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U.S. Trust Survey Points to Gaps in Advisor Service to Wealthy Americans

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U.S. Trust has published a fascinating research report on wealthy Americans, “U.S. Trust Insights on Wealth and Worth,” that indicates a large opportunity for advisors who look holistically at the entirety of a client’s financial life, including estate, wealth transfer to next generations and equipping those subsequent generations to handle the responsibilities of wealth, according to a news release on Tuesday.

The report looks at the ways in which wealth was accumulated, the “cost” of accumulating their wealth, what levels of wealth it takes for participants to feel wealthy, and what is missing from their financial plans.

For instance, 86% of the 457 high-net-worth (HNW) or ultra-high-net-worth (UHNW) participants work with “an advisor of some kind.” Although 98% have discussed “investment performance with their advisor,” and 93% “satisfied or highly satisfied with the investment performance advice they receive,” 27% “have never discussed intergenerational wealth transfer with their advisor.” Moreover, 37% “have never discussed their legacy goals,” and 44% “have never discussed their philanthropic” goals with their advisor, according to the release.  Often, the broader wealth management issues are not being nourished—and there is the opportunity.

Estate Plans

The release noted that many participants had “only basic financial and estate plans that may have sufficed at some point in their lives, but do not reflect the current complexity of their financial lives. Nor do their plans adequately account for unexpected factors that could wipe out a large portion of their assets.”

Although the majority of participants have a will, 95%, and 88% have a basic estate plan, 39% understand that they do not have a “comprehensive” estate plan: 20% do not have “a living will,” and 31% “have not named a durable financial power of attorney,” according to the report’s summary.  

When it comes to trusts, 78% don’t have a “life insurance trust,” 72% do not have an “irrevocable trust,” 48% don’t have a “revocable trust” and 88% do not have a “charitable trust” in place, the release stated

“There is an expectation about the wealthy that they have an implicit, sacred responsibility to pass down their fortune to the next generation, and this understanding has shaped expectations about the coming wave of intergenerational wealth transfer,” Sallie Krawcheck (left), president of Bank of America Global Wealth and Investment Management, stated in the release. “Our research, however, uncovered a

distinct generational mindset that reflects changing views about what retirement means and an evolving sense of what one generation owes the next. Wealth managers need to recognize these distinctions in order to connect meaningfully with both current and future clients.”

Inherited Wealth: A Surprise That Requires Thoughtful Preparation

Children that may not even realize they are to inherit substantial wealth, according to the release, have not received “the guidance and support they need to handle either the emotional aspects or financial responsibilities associated with family wealth.” Just 34% of participants “strongly agree that their children will be able to handle any inheritance they plan to leave them;” 52% of parents have not even communicated the extent of their wealth to the children. Is it any wonder, then, that 45% of those surveyed “do not believe their children will reach a level of financial maturity to handle the family money they will inherit until they are at least 35 years old?”

“We have found a significant dichotomy between clients we talk with, who tell us that intergenerational wealth transfer is the single most important issue on their minds, and a large segment of high-net-worth population we surveyed, who are not taking action and therefore leaving the legacy of their life’s work to chance,” U.S. Trust President Keith Banks stated in the release.

The survey was conducted in January and February with 457 HNW and UHNW investors with $3 million to invest, not including their primary residence.

For those advisors with a holistic practice, there is tremendous opportunity to serve more broadly the wealth management needs of these wealthy individuals. Many of the gaps survey participants indicated with their current advisors are part of the next-generation, wealth transfer, estate and philanthropy components of wealth management. Serving the parents by preparing the younger generations for the responsibilities of wealth, then, would accomplish an additional goal: it would seem that this more holistic approach to wealth management would also engage the younger generations—good for the children, the parents and good for the practice of the wealth manager.  


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