New Research and Guide Aim to Help HNW Families
Make Effective Financial Decisions, Avoid Conflict and Be
Intentional About the Impact of Wealth
Bank of America today announced the findings of a new study
conducted by Merrill Private Wealth Management, which found that 64
percent of wealth holders have never talked with family members
about how or why they intend to pass on their assets. While 48
percent plan to communicate this information eventually, or assume
family members already know, 10 percent vow never to divulge
details of their estate plan primarily because they consider it
personal and no one else’s business. But is that a good
decision?
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Disclosure of family wealth decisions
(Source: Merrill Center for Family Wealth, Merrill Private Wealth
Management. June 2019) (Graphic: Business Wire)
“This research is designed to help families make better
decisions and secure the promise of wealth, including the impact it
can have within and beyond one’s family and lifetime,” said Andy
Sieg, president of Merrill Lynch Wealth Management.
For this study, Merrill asked more than 650 high net worth
people across the country how different types of financial
decisions are made and communicated within their family. Part of an
ongoing series of white papers on wealth sustainability from the
Merrill Center for Family WealthTM, findings from this study were
published today in a new report, "How do families make effective
wealth decisions?" including:
- Decisions about family money, such as gifting to family and
charities, dividing assets among heirs and establishing trust
provisions or limitations, ranked as the most important and hardest
to make, compared to decisions about saving, investing, spending
and other day-to-day finances.
- Just 33 percent of people have informed their family of
lifetime gifts already made or committed to, such as assets held in
a trust or funding of education, a down payment on a first house or
another purpose.
- Seventy-two percent have not discussed their philanthropic
commitments.
- When asked what they consider to be the most important idea to
communicate when discussing wealth with family, the top response
was to be a good steward and handle family money wisely. However,
only 46 percent have talked with heirs about fundamental family
values and operating principles.
- On the distribution of their estate, 69 percent of wealth
holders plan to divide their assets equally among heirs while the
rest say allocation decisions are based on specific criteria, such
as merit for individual contributions (11 percent) or need (8
percent).
- While 22 percent plan to openly share details of their estate
plan with the whole family, 17 percent would share information only
as it applies to each person.
“Decisions about family money have the potential to change
lives, yet the outcome depends on how well the purpose and
reasoning behind those decisions are understood, and too often that
is left unsaid,” said Stacy Allred, head of the Merrill Center for
Family Wealth. “Misunderstanding can lead to family conflicts,
resentment and other unintended consequences including the misuse
or loss of family wealth.”
Understanding how family wealth decisions are made (or
not)
The Merrill Center for Family Wealth specializes in helping
families define the purpose of their wealth. This study found that
in six in 10 families, there is no formal structure or rigorous
process in place to ensure family wealth decisions are made and
communicated effectively. When asked how wealth decisions are
typically made, the most prevalent response was an autocratic and
top-down approach whereby one person makes decisions with little or
no input from anyone else. Seventeen percent of families make
financial decisions democratically with collective input or
representation of all members.
Limited collaboration on family wealth decisions may reflect the
high degree of confidence most people have in their own financial
decision-making.
- Three-quarters of participants, including more men (79 percent)
than women (68 percent), report complete confidence in their
financial decisions.
- Looking back on decisions they’ve made, however, just 56
percent of people said their decisions always turned out well. The
rest reported mixed results, including 21 percent who said all
their decisions turned out badly or they delayed making decisions
because they were unsure of the outcome.
“The best form of financial parenting and a big part of
improving the outcome of decisions involves putting more care into
the decision-making process itself,” added Matthew Wesley,
director, Merrill Center for Family Wealth. “Family wealth
decisions can be complicated by family dynamics, a long-time
horizon and unrecognized biases that call for a deliberate and
disciplined approach.”
Methodology The study is based on an independent survey of 656
high net worth and ultra high net worth adults with at least $3
million in investable assets, not including the value of their
primary residence. The online survey was managed by the independent
research firm Phoenix Marketing International and completed in
2018. All data have been tested for statistical significance at the
95 percent confidence level.
Merrill Lynch Wealth Management Merrill Lynch Wealth Management
is a leading provider of comprehensive wealth management and
investment services for individuals and businesses globally. With
14,690 financial advisors and $2.4 trillion in client balances as
of June 30, 2019, it is among the largest businesses of its kind in
the world. Bank of America Corporation, through its subsidiaries,
specializes in goals-based wealth management, including planning
for retirement, education, legacy, and other life goals through
investment, cash and credit management. Within this business,
Merrill Private Wealth Management focuses on the unique and
personalized needs of wealthy individuals, families and their
businesses. These clients are served by approximately 200 highly
specialized private wealth advisor teams, along with experts in
areas such as investment management, concentrated stock management
and intergenerational wealth transfer strategies. Merrill Lynch
Wealth Management is part of Bank of America Corporation.
For more information, please visit
https://www.ml.com/financial-goals-and-priorities.html.
Bank of America Bank of America is one of the world’s leading
financial institutions, serving individual consumers, small and
middle-market businesses and large corporations with a full range
of banking, investing, asset management and other financial and
risk management products and services. The company provides
unmatched convenience in the United States, serving approximately
66 million consumer and small business clients with approximately
4,300 retail financial centers, including approximately 2,200
lending centers, 2,400 financial centers with a Consumer Investment
Financial Solutions Advisor and 1,700 business centers;
approximately 16,600 ATMs; and award-winning digital banking with
more than 37 million active users, including approximately 28
million mobile users. Bank of America is a global leader in wealth
management, corporate and investment banking and trading across a
broad range of asset classes, serving corporations, governments,
institutions and individuals around the world. Bank of America
offers industry-leading support to approximately 3 million small
business owners through a suite of innovative, easy-to-use online
products and services. The company serves clients through
operations across the United States, its territories and
approximately 35 countries. Bank of America Corporation stock
(NYSE: BAC) is listed on the New York Stock Exchange.
For more Bank of America news, including dividend announcements
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www.bankofamerica.com
Merrill, its affiliates, and financial advisors do not provide
legal, tax, or accounting advice. You should consult your legal
and/or tax advisors before making any financial decisions.
Banking products are provided by Bank of America, N.A., and
affiliated banks, Members FDIC and wholly owned subsidiaries of
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Reporters May Contact: Susan Atran, Bank of America,
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