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May 25, 2016 at 09:04 AM
A new study released this week by U.S. Trust creates a portrait of high-net-worth Americans, focusing on their backgrounds, how they built and sustain their wealth and how they use it.
Researchers surveyed 684 individuals with at least $3 million in investable assets (out of more than 2 million in the U.S.), 40% of whom had between $3 million and $4.9 million, 30% between $5 million and $9.9 million, and 30% with $10 million or more. About two-thirds were men and one-third women, ranging in age from 18 to 71 and older.
The wealthy in the study had a number of characteristics in common.
Family Values
Seventy-seven percent grew up in middle- or lower-class circumstances, and 19% grew up poor. However, 45% of millennials surveyed were reared in wealthy families, significantly more than older generations.
Family values and upbringing — focused on academic achievement, financial discipline, work participation, family loyalty and civic duty — advantaged these individuals for life.
Eight in 10 described their parents as firm disciplinarians who also encouraged their individual interests and talents, and some two-thirds said their parents tolerated their mistakes and failures.
Sixty-five percent said their family had a strong tradition of philanthropy and giving back to society.
A vast majority of respondents were married or in a long-term relationship, with most staying married to the same person and thus avoiding potential financial difficulties brought on by divorce.
Investing Strategy
As investors, the high-net-worth respondents tended to be more optimistic than pessimistic about returns over the next 12 months. Although equally uncertain about both stocks and bonds, they were more pessimistic about bond returns than any other asset class.
Nearly 60% said they kept more than 10% of their investment portfolios in cash positions, and 20% reported having more than 25% in cash on hand. Their primary motivation was opportunistic, for example, to be able to invest on a sudden market downturn or rising trend.
Fifty-five percent agreed that tax-conscious investment decisions were better than chasing higher returns, tax implications notwithstanding.
Nearly half of respondents reported investments in tangible assets — farmland, investment real estate or timber properties — that can produce income and grow over time with legacy value. Indeed, investors expressed most optimism about their return on tangible assets, which tend not to be correlated to the broad market and can provide stability through changing market cycles.
