Survey Finds ‘Don’t Ask, Don’t Tell’ Attitude Toward Discussing Family Wealth

You can picture the scene: An enormously wealthy family, wearing button-down shirts and ascots, gathered around the dinner table. They’re saying very little, smiling even less and never, ever talking about money.

It’s a clichéd tableau, to be sure, and it is one that plays out less and less as tectonic demographic change alters the profile of the U.S. population.

Nevertheless, it may help explain an irony found among high-net-worth households, which is that many parents have little faith that their children will be able to manage the family’s wealth.

According to the 2015 U.S. Trust Insights on Wealth and Worth survey, only one in five parents of a high-net-worth household believes the children will be well-prepared to handle family wealth they are likely to inherit.

The survey of 640 high-net-worth individuals with at least $3 million in investable assets also found that fewer than 33 percent of households have discussed details of an inheritance with the children.

Many of today’s millionaires and billionaires are self-made and the companies they founded are private with little obligation to disclose details of holdings. A certain reticence about discussing family wealth should come as no surprise and should even be expected.

But if so much about family wealth is kept private, how can heirs expect to grow into responsible stewards of the wealth in the first place?

U.S. Trust executives who analyzed the survey data said that’s exactly where financial advisors come in: as part counselor, part financial advisor, to engage families to talk about wealth and the children’s role in it.

One of the takeaways in this year’s survey is the opportunity for advisors to encourage conversations among the nation’s wealthiest families, according to Keith Banks, president of U.S. Trust, and Chris Heilemann, chief fiduciary executive of U.S. Trust.

They see a huge opening for advisors to do more, they said in a conference call to announce this year’s survey results.

When rich families discuss their wealth with their advisors, the nature of the discussion tends to skew narrowly around portfolio construction, asset classes, investment performance and taxes - always taxes.

“The dialogue is way too narrow,” Banks said. “Good advisors are having that broad-based discussion, but those sitting down talking about portfolio basis points, those days are numbered.”

The survey found that 64 percent of respondents talk with their primary financial advisor about only one aspect of their wealth management, leaving only 36 percent of respondents discussing multiple aspects of wealth management.

That’s not to say the ultrawealthy aren’t willing to open up about their families and the wealth that surrounds them.

The survey found that 47 percent of respondents want to discuss personal matters — but advisors also need to get to them.

Here’s a spot quiz question: How many high-net-worth households have no professional advisor?

Answer: 20 percent.

Here’s the opposite question: How many high-net-worth households use some type of professional financial advisor?

Answer: 66 percent.

Clearly, many high-net-worth families remain underserved if one in five eschew professional advice.

Entrepreneurial patriarchs and matriarchs have their reasons for keeping family wealth discussions close to the vest, even in an era when the financial services world brims with chatter about transparency and disclosure and fiduciary duty.

Parents are scared that revealing the family’s true wealth will affect the work ethic of generations that follow.

Other parents, those now in their 80s and products of a more conservative era, may have been taught never to discuss money.

Still others have found that financial indiscretions sometimes come back to haunt them whereas discretion never does. Nearly all entrepreneurs know that fortunes that take a lifetime to amass can disappear in minutes.

Some parents fear — rightly so — that passing wealth onto their children too soon could endanger the whole family seen with so many people lacking in even the most basic tenets of economic theory.

For every immigrant arriving on U.S. shores with a dollar to his or her name and ending the journey by bequeathing millions of dollars to the family or leaving behind a publicly-traded company, there’s a tale of heirs squandering the family fortune.

The survey, conducted in January, found that 64 percent of respondents said they offered no or little disclosure about the level of wealth to their children.

Two-thirds — 66 percent — of baby boomers and just under half — 48 percent — of “mature” parents, those born before 1946, have disclosed little or nothing about their family wealth to children, the survey also found.

Four in 10 parents over the age of 70 don’t believe children are ready to handle family wealth at least until the age of 40, the survey also found.

The survey was conducted by the independent research company Phoenix Marketing International and respondents were equally divided among those with investable assets of between $3 and $5 million, $50 and $10 million, and $10 million or more.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].

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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].