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Implications For Advisors On How The Wealthy Define A Life “Well-Lived” - Study

Eliane Chavagnon Editor - Family Wealth Report May 28, 2015

Implications For Advisors On How The Wealthy Define A Life “Well-Lived” - Study

US Trust has today unveiled the findings of its 2015 Insights on Wealth and Worth report, which covers the crucial areas of health, family and legacy, financial security and building wealth, and the role of planning and advice.

Wealthy individuals are worried about the effect of money on their children’s values and behavior, are strategically adding non-traditional assets to their investment portfolios, and believe that investing in their health is as important as investing to build wealth. These are among the top findings of a study released by US Trust, which uncovers how the wealthy define a life “well-lived,” and the implications of this on their financial planning needs.

The 2015 Insights on Wealth and Worth report represents the views of 640 high net worth individuals with at least $3 million in investable assets.

Somewhat unsurprisingly, health emerged as the number one element required for “a life well-lived,” US Trust said. Respondents almost unanimously agreed (98 per cent) that the most valuable asset they have is their health, and that investing in health is as important as investing to build wealth. But while they are proactively investing in activities to maintain their health and wellness, many are not planning for the possibility of illness and how it might affect their income, assets or life expectations, it emerged. Even more worryingly, one in three (28 per cent) overall and 53 per cent of Millennials said their wealth “comes at the expense of their health.”

Merrill Lynch previously told Family Wealth Report that there exists a major opportunity for financial advisors to serve as a resource on healthcare issues in retirement - from providing resources and information to facilitating discussions between spouses and family members on topics such as how to pay for long-term care. But this could extend to other generations, like Millennials, it seems. Recent insights point to a stronger shift towards family wealth planning involving all family members, with today’s “modern family” having more financial inter-dependencies, from supporting adult children for longer periods of time to taking care of an aging parent.


US Trust found that nearly two-thirds of wealthy parents have disclosed little or nothing about family wealth to their children - and yet just one in five agrees strongly that their children will be prepared to handle the wealth they receive. According to research by Merrill Lynch’s Private Banking and Investment Group earlier this month, the “great transfer of inter-generational wealth” now underway is causing concern among some wealthy families that it could do more harm than good for the next generation. The findings once again highlight the role advisors can play in helping families understand the importance of discussing these crucial life topics - and, significantly, how to approach doing so.

Meanwhile, it emerged that women and men are increasingly sharing decision-making and contributions to family wealth and financial security with each successive generation. Among high net worth Millennial households, half of women contribute an equal share of household income or more income than their partners, and a quarter of men have assumed primary responsibility for child care, according to the survey. Indeed, “the days when most financial decisions in a household were made unilaterally are clearly over, and financial advisors recognize this fact,” said Shelley O’Connor, head of field management at Morgan Stanley Wealth Management, last September.


While most of those surveyed by US Trust seek advice on one technical aspect of planning, such as portfolio performance, tax planning and estate planning, only around a third are talking to an advisor about strategies around the goals they consider to be fundamentally more important, including identifying family needs and goals (36 per cent) and planning for increased longevity (34 per cent). Fewer still are talking about the strategic use of credit (21 per cent), strategic philanthropy (18 per cent) and investing for social impact (11 per cent), the firm said.

In other findings, over half (55 per cent) of those polled said they prioritize growth over protection of assets, although 64 per cent aren’t willing to seek higher returns if it means higher risk. They are also more aware this year of the tax implications of their investment decisions, US Trust said. Echoing this, six in ten have over 10 per cent of their portfolios in cash positions, including 22 per cent with more than 25 per cent. Four in ten either have moved or plan to move more of their investments into cash in anticipation of rising interest rates. Although men and women are focused equally on growing wealth, it transpired that women are more conservative, with 25 per cent of their portfolios in cash positions. Women also are less likely than men to describe themselves as opportunistic investors and strategic users of credit.

Most of the wealthy, and particularly younger investors, either currently use or are interested in adding non-traditional assets to their investment portfolios, including private equity and venture funds (48 per cent). Seven in ten own or are interested in owning tangible investments such as land, real estate, oil and gas properties and timber - primarily to diversify the portfolios and source of risk and income. However, the study identified a lack of understanding as well as a perceived risk, which is holding back one in three from making these types of investments.

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