June 1, 2015
Wealthy consumers are concerned about leaving a legacy for their children; image courtesy of Ralph Lauren
High-net-worth individuals aspire to fulfilling lives independent of their wealth, desiring to make a difference and impact on their communities and the world through talent and work, according to a new report by Bank of America’s U.S. Trust.
Seventy-five percent of wealthy individuals in the U.S. believe their goals would not change if their assets were no longer available, but three quarters say that their money does aid their ability to accomplish their life purpose. Looking beyond finances at the issues and priorities that move affluent consumers can help advisors as they direct them in their planning.
"A life well-lived shouldn’t be viewed through a rearview mirror with the final assessment of accomplishment or regret at the end of the journey. It can and should be carefully plotted and planned for," said Keith Banks, president of U.S. Trust, New York.
For the 2015 “U.S. Trust Insights on Wealth” survey, 640 individuals nationwide with at least $3 million in investable assets filled out an online questionnaire in January. Fifty-seven percent of respondents were male.
Check list
Respondents across generations listed health, financial security and family as top items necessary as a foundation to build a fulfilling life upon.
Younger millennials were more apt to rank meaningful work and financial security as high priorities, while the older respondents were more likely to prioritize health and family. In general, 98 percent agree that health is the most important personal asset.
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In general, optimism about the stock market is up, with 45 percent of respondents viewing it positively, compared with 40 percent in 2014. However, the amount that would take a large risk for a potentially greater return went down from the year-ago period.
Respondents as a whole on average indicated they felt they were 79 percent of the way toward their life goals. Not surprisingly, older consumers feel closer to where they want to be, with those aged 70 and up saying they are 89 percent there.
Even with this progress, about eight in 10 said they feel there is at least one aspect of their lives, most commonly health, giving back or family, they could be putting more work and attention towards.
Within wealthy families, traditional gender roles are shifting, particularly among millennials. While men in general are the primary breadwinners in six of 10 ultra-high-net-worth households, women are the primary or equal earners in more than half of millennial relationships.
Affluent millennial couples are more likely to collaborate on financial decisions; image courtesy of Michael Kors
Affluents prioritize leaving a legacy, with over 60 percent of those surveyed saying it is important to leave an inheritance for their children. However, this next generation might not be ready for the assets bequeathed to them.
Only 16 percent of parents anticipate their children reaching the same level of financial success as them, and just 20 percent feel strongly that their children are equipped to manage their inheritance.
Perhaps because of this unease, only about one third of parents have fully disclosed their level of wealth to their children. Respondents site concerns about the implications for work ethic and privacy, as well as a lack of maturity in their children. Many have also been taught that you do not discuss wealth.
According to Wealth-X, 75 percent of the ultra-high net worth population is over the age of 50, and over the next three decades, $16 trillion is expected to be passed down to younger generations. When wealth moves to new generations, the inheritors tend to do active things with the money, such as invest in real estate or sell inherited properties (see story).
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As baby boomers age and millennials mature into established consumers, luxury brands will have to retool many of their marketing strategies to account for the generational shift, according to a new report by Unity Marketing.
“<ahref="http://www.unitymarketingonline.com/catalog/product_detail.php/pid=202~subid=228/index.html">Millennials on Road to Affluence: Mapping a Path to the Next Luxury Generation” says that in approximately 10 years, the next consumer spending boom is scheduled due to the influx of millennial consumers who have traveled on the road to affluence. The consumers, who will be between the ages of 34-54 years old in 2015 to 2034, will replace baby boomers as the prime target for marketers working at both the high-end and low-end of the market (see story).
Giving back
Seventy-eight percent of wealthy consumers give to charity, and 66 percent clock volunteer time. Top reasons for philanthropy include wanting to help a cause dear to them, wishing to set a good example for their children and a desire to make the world a better place.
Forty percent of donations from ultra-high-net-worth individuals in the United States goes toward educational causes, according to a report by Wealth-X and Arton Capital.
The report notes that UHNW individuals are focusing on philanthropic initiatives that present long-term solutions to deep-seated problems, such as programs that promote entrepreneurial pursuits. Philanthropists also prefer to have measurement systems in place that can track and assess the cumulative efficacy of donations (see story).
"The wealthy are driven by a sense of purpose and desire to succeed, but what makes life fulfilling is not money—it’s what they do with it," Mr. Banks said. "As wealth managers, we have the opportunity to not only help our clients grow their wealth, but also to help them plan accordingly."
Final Take
Sarah Jones, staff reporter on Luxury Daily, New York
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