Polling of high net worth Americans revealed the following:
- 84% when asked about their personal wealth said they had to start from scratch/became wealthy later in life
- 87% agree about the importance of encouraging entrepreneurial values in children
- 85% report their portfolios met (45%) or exceeded (40%) their expectations during the past fiscal year
- 8.85% is the expected annual average rate of return for the U.S. market vs. 9.66% for international stock markets
- 55% agree that hedge funds enable very good ROI and 51% say they reduce portfolio risk
Wealth and the Next Generation
The survey revealed that respondents are concerned with the effects of wealth on their children and that their children be properly educated in the best ways to handle wealth. Nearly nine in ten (87%) agree with the importance of encouraging entrepreneurial values in children, and eight in ten (80%) agree with teaching children that wealth is a social responsibility. Over half (53%) are concerned about the negative impact of wealth on children, and 43% feel they owe it to their children to leave a sizeable trust.
High net worth parents (96%) also feel it is important to teach children to manage wealth and the majority of parents surveyed (61%) report their children are actively involved in managing their wealth. According to the survey, respondents report 27.4 years old as the average age when their children assume responsibility for managing their own money.
Interest in Hedge Funds
The majority of respondents view hedge funds as delivering a very good ROI (55%) and reducing portfolio risk (51%). However, three out of four respondents agree that hedge funds are difficult to investigate (77%) and that a good fund is difficult to identify (76%). Ultra high net worth respondents appear more likely to include hedge funds in their portfolio saying that hedge funds make up 6% of their portfolio compared to high net worth respondents, who say hedge funds make up only 2% of their portfolio.
"The findings reveal that there is still a limited understanding of hedge funds and other sophisticated products, even among Americans wealthiest households," said Sevilla-Sacasa. "More importantly, they also highlight the need for continued investor education around alternative investment vehicles and the importance of having unbiased advice."
Philanthropy a High Priority
Philanthropy remains a high priority for wealthy individuals. The survey revealed that many respondents are actively involved in their decisions regarding charitable giving. Eighty-eight percent say they give because of a desire to return something back to society, and nearly three in four (72%) say they make charitable donations because they want to make a difference in the world. Organizations most likely to receive donations are academic institutions and health-related organizations. About two in three say these are the charities they would consider leaving money to (68% say academic institutions and 66% say health-related institutions). Religious institutions are cited by 43% as a type of charity to which they would consider leaving money.
Interestingly, of less concern when making charitable donations are tax considerations, which are among the least cited reasons for wealthy individuals to make charitable donations, as only 33 % of respondents cite this as a reason for donating. Respondents also say that upholding a family tradition of giving to a charity is less of a concern when donating: less than one in four (24%) say they make donations just to uphold their family tradition.
Pleased with Portfolios, But Viewing the U.S. Stock Market as Riskier
Respondents appear pleased with their investment portfolios over the past fiscal year, with 85% claiming that their portfolios met (45%) or exceeded (40%) their expectations during the past fiscal year. A vast majority say that domestic stocks (81%) and real estate (80%) provided the greatest returns on their investments, and had a significant impact in generating wealth.
Although overall economic outlook amongst respondents is generally optimistic, a perception of increasing risk in U.S. stock markets is reflected in an anticipated shift in the distribution of U.S. and international equities within some portfolios. Over half (51%) believe that the U.S. stock market is becoming riskier. A significant proportion (18%) of those respondents who were asked to evaluate the U.S. stock market plan to move out of U.S. stocks, versus only 8% of those who were asked about international stocks, who plan to move out of that asset class.
Top Economic Concerns
The top financial worries of respondents are that the U.S. is losing its competitive edge in the world economy (74%) and that the budget deficit will affect the economy over the long-term (74%). These were followed by concerns that the next generation will have a more difficult time financially, cited by 73% of survey respondents. Seventy-two percent of respondents worry that environmental issues will require more government spending and that taxes will rise significantly over the next few years. Another prominent concern is that high taxes will reduce the value of their estate (71%).
