Wealth advisors will find a valuable new twist in U.S. Trust’s annual survey of high net-worth Americans, released Monday.
For the first time since the survey’s inception in 1993, the 2012 Insights on Wealth and Worth explored differences and similarities across three generations of American wealth: baby boomers (ages 47 to 66), the generation before them (67 and older) and Generations X and Y (18 to 46).
“Understanding these generational differences is important for the wealth advisors and other professionals who guide these families, since it will enable them to better serve their clients and build stronger relationships with them,” said Keith Banks, president of U.S. Trust, in a statement.
Consider: 76% of Gen Xers and Gen Yers and 73% of the generation older than the baby boomers said it was important to leave a financial inheritance to their children as a way to preserve the continuity of family wealth and to influence their children’s lives after they are gone.
By comparison, 55% of baby boomers thought it was important to leave a financial inheritance to their children. Among those who did not think it was important, 31% said they would rather leave money to charity than to their children.
Moreover, 40% of Gen Xers and Gen Yers had set up a financial plan for their parents’ elder care needs, versus 20% of baby boomers who had done so. And 54% of the younger generation group had paid medical costs for parents and other relatives, compared with 42% of baby boomers.
“Our survey points to a shift in generational behavior and outlook, most likely shaped by personal experience and societal responses to economic realities,” Banks said. “The next generation has not experienced the consistently strong economic growth or investment returns that baby boomers experienced during the longest bull market in history.”
The survey includes many other insights into generational similarities and differences. Gen Xers and Gen Yers were aligned with the generation before the baby boom in their focus on the needs of the family and the continuity of family wealth.
The survey found the youngest generation pragmatic, proactive and disciplined in their approach to investing and wealth management, surpassing baby boomers in planning for wealth for themselves and their families.
Eighty-five percent of survey respondents had talked with their spouse about long-term care plans, but 56% had never communicated their plans with their children, and 43% had never talked with parents and older relatives about what that generation’s plans and expectations were.
Thirty-three percent of Gen Xers and Gen Yers, compared with only 6% of baby boomers, had bought long-term care insurance for their parents.
Thirty-eight percent of those aged 18 to 46 and 30% of baby boomers were personally financing the cost of long-term care for aging or infirm parents or relatives.
Only 37% of wealthy parents had fully disclosed their family’s level of wealth to their children, and 51% had disclosed only a little. Respondents over the age of 67 who had not fully disclosed their wealth said the primary reason was that they had been taught never to discuss wealth with anyone.
Baby boomers and the younger generation were aligned in being more comfortable talking about wealth. However, most either had not gotten around to it or were concerned that it would negatively affect their children’s work ethic.
Estate planning and intergenerational wealth transfer
Although most respondents said they had a basic estate plan, including a will, a healthcare proxy/living will and a power of attorney, only 51% had a revocable trust and only 22% had an irrevocable trust. The youngest generation, in particular, underutilized trusts.