Trust 2013 Insights on Wealth and Worth found that family
health has emerged as the new risk to family wealth. Long-term care and
out-of-pocket healthcare costs, combined with financial support for
extended family, are weighing heavily on families, particularly women
and younger generations, yet are risks to wealth that are not well
reflected in financial planning.
U.S. Trust today published findings of a survey of 711 high net worth
adults in the U.S. with more than $3 million in investable assets, which
Forty-seven percent of all respondents have created a financial plan
to address long-term care needs that they and their spouse or partner
might need, but only 18 percent have a financial plan that accounts
for parents’ long-term care costs.
Only one-quarter (27 percent) of baby boomers and 16 percent of those
who are over age 68 say they ever expected their parents might turn to
them for financial assistance. Yet, one-third of Generation X and
nearly half (46 percent) of Generation Y expect their parents or
in-laws to rely on them for financial assistance at some point in
Sixty-three percent of wealthy people feel responsible for financially
supporting their parents or in-laws if needed, even if it jeopardizes
their own financial security, and 55 percent feel a responsibility to
provide financial assistance for less financially fortunate siblings
if they were to need it. Fifty-six percent of wealthy parents say they
provide financial support to their adult children.
Nearly half (46 percent) of respondents have provided substantial
financial support (not a loan) to adult family members other than
their own spouse or partner. Two-thirds (69 percent) do not have a
financial plan that accounts for the financial needs of any of these
other adult family members.
The largest study of its kind, Insights on Wealth and Worth found that
the wealthy have a heightened sense of financial security and have
shifted their investment priorities from asset protection to asset
growth. Yet their well-documented aversion to risk still prevails. Lower
risk trumps the pursuit of higher returns as a priority in managing
their wealth. Despite this, investment risk is one of three broad areas,
including family wealth and retirement planning, where U.S. Trust found
a disconnect between goals and proactive wealth planning.
“The majority of people we surveyed grew up in middle-class families and
created their own wealth. They don’t see themselves as wealthy, and many
are unaware of risks and circumstances that grow increasingly complex as
wealth accumulates,” said Keith
Banks, president of U.S. Trust. “The wealthy have been disciplined
about protecting their assets from market loss, but may have a false
sense of financial security. They are not adequately planning for family
health concerns or for the retirement that they want. We need to shift
the conversation about wealth management to these important topics and
expand their understanding of risk.”
Key findings from the 2013 U.S. Trust Insights on Wealth and Worth are:
Investing: Cash on the sidelines and confusion about taxes
Eighty-eight percent of people surveyed say they feel financially
secure right now, and 48 percent feel even more financially secure
today than they did five years ago. Those who don’t feel confident
about their future financial security are more likely to be women,
members of Generation X (adults aged 33 to 48) and households on the
highest tier of the high net worth segment, all of whom share a
primary concern about income in retirement.
Six in 10 (60 percent) high net worth investors say asset growth is a
higher priority than asset preservation, a reversal of goals from a
year ago when nearly six in 10 (58 percent) said that asset protection
was more important. Yet, nearly two-thirds (63 percent) still say that
reducing risk and achieving a lower rate of return is more important
than pursuing higher returns by increasing risk.
A little over half (56 percent) of high net worth investors have a
large amount of funds still sitting in cash accounts. Only 12 percent
are content leaving their cash on the sidelines, yet few (16 percent)
have immediate plans to move it. Two in five plan to gradually invest
cash holdings over the next two years, and 35 percent have no plans to
Fifty-seven percent of respondents say that pursuing higher returns
regardless of the tax impact is a higher priority than minimizing
taxes. Only 34 percent feel very well-informed about the impact of
recent tax law changes on the total return of their investment
Only 37 percent of respondents, including 42 percent of men and 30
percent of women, feel very well-informed about how the tax law
changes affect their income. And two in three respondents do not feel
well-informed about strategies available to them to help minimize the
impact of taxes on income, investments or their estate. Nearly seven
in 10 (69 percent) of high net worth investors aren’t changing
investment strategy in order to minimize taxes.
The majority of wealthy investors (86 percent) agree that a long-term
buy-and-hold approach still is the best growth strategy, with 35
percent strongly agreeing with this.
Retirement planning gets an incomplete
Sixty-two percent of high net worth households, including 52 percent
of those still working, are very confident they will have sufficient
income in retirement, in contrast to the rest of the U.S. population.
Six in 10 non-retirees have been calculating their retirement income
by reviewing expected distributions from retirement savings accounts.
Yet a large number have not adequately accounted for the impact of
inflation (47 percent), taxes on their investment income (52 percent),
life expectancy (56 percent), the cost of long-term care (62 percent),
or any financial support that might be needed by their children (80
percent) or parents (82 percent).
Three-quarters of respondents have not adequately factored into their
retirement planning any increase or decrease in real estate values.
Yet 23 percent of retirees and 52 percent of non-retirees (including
39 percent of baby boomers) say primary residential real estate is
important to funding their retirement.
Only one in three high net worth adults under the age of 49 envisions
working beyond age 65. Meanwhile, six in 10 baby boomers, many already
of retirement age, now have plans to work beyond age 65.
Once retired from their current occupation, 11 percent of respondents
say they are likely to continue working full-time in a new endeavor
and 41 percent expect to continue working on a part-time basis. More
than half (54 percent) of the wealthy would like to spend time
All in the family wealth
Insights on Wealth and Worth found
that the transfer of wealth and values is important in high net worth
households, and that attitudes and behaviors about money, work and
charitable giving begin to take shape early in life within the home.
This year’s survey found that generational gaps in attitudes about
leaving an inheritance have narrowed and that work ethic and the
transfer of financial skills and knowledge have the greatest influence
on the next generation.
Only one-quarter of all survey respondents attribute the majority of
their wealth to an inheritance. Those who have inherited wealth are
more likely to want to leave an inheritance themselves. Seventy-seven
percent of people who inherited the majority of their wealth, and 63
percent of those who earned it, consider it an important goal to leave
a financial inheritance to the next generation.
Two in three baby boomers do not expect to receive an inheritance; 57
percent of adults under the age of 32 do expect an inheritance.
Sixty-four percent of baby boomers, compared to 78 percent of adults
younger than age 32 and 72 percent of those over age 68, think it’s
important to leave an inheritance.
Only two in five wealthy parents (42 percent) agree strongly that
their children are/will be well-prepared to handle their inheritance.
Few wealthy parents believe their children will be mature enough to
handle their wealth before the age of 25. Just 39 percent of parents
whose children already are age 25 or older have fully disclosed their
wealth to children, while 53 percent have disclosed just a little and
8 percent have disclosed nothing at all. The two most common reasons
for not disclosing wealth to children are (1) overall aversion to the
topic, having been taught never to discuss wealth with anyone; and (2)
parents’ concern that disclosing information about family wealth will
negatively affect their children’s work ethic.
Eighty-eight percent of parents agreed that their children would
benefit from discussions with a financial professional. One in three
(31 percent) respondents received formal financial training themselves
from a professional advisor. Yet only 16 percent of parents have
provided, or have plans to provide, their children with access to
formal financial skills training.
Two-thirds of wealthy parents say they would rather have their
children grow up to be charitable than to be wealthy.
Eighty-nine percent of wealthy parents believe their children
appreciate the value of a dollar and the privileges of growing up in a
family with good fortune. However, half of parents (51 percent),
particularly those with young children, think their children feel
entitled to a lifestyle that was worked hard for, and 47 percent worry
that, by growing up without knowing what it’s like to go without,
their children may not attain the same level of success. When it comes
to estate planning, U.S. Trust found that, while the basics, such as a
written will, are in place, comprehensive planning is incomplete.
Survey respondents cited the top three goals of estate planning as (1)
ensuring the needs of a spouse are met; (2) minimizing estate taxes;
and (3) minimizing the administrative burden of settling one’s estate.
Despite awareness of the importance of estate planning, Insights on
Wealth and Worth found:
Nearly three-quarters (72 percent) of respondents do not have a
comprehensive estate plan, including 84 percent of those under the age
of 49, and 65 percent age 49 or older.
Approximately one-half (55 percent) have never established a trust of
any kind, primarily for two reasons: procrastination and the mistaken
notion that outlining wishes in one’s will precludes the need for a
Six in 10 respondents have named, or intend to name, their spouse or
partner as executor of their estate. Only 32 percent of people
consider the financial knowledge and skills of the person they name as
their executor. Having sufficient legal and financial knowledge was
cited as the top difficulty in serving as an executor by those who
already have served, particularly by women.
Two-thirds (67 percent) of respondents say they have organized their
personal, financial, medical and legal records and information in one
place, but nearly half (46 percent) have not informed the executor of
their estate about how to access the records. Fifty-five percent of
respondents say they have organized passwords for accessing digital
records or accounts, but 63 percent have not specified their wishes
authorizing access to the passwords or to any online assets.
Investment decision-making in a transforming world
on Wealth and Worth found a desire to use wealth in a way that reflects
personal goals, passions and tangible assets. In addition to leaving too
much cash on the sidelines, the survey also found a limited
understanding of innovative, risk-based approaches to portfolio
construction and insufficient planning to protect some of these
non-financial assets. Among those surveyed:
Sixty-five percent of wealthy households surveyed own investments in
some type of tangible asset, ranging from real estate to oil and gas
properties to farmland, a trend particularly evident among younger
investors. One-third (35 percent) of investors under the age of 32 say
that tangible investments are important to their overall wealth
strategy given the current tax, political and economic environment.
Six in 10 wealthy individuals feel that they can have some influence
on society by how they invest, and 45 percent agree that it’s a way to
express their social, political and environmental values. Nearly half
(46 percent) of respondents feel so strongly about the impact of their
investment decisions that they would be willing to accept a lower
return from investments in companies that have a greater positive
impact. Forty-four percent would be willing to take on higher risk.
One-half (51 percent) of those surveyed, including 65 percent of women
and 67 percent of investors under age 49, think it is important to
consider the impact of investment decisions on society and the
environment. Yet only one in four investors has reviewed their
investment portfolio to evaluate its impact on these concerns.
Six in 10 (59 percent) high net worth individuals dedicate a portion
of their wealth to the collection of valuable assets such as such as
fine art, watches and jewelry, antiques, fine wines and rare coins and
books or classic and high-performance cars. The majority say they
collect primarily for enjoyment and the intrinsic value of the
collection, versus expecting a return, which may explain why so few
have taken steps to protect their collections as they might other
financial assets. Only about half of those with collections have
insurance. Only 19 percent of collectors have discussed or outlined
their wishes for the collection with future heirs.
Additional survey findings from the 2013 U.S. Trust Insights on Wealth
and Worth can be found at www.ustrust.com/survey.
U.S. Trust 2013 Insights on Wealth and Worth is
based on a nationwide survey of 711 high net worth and ultra high net
worth adults with at least $3 million in investable assets, not
including the value of their primary residence. Respondents were equally
divided among those who have between $3 million and $5 million, $5
million and $10 million, and $10 million or more in investable assets.
The survey was conducted online by the independent research firm Phoenix
Marketing International in February and March of 2013. Asset information
was self-reported by the respondent. Verification for respondent
qualification occurred at the panel company, using algorithms in place
to ensure consistency of information provided, and was confirmed with
questions from the survey itself. All data have been tested for
statistical significance at the 95 percent confidence level.
U.S. Trust, Bank of America Private Wealth Management is
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private banking and retail brokerage. U.S. Trust employs more than 4,000
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As part of Bank of America, U.S. Trust can provide access to a broad
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extensive retail banking platform.
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