Engagement in financial planning drives happiness, Wells Fargo’s new Positive Financial Indicator (PFI) shows
Sixty-two percent of American millennials describe themselves as very
“happy” and 65 percent say their life is “meaningful,” according to a
new study published today by Wells Fargo & Company. Although millennials
are happy, 69 percent say they want to get over their “anxiety” about
money, and only a third say they are “satisfied” with their financial
life. In the face of financial pressures, the study’s Positive Financial
Indicator (PFI) shows that millennials are happier when they take
specific action with their money and are engaged in financial planning.
These findings are part a comprehensive study to gauge the nature of
millennial happiness, financial knowledge, and millennial attitudes
about career and relationships. Conducted by Harris Poll June 16-29,
2017, on behalf of Wells Fargo, the results of the 2017
Wells Fargo Millennial Study are based on an online survey of 1,771
millennials (ages 20-36), 26 percent of whom are “affluent,” have
$100,000 or more in investable assets (earning a median personal income
of $88,000) and 74 percent of whom are non-affluent with less than
$100,000 in investable assets (earning a median personal income of
$43,000).
The study found that the millennial generation of more than 75 million
Americans does not directly connect happiness to the pursuit of money.
In fact, 88 percent say they see success as more about being “happy” and
less about “material prosperity.” A quarter of millennials say, “I don’t
care about money.”
The study also found that across all millennials, men rate themselves
happier than do women (68 percent and 58 percent respectively) on a
seven-point scale.
“In this research, millennials have told us that love and family are the
keys to happiness,” said Kristi Mitchem, CEO of Wells Fargo Asset
Management. “However, the study also uncovered another driver of
happiness for millennials, and it revolves around action and engagement
with their financial lives. The more active this generation is with
their finances, the happier they are — and this was proven out by the
group of millennials who affirm all five statements in what we are
calling the ‘Positive Financial Indicator.’ What’s interesting about
this is it’s not clear that millennials recognize how being
proactive with finances leads to happiness. We have an opportunity to
explain that with this study.”
Wells Fargo’s Positive Financial Indicator (PFI) – A Driver of
Happiness
In the Wells Fargo study, a group of five specific statements (listed
below) were highly correlated, and when looked at in aggregate, is also
a driver of happiness. Called the Positive Financial Indicator (PFI),
the five statements identify various aspects of financial engagement
that range from saving for retirement to taking an active role in
setting and achieving financial goals. Out of the entire population, the
36 percent of millennials who affirm all five aspects of engagement in
the PFI are happier than those who do not. (Note: Warren Cormier
of Boston Research Technologies conducted a multivariate analysis of the
data from the survey and found PFI as a driver of happiness).
Other attributes of the 36 percent who affirm all five statements are as
follows:
- 55 percent are men and 45 percent are women
- Men and women earn the same median personal income of $63,000
- 33 percent of the group earn less than $50,000
- 31 percent of the group fall between the ages of 20 and 27 and 69
percent fall between ages of 28 and 36
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(The table below indicates how many millennials are engaging in
these activities individually)
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The PFI Statements:
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All
Millennials
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Women
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Men
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I have enough money to be able to save for future needs
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58%
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51%
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68%
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I am saving enough for retirement
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58%
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50%
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68%
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I feel in control of my financial life
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68%
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62%
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78%
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I take an active role in setting and achieving goals for my
financial life
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83%
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81%
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87%
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I am able to pay for my monthly expenses
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85%
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84%
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87%
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Top 2-Box Happiness
Millennials who rate themselves 6 to 7 on a 7-point agreement scale
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All millennials
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Total
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Women
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Men
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“In general I consider myself happy”
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62%
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58%
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68%
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Millennials who affirm all 5 aspects of PFI
“In general I consider myself happy”
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79%
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74%
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83%
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Financial Pressures on Millennials
Millennials in the study were asked to rate areas of satisfaction in
their lives. The fewest were satisfied with their “financial life”
(among eight categories) with only 32 percent of millennials saying they
are satisfied, rating it a 6 or 7 on a 7-point scale. The highest rated
area is “family relationships” with 56 percent saying this gives them
satisfaction.
Millennials face clear financial pressures:
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All
Millennials
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Affluent
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Non-
Affluent
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All
Women
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All
Men
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I have a significant amount of debt
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46%
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35%
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50%
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47%
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45%
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I can’t afford to pay for my healthcare
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43%
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35%
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46%
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44%
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42%
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I rely regularly on others for support (family, spouse, friends)
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42%
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44%
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40%
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42%
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43%
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“Millennials are facing significant debt and say their financial life is
generally not satisfying. Money is probably the area they don’t want
to grapple with. Yet if we can change this mindset and expand the
population of millennials who engage with their money, they will reap
the rewards of greater happiness — and at the same time, put themselves
on better financial footing. Taking a more proactive stance with money
is not necessarily dependent on having more money. Millennials
should start to engage as soon as they start earning money and employers
and financial service firms can help push this effort forward,” said
Mitchem.
Millennials and the Stock Market
The study found millennials have mixed feelings about the stock market.
Forty-one percent say they have “reduced investments” in the stock
market because of the effects of the Great Recession.
Invested in the stock market?
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17 percent of millennials are not currently invested in the market but
“plan to in the future.”
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20 percent of millennials are not currently invested in the market and
“never plan to be.”
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53 percent of millennials say they will “never be comfortable
investing in the market.”
While some millennials do have concerns about investing in the stock
market, investors who were invested in the U.S. stock market in March of
2009 would have realized a cumulative gain (including dividends) of
190.7 percent on their investment at the close of second quarter 2017, a
period of more than eight years. For illustrative purposes, if a
24-year-old started to invest $600 a year ($50 a month) in March of 2009
in a total U.S. equity market index fund, he/she would have $8901 at the
end of second quarter 2017. (Source: Wells Fargo Investment
Institute)
Effect of PFI on Investing in the Stock Market
Men and women who responded positively to all five statements in the PFI
were more likely to be invested in the stock market. Ninety percent of
the men in the PFI group and 78 percent of women are invested in the
market; this compares to 60 percent of men and 46 percent of women who
do not affirm all five statements in the PFI.
In addition, millennials who respond positively to all five statements
in the PFI are more bullish on the market, with 77 percent of men and 70
percent of women saying “despite it all, the stock market is the best
place to invest my money.” This compares to 49 percent of men and 32
percent of women who do not affirm the PFI.
“The percentage of total millennials who are not investing in the market
today is large. It’s important that we address this straight on by
showing the value of saving and investing for the long term. However, we
see the group that is taking action with their money — our PFI group — is
more likely to be invested in the market and to say it is the ‘best
place’ to invest. But even with this group, women trail men in terms of
their overall participation in the market. More millennials — and
particularly women — should be in the market with a long-term investing
strategy in place,” said Mitchem.
Who is the Financial Decision-maker?
In addition to examining what women and men are doing to manage their
finances and investments, the study looked at how women and men see
themselves in terms of whether they are a primary or a joint
decision-maker for investments and long-term decisions such as
retirement planning. In contrast to the general population of
millennials, women who affirm all five statements in the PFI are more
likely to see themselves as a primary decision-maker.
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All Millennials
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Women
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Men
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Primary decision-maker
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59%
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82%
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Joint decision-maker
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41%
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18%
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Affirm PFI (agree with all 5 questions)
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Primary decision-maker
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76%
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89%
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Joint decision-maker
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24%
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11%
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“When I see this data, it appears that when millennial women set
financial goals and take action with their money — those who affirm the
PFI — they are more likely to see themselves as the primary decision
maker in relation to financial planning. It’s important for women to
take an active role in financial decision-making, and for them to see
themselves in this role, rather than ceding decisions to somebody else,”
said Mitchem.
Working Millennial Men and Women: Earning, Saving and Financial
Confidence
Full-time employed millennials rate a fulfilling career as an
“important” part of their lives (94 percent), and 77 percent say they
are “happy to go to work each day.” However, 82 percent of full-time
employed men say they are “happy” going to work versus 72 percent of
women who are employed full time.
Among all full-time employed millennials, women are earning a median
personal income that trails that of men, and they are saving less on a
monthly basis. However, income differences narrow between men and women
who are affluent and for those who affirm all five statements in the PFI.
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All Millennials (full-time employed)
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Women
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Men
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Median personal income
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$43,000
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$63,000
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Median monthly saving
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$200
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$500
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Affluent Millennials (full-time employed)
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Median personal income
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$88,000
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$88,000
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Median monthly saving
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$675
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$1,000
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Affirm Five Statements of PFI (full time employed)
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Median personal income
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$63,000
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$63,000
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Median Monthly Savings
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$500
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$800
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All millennial
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Affluent
millennial
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Affirm all 5
PFI statements
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Women
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Men
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Women
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Men
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Women
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Men
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“I am fully employed in my preferred career”
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46%
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57%
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63%
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79%
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66%
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72%
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“I am confident my career will provide me with financial security”
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79%
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87%
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85%
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92%
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93%
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98%
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“I know everything I need to know to use my money
successfully”
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43%
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63%
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53%
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74%
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66%
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82%
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“Men are more likely to say they are in their preferred career and are
more confident in their financial security than are women, but things
change and shift positively for women who are taking greater action
around their finances. The data shows they earn and save more, although
not as much as men, and they are also more confident in their career
choice and the financial future they are striving for,” said Mitchem.
The Roots of Happiness and Satisfaction
A goal of the study was to uncover the roots of happiness among
millennials. Sixty-two percent of all millennials describe themselves as
“happy” (6 or 7 on a 7-point scale). The study examined the factors that
drive millennial happiness and feelings of well-being.
Love and relationships are the top drivers of happiness for all
millennials. Respondents were given a choice of five words and asked to
select the word they most associate with happiness and love took the top
spot: “love” (62 percent), “doing good” (23 percent), “money” (10
percent), “work” (4 percent) and “power” (1 percent).
When asked to identify activities they actively engage in to make
themselves happier, family and friends are highest:
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Top-3 actions that millennials actively engage in to make themselves
“happier”:
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Spending time with family
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72%
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Spending time with friends
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61%
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Helping others
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59%
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Regarding satisfaction with select areas in life that bring
satisfaction, the three with the highest levels of satisfaction among
millennials are family relationships (56 percent), intellectual life (52
percent) and recreation and hobbies (50 percent). About a third (32
percent) of millennials are “satisfied” with their financial life and
yet 98 percent of this generation also says feeling “financially secure”
is important to them, along with feeling physically (97 percent) and
mentally (97 percent) healthy.
“It’s great to see the bright outlook of the millennial generation and
that happiness is about the deep bonds of friendship and family, and not
explicitly about money. At the same time, this generation has a chance
to become happier by taking specific actions — such as saving and
planning for the future — that will benefit this group at large and lead
to greater happiness,” said Mitchem.
For more information about this study, visit wellsfargofunds.com/generations.
About the Survey:
On behalf of Wells Fargo, Harris Poll conducted 1,771 online interviews
with American Millennials age 20 to 36 who identify as either the
primary or joint financial decision-maker for their household. The
survey was conducted from June 16-29, 2017. Data were weighted as needed
to represent the population of those meeting the qualification criteria.
Figures for education, age, gender, race, ethnicity, region, household
income, investable assets, marital status, employment status, and number
of adults in the household were weighted where necessary to bring them
in line with their actual proportions in the population.
About Wells Fargo:
Wells Fargo & Company (NYSE: WFC) is a diversified, community-based
financial services company with $1.9 trillion in assets. Wells Fargo’s
vision is to satisfy our customers’ financial needs and help them
succeed financially. Founded in 1852 and headquartered in San Francisco,
Wells Fargo provides banking, insurance, investments, mortgage, and
consumer and commercial finance through more than 8,500 locations,
13,000 ATMs, the internet (wellsfargo.com)
and mobile banking, and has offices in 42 countries and territories to
support customers who conduct business in the global economy. With
approximately 271,000 team members, Wells Fargo serves one in three
households in the United States. Wells Fargo & Company was ranked No. 25
on Fortune’s 2017 rankings of America’s largest corporations. News,
insights and perspectives from Wells Fargo are also available at wellsfargo.com/stories
About Harris Poll:
Over the last 5 decades, Harris Polls have become media staples. With
comprehensive experience and precise technique in public opinion
polling, along with a proven track record of uncovering consumers’
motivations and behaviors, The Harris Poll has gained strong brand
recognition around the world. The Harris Poll offers a diverse portfolio
of proprietary client solutions to transform relevant insights into
actionable foresight for a wide range of industries including health
care, technology, public affairs, energy, telecommunications, financial
services, insurance, media, retail, restaurant, and consumer packaged
goods. For more information, contact us at ConsumerInsightsNAInfo@nielsen.com.
About Boston Research Technologies:
Boston Research Technologies is a strategic marketing research firm
founded in 1985 and specializes in consumer attitudes and behaviors in
the financial arena. The specific focus of BRT's research is in decision
modeling, applying advanced statistical modeling techniques and
behavioral finance concepts to experimental design and analysis.
Wells Fargo Asset Management (WFAM) is a trade name used by the asset
management businesses of Wells Fargo & Company. Wells Fargo Funds
Management, LLC, a wholly owned subsidiary of Wells Fargo & Company,
provides investment advisory and administrative services for Wells Fargo
Funds. Other affiliates of Wells Fargo & Company provide subadvisory and
other services for the funds. The funds are distributed by Wells
Fargo Funds Distributor, LLC, Member FINRA, an affiliate of Wells
Fargo & Company. Neither Wells Fargo Funds Distributor nor Wells Fargo
Funds Management holds fund shareholder accounts or assets. This
material is for general informational and educational purposes only and
is NOT intended to provide investment advice or a recommendation of any
kind—including a recommendation for any specific investment, strategy,
or plan.