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Wealthy families make investment decisions by committee, says SEI survey

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The 2008 financial crisis has changed the way affluent families view their investments and make important decisions, and the change is greatest among those with the greatest wealth, according to a poll released by SEI.

 
Nearly half of respondents (48 per cent) with more than USD5m in investable assets (penta-millionaires) say their family makes investment and wealth management decisions more democratically following the financial crisis of 2008.
 
By contrast, only a quarter of respondents in the "mass affluent" market (households with between USD250,000 and USD1m in investable assets) say their family makes decisions more democratically after the crisis. The results point to a growing divide in the behaviours and investment decision making between different segments of affluent families.
 
The poll, of more than 800 individuals representing individuals or families with an average of USD1.2m in investable assets, was carried out by independent research firm Phoenix Marketing International.
 
Beyond the increased collaboration among the wealthiest segment, the survey also revealed that those with the most wealth are most confident about their family’s level of preparation for the future. More than half of respondents (55 per cent) with more than USD5m in investable assets believe the next generation of their family is adequately prepared to handle the challenges of managing substantial wealth. That number drops to less than half (42 per cent) among families in the broader "wealth market" (households with more than a million dollars in investable assets) and less than a quarter (19 per cent) among the mass affluent.
 
"The financial crisis was a wake-up call for many Americans, but it has clearly changed behaviour most significantly among the wealthiest families," says Michael Farrell, managing director for SEI Private Wealth Management. "The level of collaboration has increased dramatically among the most affluent and perhaps not coincidentally, so has the level of confidence they have in future generations. We’ve consistently advocated the importance of communication in sustaining wealth for the long term. We only hope it won’t take another financial crisis for this to become the norm among families at all levels of wealth."
 
While decision making and preparation of future generations differs greatly among different sectors of wealthy families, how they define success is largely consistent. When asked how they measure financial success across generations, more than half of penta-millionaires (60 per cent) chose absolute returns and total assets. That number was nearly identical among both the mass affluent and wealth markets (62 per cent each). Risk and security was chosen by 27 per cent of penta-millionaires polled, 25 per cent of the wealth market, and 27 per cent of the mass affluent. Heirs and legacy was chosen as the measure of success by 13 per cent of penta-millionaires, 13 per cent of the wealth market, and 11 per cent of mass affluent.

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