Most wealthy respondents came from middle-class or poor families.

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.

One in five individuals surveyed were fine art collectors, including one in three ultra-high-net-worth art collectors who said they used art as an alternative asset class and a core part of their wealth structuring and philanthropic giving strategies.

Eighty-one percent of wealthy respondents said investing to reach long-term goals was more important than funding near-term needs.Some two-thirds of respondents considered credit as a means to strategically build their wealth. Eighty percent said they knew how and when to use credit as financial advantage.

Millennials in the survey stood out as highly optimistic, opportunistic and knowledgeable investors, according to U.S. Trust. They came across as entrepreneurial and confident in their ability to improve their own circumstances and make the world a better place for themselves and others.

Contributing to Society

Some three-quarters of wealthy individuals in the study expressed more confidence in the private sector’s than in the government’s ability to solve social and environmental issues. Sixty percent maintained that private money invested in public works and social programs could produce superior outcomes.

U.S. Trust found that the use of impact investments grew by double digits over the past year among high-net-worth millennials and women. Moreover, 27% of ultra-high-net-worth individuals now used social and environmental impact in their investing strategies, up from 9% in 2015.

Recent research by the Global Impact Investing Network found that investors planned to increase capital committed to impact investments this year. U.S. Trust’s survey found that nearly three-quarters of wealthy individuals made financial contributions to nonprofits and causes, and considered philanthropic giving the best way they make the greatest contribution. Another 61% actively volunteered their time, skills and services to nonprofit organizations, and 16% worked for a nonprofit group.

Why did wealthy individuals in the study consider making a contribution is so important? For these reasons:

  • To support their values and interests
  • Belief that the wealthy have a moral obligation to share their good fortune with less fortunate people
  • A strong desire and sense of potential to improve the world
  • A family history of giving back
  • A sense of gratitude for the support they were given when they had less and needed the help

National Policy Perspective

Nearly nine in 10 survey respondents said businesses and individuals were most effective at creating better economic opportunities and a higher standard of living for more people.

Survey respondents said the most effective ways to stimulate the economy were comprehensive tax reform, investments in infrastructure, increasing the rate of business startups and investments in new innovation and research.

A mere 10% believed that the government was most effective at creating economic opportunities.

Two-thirds of wealthy respondents said economic equality in the country would be worse or no better if left entirely to the government to address, no matter who wins the presidential election.

Although 70% expressed confidence in the growth of the national economy, more felt stronger about their own local economies, where they could more directly make a difference as business owners and through local leadership, involvement and philanthropy.

— Check out Wealthy Women vs. Wealthy Men: 4 Key Differences in How They Invest on ThinkAdvisor.