Financial realities are changing for high-net-worth clients, as more-and-more baby boomers must care for adult family members, and millennials weigh their investments and values alongside each other, shows a new study by U.S. Trust.
About 60% of high-net-worth clients said that they provided substantial financial support to adult family members, including siblings, parents and children. Meanwhile, only 3% had financial plans that take financial backing for these adults into account.
To help clients, advisors should consider client assets, philanthropic interests and the level of financial assistance they want to provide, said Chris Heilmann, chief fiduciary executive at U.S. Trust. "Advisors across the board, in working with families, need to understand that it's not a one size fits all," Heilmann said during a presentation to reporters last week.
The study also found that only 38% of married couples said they had a financial plan to address potentially high medical costs for themselves.
"While these circumstances are not unique to the wealthy, they can complicate an already complex wealth planning process," said Keith Banks, president of U.S. Trust, in a statement.
MATCHING VALUES WITH INVESTMENTS
There is yet another shift in the investing landscape: Millennials who want their investments to match their values.
About 75% of millennial investors surveyed considered a company's social and environmental impact an important factor in deciding on investments. Additionally, 80% said that socially motivated investors could help hold public companies and governments accountable for their actions.
"Beyond just impact investing, the wealthy want to use their wealth in ways that are meaningful and will have an impact on society," said Banks during the presentation.
Jackie Vanderbrug, investment strategist at U.S. Trust, said in an email that the growing interest in values-based investing was due to greater awareness that aligning investments with values does not require sacrificing returns. Advisors who engage their clients around values and investments can deepen their relationships, Vanderbrug added.
"This is true with younger investors directly, but also with families," Vanderbrug said. "The next generation's interest in values-based investing can initiate a family-wide conversation about values, a very important event for families. We know from our research that, given a choice, wealth creators would rather hand down their values than their money."
Millennial investors also have an appetite for non-correlated assets. According to the survey, 80% said they owned or wanted to own tangible assets such as real estate and timber, attributable to the financial crisis, said Banks.
"Think about what they've seen over their relatively short lives. They've seen some incredible instances like 2008 where the market went against people and created real pain," he noted. "There's a truncated view of the markets, and that view has seen some tough times."
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