Family health has emerged as the new risk to family wealth, according to the US Trust 2013 Insights on Wealth and Worth.
Long-term care and out-of-pocket healthcare costs, combined with financial support for extended family, are weighing heavily on families, particularly women and younger generations, are risks to wealth that are not well reflected in financial planning.
US Trust has published findings of a survey of 711 high net worth adults in the US with more than USD3m in investable assets.
Forty-seven per cent of all respondents have created a financial plan to address long-term care needs that they and their spouse or partner might need, but only 18 per cent have a financial plan that accounts for parents’ long-term care costs.
Only one-quarter (27 per cent) of baby boomers and 16 per cent of those who are over age 68 say they ever expected their parents might turn to them for financial assistance. Yet, one-third of Generation X and nearly half (46 per cent) of Generation Y expect their parents or in-laws to rely on them for financial assistance at some point in their lives.
Sixty-three per cent of wealthy people feel responsible for financially supporting their parents or in-laws if needed, even if it jeopardises their own financial security, and 55 per cent feel a responsibility to provide financial assistance for less financially fortunate siblings if they were to need it. Fifty-six per cent of wealthy parents say they provide financial support to their adult children.
Nearly half (46 per cent) of respondents have provided substantial financial support (not a loan) to adult family members other than their own spouse or partner. Two-thirds (69 per cent) do not have a financial plan that accounts for the financial needs of any of these other adult family members.
The largest study of its kind, Insights on Wealth and Worth found that the wealthy have a heightened sense of financial security and have shifted their investment priorities from asset protection to asset growth. Yet their well-documented aversion to risk still prevails. Lower risk trumps the pursuit of higher returns as a priority in managing their wealth. Despite this, investment risk is one of three broad areas, including family wealth and retirement planning, where US Trust found a disconnect between goals and proactive wealth planning.
“The majority of people we surveyed grew up in middle-class families and created their own wealth. They don’t see themselves as wealthy, and many are unaware of risks and circumstances that grow increasingly complex as wealth accumulates,” says Keith Banks, president of US Trust. “The wealthy have been disciplined about protecting their assets from market loss, but may have a false sense of financial security. They are not adequately planning for family health concerns or for the retirement that they want. We need to shift the conversation about wealth management to these important topics and expand their understanding of risk.”
