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Study reveals US HNWI planning shortfalls in achieving a ‘life well-lived’


Eight in 10 US high net worth investors (HNWIs) have identified at least one area of their lives, such as giving back and pursuing passions, that needs greater attention to make their life more fulfilling.

That’s according to the 2015 US Trust Insights on Wealth and Worth survey which identifies what the wealthy consider to be important elements of a life well-lived, ranking health, family and financial security as essential.

“A life well-lived shouldn’t be viewed through a rearview mirror with the final assessment of accomplishment or regret at the end of the journey. It can and should be carefully plotted and planned for,” says Keith Banks, president of US Trust. “The wealthy are driven by a sense of purpose and desire to succeed, but what makes life fulfilling is not money; it’s what they do with it. As wealth managers, we have the opportunity to not only help our clients grow their wealth, but also to help them plan accordingly.”

The findings are based on a nationwide survey of 640 high net worth (HNW) individuals with at least USD3 million in investable assets. “US Trust Insights on Wealth and Worth” is among the largest annual studies to cover the attitudes and preferences of HNW individuals on growing, preserving and passing on wealth. The 2015 study builds on earlier explorations of financial security, giving back to the community, and family dynamics by taking an in-depth look at how priorities across all of these areas align with planning for a life well-lived.

Health is the number one element to “a life well-lived.” The wealthy almost unanimously agree (98 per cent)  that the most valuable asset they have is their health, and investing in health is as important as investing to build wealth.

While the wealthy view money as empowering, 75 per cent say their purpose in life would not change even if they lost their wealth.

Eighty-six per cent say that giving back to society is an essential or important part of their lives, with women and millennials driving interest in giving and investing for social impact.

Priorities differ depending on gender, circumstance and life stage. Younger respondents are focused primarily on work and financial security. Health and family become more valuable later in life. Nearly six in 10 overall, and 83 per cent of millennials, say they struggle to balance competing priorities across their work, family, social and financial lives.

Women and men are increasingly sharing decision-making and contributions to family wealth and financial security with each successive generation. In HNW millennial households, half of women contribute an equal share of household income or more income than their partners, and one-quarter of men have assumed primary responsibility for child care.

Priorities by age and gender in market outlook, investing and wealth building strategies have significant implications for family wealth, financial security and planning. Conflicts and lack of sufficient planning point to gaps in all of the essential elements of a life well lived.

The wealthy are proactively investing in a multitude of activities to maintain their health and wellness, but many are not planning for the possibility of illness and how it might affect their income, assets or life expectations. 

Nine in 10 respondents are willing to spend more money on their health, and, not surprisingly given the high value placed on it, 31 per cent of those over age 70 say they would spend any amount if they could have good health. Despite this willingness to spend substantially on maintaining or restoring health, half have not planned financially for an unexpected or degenerative health issue.

More than half (55 per cent) say they would take a genetic test to identify their risk of a debilitating or life-threatening disease, and 46 per cent say that, if faced with a high-risk condition, they would seek radical or preemptive medical treatment. However, in such an event, they are less proactive about securing their financial or family security, with only 28 per cent saying they would review their financial plans or create a comprehensive estate plan.

If long-term care were ever needed, more than half of the wealthy expect to stay in their own homes, with care provided by family or private home health care. Another 23 per cent would move to a luxury long-term care facility. Yet, 44 per cent with long-term care plans have not yet planned for the cost of that care, including out-of-pocket health care expenses.

Nearly one in three (28 per cent)  overall and 53 per cent of millennials say that their wealth comes at the expense of their health.

The study found that family clearly represents the greatest source of enjoyment in life and is the motivator for financial success and security. Leaving a financial legacy to the next generation ranks fifth in relative importance as a contributor to a life well-lived. 

While three in four wealthy parents say it is important to leave an inheritance to the next generation, only one in five agrees strongly that their children will be prepared to handle the wealth they receive.

Nearly two-thirds of wealthy parents have disclosed little or nothing about family wealth to their children, largely because of concern that it will affect their work ethic and family privacy.

Though 54 per cent of the wealthy believe their family would benefit from developing a formal set of principles to guide the purpose and meaning of their wealth, only one in 10 has done so.

Survey respondents describe financial security as essential to a life well-lived because it provides options and the freedom to live life as they choose, without financial worries or restrictions. Their approach to investing and building wealth is shaped by their priorities and outlook, which in some cases is preventing progressing toward their wealth and investing goals.

HNW investors are slightly more optimistic in their outlook on the markets this year than last, but their views remain mixed, with millennials and women most uncertain and concerned about losses. While more than half (55 per cent)  of HNW investors say their greater priority is growth over protection of assets, 64 per cent aren’t willing to seek higher returns if it means higher risk, and they are far more aware this year of the tax implications of their investment decisions. 

Six in 10 HNW investors have more than 10 per cent of their portfolios in cash positions, including 22 per cent with more than 25 percent. Four in 10 either have moved or plan to move even more of their investments into cash in anticipation of rising interest rates.

About 20 per cent say they are looking for advice on the best way to invest in a low-interest rate environment. One-third (34 per cent)  are having these discussions with trusted professionals now.

Though men and women are focused equally on growing wealth, women are more conservative, with 25 per cent of their portfolios in cash positions. Women also are less likely than men to describe themselves as opportunistic investors and strategic users of credit as a way to grow wealth.

Most of the wealthy, and particularly younger HNW investors, either currently use or are interested in adding non-traditional assets to their investment portfolios, including private equity and venture funds (48 per cent) . Seven in 10 own or are interested in owning tangible investments such as land, real estate, oil and gas properties and timber, primarily to diversify the portfolios and source of risk and income. Yet, lack of understanding and perceived risk is holding back one in three HNW investors from these types of investments.

Insights on Wealth and Worth found that a majority of the wealthy seek advice on one technical aspect of planning, such as portfolio performance, tax planning and estate planning. However, only about one-third of the wealthy are talking with an advisor about strategies around the goals they consider to be fundamentally more important, including identifying family needs and goals (36 per cent)  and planning for increased longevity (34 per cent) . Even fewer are having discussions about the strategic use of credit (21 per cent) , strategic philanthropy (18 per cent)  and investing for social impact (11 per cent).

Insights on Wealth and Worth also found that those people who are getting professional advice are farther along on measures they describe as essential to a fulfilling, meaningful life. Not only do they feel more financially security and are less conflicted by competing priorities, they are more likely to say their family has a healthy relationship with money and their actions are in greater alignment with their intentions when it comes to growing, preserving and passing on wealth and making a difference in the world.

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