers continue to push for economic diversity on campus, leading to even tighter standards for top students from top school districts.
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I came across a statistic in an old press release from August 2002 (word of caution: the Internet never forgets) from the Consumer Federation of America (www.consumerfed.org) which noted that more than 5 billion solicitations for new credit cards were sent to Americans in a 12-month period spanning 2001 to 2002. That’s more than 50 solicitations per household.

With all of that brain power, money and creativity being leveraged just to get people to say “yes” to a new credit card, I did a little digging to find out what kinds of offers are being made to affluent Americans these days. Here are a few that caught my eye.
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