The Generational Divide
How are wealthy families managing their wealth? According to a recent study from U.S. Trust, it depends on how old they are.
Illustration by Robert Neubecker
Baby Boomers— the wealthiest generation in American history— are set to transfer $30 trillion to their children and grandchildren in coming years. But are they— and their heirs— prepared?
That’s one of many questions illuminated by the 2017 U.S. Trust Insights on Wealth and Worth® survey,** one of the most in-depth studies exploring the attitudes, behaviors, goals and needs of wealthy families in the United States. U.S. Trust has conducted the survey for more than 20 years, choosing this year to focus on generational parallels and divides.
The various generations examined share many values, but there are also differences that can lead to conflict and tension, the survey finds. For example, some parents and adult children question the ability of each other to manage family money, an issue that may arise from different preferences they have when it comes to both investing and supporting causes.
The 2017 U.S. Trust Insights on Wealth and Worth® survey zeroes in on attitudes and behaviors in a number of additional areas besides investing, including family dynamics, art collecting, work and business ownership. You can find detailed results and summaries on these topics at ustrust.com/survey.
A Lack Of Confidence
Nearly two-thirds of wealthy individuals consider it important to leave a financial inheritance to the next generation, but more than half of parents aren’t entirely confident that their children will serve as good stewards, and an even larger proportion of adult children aren’t very confident that their parents will do so. Only four in 10 overall are very confident that their children will use the money they receive responsibly, and only two in 10 think that their grandchildren will do so.
A Different Approach to Asset Allocation
We found that older investors rely primarily on stocks, bonds and cash. Millennials, however, allocate much less to stocks and bonds, and a lot more to cash, primarily for opportunistic acquisitions.
Similarly, seven in 10 millennials are more focused on generating income than on long-term capital appreciation, compared with four in 10 baby boomers, possibly a reflection of interest in funding a business start-up, buying a house or paying down debt.
A Trend Towards Tangible Assets
Looking for growth, income and positive impact, the younger generation is also passing up traditional investments in favor of alternative strategies, including private equity and tangible assets such as investment property, farmland, timber, and oil and gas properties.
Giving and Investing with Impact
Millennials also are driving growth and interest in impact investments, in which a company’s impact on society and the environment is an important objective.
IMPORTANT INFORMATION
Investing involves risk. There is always the potential of losing money when you invest in securities. The information and views contained in this publication are for informational purposes only and do not provide investment advice or take into account your particular investment objectives, financial situations or needs and are not intended as a recommendation, offer or solicitation for the purchase or sale of any security, financial instrument or strategy. Neither U.S. Trust, Bank of America Corporation nor any of its affiliates are responsible for this content, and before acting on any information in this material, you should consider whether it is suitable for your particular circumstances, liquidity needs, time horizon and risk tolerance and, if necessary, seek professional advice. Any opinions expressed herein are given in good faith, are subject to change without notice and are only correct as of the stated date of their issue. Projections made may not come to pass due to market conditions and fluctuations. Some of the featured participants are not employees of U.S. Trust. The opinions and conclusions expressed are not necessarily those of U.S. Trust or its personnel. Any of their discussions concerning investments should not be considered a solicitation or recommendation by U.S. Trust and may not be profitable.
Past performance is no guarantee of future results. Asset allocation, diversification and rebalancing do not ensure a profit or protect against loss in declining markets.
Any information presented about tax considerations affecting client financial transactions or arrangements is not intended as tax advice and should not be relied upon for the purpose of avoiding any tax penalties. Neither U.S. Trust and its representatives nor its advisors provide tax, accounting or legal advice. Clients should review any planned financial transactions or arrangements that may have tax, accounting or legal implications with their personal professional advisors.
Always consult with your independent attorney, tax advisor, investment manager and insurance agent for final recommendations and before changing or implementing any financial, tax or estate planning strategy.
OTHER IMPORTANT INFORMATION
** The 2017 U.S. Trust Insights on Wealth and Worth® survey is based on a nationwide survey of 808 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 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 January and February of 2017. 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% confidence level.
