Bank of America today announced the findings of a new study conducted by Merrill Private Wealth Management, which found that 64 percent of wealth holders have never talked with family members about how or why they intend to pass on their assets. While 48 percent plan to communicate this information eventually, or assume family members already know, 10 percent vow never to divulge details of their estate plan primarily because they consider it personal and no one else’s business. But is that a good decision?
“This research is designed to help families make better decisions and secure the promise of wealth, including the impact it can have within and beyond one’s family and lifetime,” said Andy Sieg, president of Merrill Lynch Wealth Management.
For this study, Merrill asked more than 650 high net worth people across the country how different types of financial decisions are made and communicated within their family. Part of an ongoing series of white papers on wealth sustainability from the Merrill Center for Family WealthTM, findings from this study were published today in a new report, "How do families make effective wealth decisions?" including:
Source: Merrill Center for Family Wealth, Merrill Private Wealth Management. June 2019
“Decisions about family money have the potential to change lives, yet the outcome depends on how well the purpose and reasoning behind those decisions are understood, and too often that is left unsaid,” said Stacy Allred, head of the Merrill Center for Family Wealth. “Misunderstanding can lead to family conflicts, resentment and other unintended consequences including the misuse or loss of family wealth.”
The Merrill Center for Family Wealth specializes in helping families define the purpose of their wealth. This study found that in six in 10 families, there is no formal structure or rigorous process in place to ensure family wealth decisions are made and communicated effectively. When asked how wealth decisions are typically made, the most prevalent response was an autocratic and top-down approach whereby one person makes decisions with little or no input from anyone else. Seventeen percent of families make financial decisions democratically with collective input or representation of all members.
Limited collaboration on family wealth decisions may reflect the high degree of confidence most people have in their own financial decision-making.
“The best form of financial parenting and a big part of improving the outcome of decisions involves putting more care into the decision-making process itself,” added Matthew Wesley, director, Merrill Center for Family Wealth. “Family wealth decisions can be complicated by family dynamics, a long-time horizon and unrecognized biases that call for a deliberate and disciplined approach.”
The study is based on an independent survey of 656 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. The online survey was managed by the independent research firm Phoenix Marketing International and completed in 2018. All data have been tested for statistical significance at the 95 percent confidence level.
Merrill Lynch Wealth Management is a leading provider of comprehensive wealth management and investment services for individuals and businesses globally. With 14,690 financial advisors and $2.4 trillion in client balances as of June 30, 2019, it is among the largest businesses of its kind in the world. Bank of America Corporation, through its subsidiaries, specializes in goals-based wealth management, including planning for retirement, education, legacy, and other life goals through investment, cash and credit management. Within this business, Merrill Private Wealth Management focuses on the unique and personalized needs of wealthy individuals, families and their businesses. These clients are served by approximately 200 highly specialized private wealth advisor teams, along with experts in areas such as investment management, concentrated stock management and intergenerational wealth transfer strategies. Merrill Lynch Wealth Management is part of Bank of America Corporation.
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