By Cyril Tuohy
Twice as many families with more than $5 million in investable assets say they make financial decisions more democratically than do less-well-off families in the mass affluent segment, in the wake of the financial crisis, according to new research.
The more families decide to invest by consensus, the more likely they are to feel financially prepared for the future, the research also finds.
“The financial crisis was a wake-up call for many Americans, but it has clearly changed behavior most significantly among the wealthiest families,” Michael Farrell, managing director for SEI Private Wealth Management, said in a statement. “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.”
Nearly half (48 percent) of the nation’s wealthiest families — so-called pentamillionaires with more than $5 million -- said their investment decisions are made more broadly than they were before the Great Recession. But only 25 percent of the respondents in the mass affluent market — households with between $250,000 and $1 million, said their families have sought more consensus following the crisis.
The survey found that 55 percent of families with more than $5 million believe the next generation is adequately prepared to handle the challenges of managing wealth, compared to 42 percent of families with more than $1 million who believe the next generation is prepared. Only 19 percent of families with between $250,000 and $1 million believe their next generation is prepared to manage the wealth, the survey found.
Even as the study found a divide in investment behaviors among different segments of the affluent market, the results also point to the importance of communication among family members with regard to financial decisions, Farrell said.
Wealthy families have less confidence in the ability of institutions to manage wealth in the wake of the recession, separate SEI surveys have found.
The poll of more than 800 people representing individuals or families with an average of $1.2 million in investable assets was carried out by Phoenix Marketing International for SEI.
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].
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