U.S. Trust Survey Finds Modern American Family Dynamics Complicate Wealth Management

New Study Explores Views on Family, Income Equality and Investing Among Wealthy

NEW YORK--()--The 2014 U.S. Trust Insights on Wealth and Worth® survey released today provides a new, in-depth look at the structurally diverse modern American family and finds the dynamics add complexity to money issues already heightened in families with increased wealth.

Based on a nationwide survey of 680 U.S. high net worth individuals with $3 million or more in investable assets, the annual study finds that changing family structures, multi-generational and extended family circumstances, evolving gender roles, and generational views on investing and use of wealth are challenging traditional approaches to wealth planning.

Wealth and the modern American family

U.S. Trust found that family dynamics, including change in family structures and roles among men, women and multiple generations affect both immediate and extended family members.

  • The perspective of mine, yours and ours is the new reality of wealth management. Nearly half (46 percent) of wealthy families in the study have experienced a change or disruption in the family dynamic, following a divorce, loss of a spouse or partner and subsequent remarriage and blending of families.
  • In modern families, women are playing an active role in wealth planning and decision-making as they make significant contributions to family wealth. More than half (52 percent) of women came into their marriage or relationship with financial assets equal to or greater than their spouse or partner, and one-third (33 percent) of women are now the primary income earner or contribute equally to household wealth.

While families grow more complex, so do their challenges. A concerning trend among modern high net worth families is assuming financial responsibilities for family members and encountering family circumstances that they are, in many cases, unprepared to handle.

  • Six in 10 (59 percent) wealthy people have provided substantial financial support to adult members of immediate and/or extended family, including siblings, parents, children, nieces and nephews. Yet few (3 percent) have a financial plan that accounts for this.
  • The top five circumstances that affect overall family financial well-being include: divorce, addictions, untimely death or disability of a primary income earner, medical crises and disagreements over inheritance or distribution of family assets.
  • Despite the prevalence of medical crises, and risk it represents to wealth, only 38 percent of married couples have a financial plan to address the cost of long-term care for both partners. Only one in 10 have a financial plan that accounts for the long-term care needs of aging parents.

“Families today come in all shapes and sizes and the wealthy are not immune to the ripple effect of extenuating circumstances on overall family financial well-being,” said Keith Banks, president of U.S. Trust. “While these circumstances are not unique to the wealthy, they can complicate an already complex wealth planning process. Traditional approaches to wealth management need to evolve and incorporate the diverse perspectives, roles and contemporary needs of the modern family.”

The great intergenerational transfer of wealth

The changing dynamic of the modern American family coincides with the ongoing transfer of more than $15 trillion1 in financial and non-financial high net worth assets over the next two decades. The majority of wealthy people today (78 percent), and particularly baby boomers, achieved financial success through creating it, versus inheriting it, and at least half (52 percent) grew up in middle-class or lower-middle-class households.

Their children and heirs are more likely to grow up wealthy and are the current and future beneficiaries of substantial family wealth. More than half (56 percent) of surveyed millennials (ages 18 through 33) are second- or third-generation wealthy, and nearly half (48 percent) already have received a financial inheritance. However, the vast majority of wealthy parents (96 percent) think children aren’t mature enough to handle family money until they are at least age 25.

Possibly the source of this concern, only four in 10 (38 percent) wealthy parents with adult children over the age of 25 have fully disclosed their financial status to their children, and only 38 percent of wealthy parents strongly agree their children will be well-prepared to handle the inheritance planned for them. Parents of children of all ages appear open to rectifying this disconnect, as the vast majority (92 percent) believe their children would benefit from a discussion with a financial professional.

“We know from our long history of working with wealthy families, and our survey confirms, that effectively transferring wealth and keeping family relationships intact is of utmost importance,” said Chris Heilmann, chief fiduciary executive at U.S. Trust. “Even the more complex issues that modern families face can be managed with careful planning and efforts to build the financial skills and values future heirs need to be good stewards of family wealth.”

Millennials approach to investing and money management

In addition to receiving their wealth under different circumstances, millennials also plan to put it to use in distinctively different ways, shedding new light on the direction and purpose of the substantial amount of family wealth changing hands in the coming years.

  • Two-thirds (66 percent) of millennials say that their investing focus is on meeting long-term goals, and their approach is innovative, individualized and opportunistic.
  • Three-quarters (75 percent) of millennials consider the social and environmental impact of the companies they invest in to be an important part of investment decision-making.
  • Nearly eight in 10 (79 percent) millennials feel strongly that private capital from socially motivated investors can help hold public companies and governments accountable for their actions and results.
  • Eight in 10 (81 percent) millennials either own or are interested in owning tangible assets such as land, real estate and timber, and they are more interested than any other age group in using private equity and hedging strategies.
  • Millennials are most likely to describe themselves as opportunistic investors, and they, more than any other age group, are using credit to make strategic and opportunistic investments including starting or growing a business.

Use of wealth for meaning and impact

In general, the wealthy feel strongly about putting their financial success to work in a way that is meaningful and will create positive social change. They rank “giving back to society” among the most important uses of their wealth, second only to providing for their own families.

Nine in 10 (89 percent) wealthy Americans say they would help foster greater income and opportunity in the country primarily by financially supporting programs that support employment and education opportunities, paying more in taxes, creating jobs, and/or supporting legislation to reduce regulation and taxes on small business and entrepreneurs.

“Most of the wealthy today are self-made and want their legacy to matter,” added Banks. “They want to make a meaningful and positive contribution that will benefit their families, the companies they own, the communities they live in and society overall, but many lack the proper guidance and tools given the complexity of their lives. At U.S. Trust, our work with clients and the robust family services we offer reflect our understanding of how needs and expectations change as circumstances and the family dynamic evolve.”

Opportunistic investing and borrowing

U.S. Trust found that distinct generational perspectives and changing family roles and responsibilities are reflected in the widely varied investment outlook and approaches among the wealthy. Only 40 percent of high net worth investors, especially men, feel bullishly optimistic about the market, while the remainder are more likely to describe themselves as fearful of losing money (12 percent), pessimistic (10 percent), opportunistic in down markets (12 percent), unsure but remaining hopeful (9 percent) and unsure which way the market is headed but following the herd (6 percent). Other findings include:

  • One in four high net worth investors say they missed out on the bull market rally.
  • More than half (53 percent) don’t think they are on track to meet long-term goals with their current asset allocation strategy.
  • Two in 10 still have more than 25 percent of their portfolio in cash positions. High net worth investors who currently have more than 10 percent of their investment portfolio allocated to cash were three times more likely to say they missed the market rally.
  • However, risk tolerance is returning with 42 percent pursuing higher investment returns despite increased risk, compared to 37 percent in 2013 and 30 percent in 2012.

The very wealthy have a reputation for knowing how to use credit strategically to their advantage. The top five ways high net worth investors use credit are: to invest opportunistically, buy real estate, pay taxes, fund education expenses, and start a new business.

Credit accounts for more than 10 percent of the personal balance sheets of half of wealthier households (with more than $10 million in investable assets), while the majority (two-thirds) of $3-million-plus households have less than 10 percent. The survey findings suggest that one reason they aren’t using more credit may be lack of knowledge. Only 35 percent of respondents feel they have a good understanding of how to use credit strategically, and just 31 percent feel they were well prepared in life with the financial skills to strategically use credit.

The 2014 U.S. Trust Insights on Wealth and Worth survey also includes findings on high net worth business owners and senior executives and additional detailed findings about high net worth women executives, trust and estate planning, and additional gender and generational findings.

The complete 2014 U.S. Trust Insights on Wealth and Worth survey findings can be found at www.ustrust.com/survey.

1 Cerulli Associates, “Wealth Transfer: Sizing, Trends & Opportunities”, 2010

Survey Methodology
The 2014 U.S. Trust Insights on Wealth and Worth® survey is based on a nationwide survey of 680 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 2014. 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
U.S. Trust, Bank of America Private Wealth Management is a leading private wealth management organization providing vast resources and customized solutions to help meet clients' wealth structuring, investment management, banking and credit needs. Clients are served by teams of experienced advisors offering a range of financial services, including investment management, financial and succession planning, philanthropic and specialty asset management, family office services, custom credit solutions, financial administration and family trust stewardship.

U.S. Trust is part of the Global Wealth and Investment Management unit of Bank of America, N.A., which is a global leader in wealth management, private banking and retail brokerage. U.S. Trust employs more than 4,000 professionals and maintains 140 offices in 32 states.

As part of Bank of America, U.S. Trust can provide access to a broad range of banking solutions for individuals and businesses, and an extensive retail banking platform.

Bank of America
Bank of America is one of the world's largest financial institutions, serving individual consumers, small businesses, middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services. The company provides unmatched convenience in the United States, serving approximately 49 million consumer and small business relationships with approximately 5,100 retail banking offices and approximately 16,200 ATMs and award-winning online banking with 30 million active users and more than 15 million mobile users. Bank of America is among the world's leading wealth management companies and is a global leader in corporate and investment banking and trading across a broad range of asset classes, serving corporations, governments, institutions and individuals around the world. Bank of America offers industry-leading support to approximately 3 million small business owners through a suite of innovative, easy-to-use online products and services. The company serves clients through operations in more than 40 countries. Bank of America Corporation stock (NYSE: BAC) is listed on the New York Stock Exchange.

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Reporters May Contact:
Julia Ehrenfeld, U.S. Trust, 1.646.855.3267


Reporters May Contact:
Julia Ehrenfeld, U.S. Trust, 1.646.855.3267