A healthy work ethic is necessary to becoming wealthy, but an ability to change and adapt is key to staying wealthy, according to a recent survey by wealth management firm SEI.
An overwhelming majority (80%) of wealthy families say hard work was either the most important quality or a very important quality in their achieving financial success. SEI's report was based on a survey of 100 families with more than $20 million in assets.
An even larger percentage (95%) agreed that innovation-an ability to adapt to changing conditions and reinvent business or financial strategies-is important to staying wealthy from one generation to the next.
The results clearly suggest that innovation is important to sustaining wealth over the long-term, SEI said, but survey respondents were divided on where they expect innovation to come from.
Professional advisors were credited with being the most likely source of innovation by 41%, while 37% say innovation will come from those in business. Thirty-six percent expect innovation to come from younger family members.
Despite the expectation of innovation from professional advisors, the survey shows that only 2% of respondents view wealth management as the most innovative industry. Thirty-four percent say the wealth management industry is not very innovative.
"Wealthy families are craving new ways of communicating and collaborating with their advisors and new strategies for building and sustaining wealth," said Michael Farrell, managing director for SEI private wealth management. "After everything that has gone on in recent years, they understand that sometimes it takes a different approach to be successful."
The most innovation has been in investment products, according to 11% of respondents. However, investment advice was named as the area of wealth management that has seen the least innovation by 14% of respondents, followed by reporting (12%) and education and family communications (11%).
At the same time, the impact of innovation on wealth management is seen as very or mainly positive by 86% of those surveyed. Innovation provides better communication and more empowerment, they say.
Because of the lack of confidence in wealth management to be innovative, SEI pointed out some innovative practices being adopted by the industry.
Advice is being tailored to individuals and individual situations rather than being based on just a simple number calculation, and investments are being designed to meet specific lifestyle, retirement and charitable giving objectives, SEI said. Also, reporting is becoming all-inclusive, including all investments, progress toward goals and any overlap that might exist between portfolios managed by different investment managers, SEI said.
-Karen DeMasters