High-net-worth families are talking more about their money with those who will inherit it than past generations did, says a study released Wednesday by Wilmington Trust.
The older generation that now holds the wealth tends to share financial information with their children and grandchildren, who will eventually inherit. That same older generaton of HNW people. who now control the family wealth, did not receive much information on family wealth from their parents. Forty-eight percent of the wealth holders share complete financial information with their heirs, while only 33 percent of the wealth holders received similar information from their benefactors, says the report, “Navigating the Wealth Transfer Landscape.”
The number is important because “wealthy families that remain successful over multiple decades not only master their financial strategies, but are also strong in many other ways, such as having open communication, continual education, well-defined values and, perhaps most important, a strong family culture that connects their history with their future,“ the study says.
The study included 57 families with at least $20 million in assets, including 72 percent who have at least $50 million in assets. It was conducted by Wilmington Trust, Campden Wealth, and the Institute for Private Investors.
Thirty percent of the wealth holders who are not sharing information are doing so because they fear demotivating the inheritors, a fear that may be unfounded, says the study. Sixty-three percent of inheritors plan to continue to work in some capacity and most say they will not alter their lifestyle significantly.
The survey also confirms that both wealth holders and inheritors feel a deep sense of obligation to protect the family’s wealth for future generations. Each group believes wealth is not a gift to be squandered, but a vehicle to move the family forward, and help others through philanthropy, the study says.
“It’s natural for leaders of multigenerational families to be protective of the younger generations. They simply want what’s best for their children and grandchildren,” says Tom Rogerson, senior family wealth strategist at Wilmington Trust, a financial services firm based in Wilmington, Del. “Preserving family wealth across generations requires making sure the next generation is ready to receive the money. A strong family culture that promotes education and open communication is vital for success.
“Additionally, successful families work to strike the right balance in empowering their heirs to pursue their life goals, while preparing them for the responsibility of managing the family wealth,” he says.
Reasons for not telling heirs how much they will inherit include the fact that some wealth holders have not made that decision yet; they want to wait until heirs are older, or they fear that heirs may be counting on wealth that may not materialize.
The wealth holders and inheritors share a top fear that friends and acquaintances will discover the extent of their wealth (47 percent), followed by 44 percent who are afraid of becoming a target of predators or scams and 42 percent who fear they will be judged by peers solely based on their wealth. Additionally, 25 percent of survey participants worry about raising well-adjusted children. Only 21 percent say they fear losing all their wealth, the study shows.
Finding trustworthy and responsive financial advisors is a top priority for 93 percent of the study participants. They also want advisors who can give sophisticated expertise at a reasonable cost. The next three highest priorities in advisor selection are tax mitigation expertise (82 percent), competitive fees (75 percent) and recordkeeping (75 percent).
Not surprisingly, wealthy families also value advisors with expertise in trust and estate planning (74 percent), as well as the ability to assist with family decision making and governance (65 percent).