Generational Divide Exists Among Nation’s Wealthy, Finds U.S. Trust 2012 Insights on Wealth and Worth

  Generational Divide Exists Among Nation’s Wealthy, Finds U.S. Trust 2012
  Insights on Wealth and Worth

Business Wire

NEW YORK -- June 18, 2012

The U.S. Trust2012 Insights on Wealth and Worth nationwide survey of 642 high
net worth and ultra high net worth adults found distinct generational
differences in response to new economic realities, uncertain financial
security, a looming elder care crisis and dual financial responsibilities for
both children and parents.

  *Forty percent of Gen-Xers and Gen-Yers, aged 18 to 46 versus 20 percent of
    baby boomers have established a financial plan for parents’ elder care
    needs.
  *Fifty-four percent of Gen-Xers and Gen-Yers and 42 percent of baby boomers
    have paid medical costs for parents and other relatives.
  *Gen-Xers and Gen-Yers and the generation older than the baby boomers are
    closely aligned in the importance of intergenerational wealth transfer,
    with 76 percent of those aged 18 to 46 and 73 percent of those over the
    age of 67, saying it is important to leave a financial inheritance to
    their children. The primary reasons for leaving an inheritance are to
    preserve the continuity of family wealth and to influence their children’s
    lives after they are gone. By comparison, only about half (55 percent) of
    baby boomers think it is important to leave a financial inheritance to
    their children. Among those who don’t think it is important, one in three
    (31 percent) said they would rather leave money to charity than to their
    children.

“Our survey points to a shift in generational behavior and outlook, most
likely shaped by personal experience and societal responses to economic
realities,” said Keith Banks, president of U.S. Trust. “The next generation
has not experienced the consistently strong economic growth or investment
returns that baby boomers experienced during the longest bull market in
history.”

Wealth and family responsibilities: taking care of the generation before and
after

With greater similarities in attitude to the generation before the baby boom,
Gen-Xers and Gen-Yers are focused on the needs of the family and the
continuity of family wealth, including leaving a financial inheritance to
their children. They are pragmatic, proactive and disciplined in their
approach to investing and wealth management, surpassing baby boomers in
planning for wealth for themselves and their families.

The annualU.S. TrustInsights on Wealth and Worth study has consistently
identified family harmony and financial security as top goals. Achieving these
goals can be challenging amid the complexity of circumstances in families of
significant wealth. The 2012 survey found that the majority of surveyed
respondents (62 percent) feel that family and harmony in the home is the realm
in their lives where they have the greatest ability to effect change. While
the importance of family is a common denominator across all generations, U.S.
Trust found that each generation emphasizes different elements of family
responsibilities.

Survey highlights include:

Elder care

  *Eighty-five percent of respondents said they have talked with their spouse
    about long-term care plans, but more than half (56 percent) have never
    communicated their plans with their children, and four in 10 (43 percent)
    have never talked with parents and older relatives about what that
    generation’s plans and expectations are.
  *Thirty-three percent Gen-Xers and Gen-Yers, compared to only 6 percent of
    baby boomers, have purchased long-term care insurance for their parents.
  *Thirty-eight percent of those aged 18 to 46 and 30 percent of baby boomers
    are personally financing the cost of long-term care for aging or infirmed
    parents or relatives.

Financially empowering children

  *Six in 10 (61 percent) wealthy parents are not fully confident their
    children will be well-prepared to handle any financial inheritance left to
    them, with baby boomers having the least degree of confidence. Only 32
    percent of baby boomers, compared to more than half (52 percent) of
    Gen-Xers and Gen-Yers and 54 percent of older respondents (age 67 and
    older), are confident their children will be prepared emotionally and
    financially to receive a financial legacy.
  *Only 37 percent of wealthy parents have fully disclosed their family’s
    level of wealth to their children, and half (51 percent) have disclosed
    only a little. Among those who have not fully disclosed their wealth,
    older respondents over the age of 67 said the primary reason was because
    they were taught never to discuss wealth with anyone. Baby boomers,
    Gen-Xers and Gen-Yers are aligned in being more comfortable talking about
    wealth, but most either haven’t gotten around to it or are concerned that
    it will negatively affect their children’s work ethic.

Estate planning and intergenerational wealth transfer

  *The vast majority of survey respondents have the basic elements of an
    estate plan including a will, a healthcare proxy/living will and a power
    of attorney. Yet, consistent with previous research, the wealthy – and
    particularly those who are younger – are underutilizing trusts. Only 51
    percent have a revocable trust, and only 22 percent have an irrevocable
    trust.
  *Despite their considerable resources, nearly six in 10 respondents overall
    do not have a comprehensive estate plan, including 66 percent of baby
    boomers, 70 percent of those under the age of 47 and 48 percent of those
    over the age of 67.
  *When asked why they have not established a trust, U.S. Trust found
    widespread misunderstanding and lack of professional guidance. The top
    reason (43 percent) is a belief that because their wishes have been
    outlined in a will there is no need for a trust. Procrastination is the
    second-biggest reason (31 percent). Another 17 percent said they don’t
    think they have enough money to warrant having a trust, and an equal
    number said they don’t even know what the benefits of having a trust are.
  *One-half of all survey respondents said that leaving an inheritance is a
    way to protect the continuity of family wealth. Baby boomers are less
    motivated by this than younger and older generations.
  *Despite the possibility of tax law changes in 2013 that could increase
    estate taxes and lower lifetime gifting limits, many of the wealthy have
    not proactively taken steps to reduce the size of their taxable estate.
    Two-thirds (67 percent) have not made, nor do they intend to make, a
    financial gift to a loved one before the end of the year. Only 17 percent
    have made a financial gift to a charitable organization.

Approaches to growing wealth

High net worth investors continue to be cautiously optimistic about the
management of their investment portfolio, given ongoing market volatility and
political and economic uncertainty. Most survey respondents described
themselves as independent, opportunistic and smart when making investment
decisions, although nearly one-quarter (23 percent) of the youngest generation
of investors described themselves as “exhilarated.”

  *Not surprisingly, the youngest generation favors growth over preservation,
    and they are more willing to assume increased risk to achieve growth
    returns. Older generations are more inclined to seek asset preservation
    and lower-risk strategies.
  *Overwhelmingly, all high net worth households believe in diversification
    to reduce risk over a means to market outperformance. The wealthy are more
    than twice as likely to say that lowering risk in their investment
    portfolio is a higher priority than pursuing higher returns.
  *More than half (54 percent) of respondents say that customized benchmarks
    are a better way of measuring investment performance than broad market
    benchmarks. The preference for personalized benchmarks is strongest among
    young investors. More than three-quarters (77 percent) of
    youngest-generation respondents, compared to 52 percent of baby boomers
    and 55 percent of older respondents, value customized benchmarks.

“These three generations of wealth all approach life, and investing, from
different angles that reflect their diverse experiences,” said Banks.
“Understanding these generational differences is important for the wealth
advisors and other professionals who guide these families, since it will
enable them to better serve their clients and build stronger relationships
with them.”

Protecting family privacy and security

The U.S. Trust2012 Insights on Wealth and Worth survey also explored privacy
and security, an emerging area of wealth management that varies significantly
by age and experience. Those in the younger, technologically savvy generation
who have grown up in an online world of digital devices and information better
understand the related potential risk to their privacy and security. As a
result, they are more apt to have taken actions to protect themselves, their
finances and personal and physical safety. However, U.S. Trust found a
generally low level of proactive activity to protect family privacy and
security compared to the level of concern.

  *One in three high net worth households thinks social media and personal
    information online have increased the risk to their family’s privacy and
    safety. Yet, only 13 percent have sought educational information about
    protecting privacy and security and only 14 percent have ever conducted an
    analysis of online information about themselves or family.
  *Just 17 percent of respondents overall said they are concerned about
    privacy and safety specifically because of their wealth; however, privacy
    and safety concerns are associated with age. Notably, the youngest
    generation is the most concerned (37 percent), compared to baby boomers
    (20 percent) and the oldest generation (10 percent).
  *Among those who are concerned, the greatest concerns about
    privacy/security are: financial ID theft; online theft; and intrusion of
    privacy. When it comes to physical safety, the youngest generation, and
    oldest generation, are the most concerned.

For the first time since the survey’s inception, Insights on Wealth and Worth
explored differences and similarities across three generations of wealth in
America. U.S. Trust began surveying the high net worth market in 1993,
Insights on Wealth and Worth explores distinct differences in the attitudes,
aspirations and behaviors among three generations of wealth in America: baby
boomers (between the ages of 47 and 66), the generation before them (aged 67
and older), and Generations X and Y (aged 18 to 46).

Additional information about the 2012 U.S. Trust Insights on Wealth and Worth
survey can be found at www.ustrust.com/survey.

Survey Methodology

U.S. Trust2012 Insights on Wealth and Worth is based on a nationwide survey of
642 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. Among
respondents, 37 percent have between $3 million and $5 million in investable
assets, 31 percent have between $5 million and $10 million and 32 percent have
$10 million or more.The survey was conducted online by the independent
research firm Phoenix Marketing International in March of 2012. Asset
information was self-reported by the respondent. Verification for respondent
qualification occurred at the panel company, using algorithms in place to
ensure consistency of information provided, and was confirmed with questions
from the survey itself. All data have been tested for statistical significance
at the 95 percent confidence level.

About U.S. Trust

U.S. Trust is part of the Global Wealth and Investment Management unit of Bank
of America, which is a global leader in wealth management, private banking and
retail brokerage. U.S. Trust is responsible for $333.8 billion in client
balances*. The firm employs more than 4,000 professionals and maintains 140
offices in 32 states.

*Source: Bank of America. As of March 31, 2012, U.S. Trust, Bank of America
Private Wealth Management had client balances of $ 333.8 billion. Client
Balances consists of assets under management (AUM), client brokerage assets,
assets in custody, loan balances and deposits of U.S. Trust, Bank of America
Private Wealth Management clients held at Bank of America, N.A. and affiliated
banks.

Bank of America

Bank of America is one of the world's largest 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 57
million consumer and small business relationships with approximately 5,700
retail banking offices and approximately 17,250 ATMs and award-winning online
banking with 30 million active users. Bank of America is among the world's
leading wealth management companies and is a global leader in 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 4 million small
business owners through a suite of innovative, easy-to-use online products and
services. The company serves customers through operations in more than 40
countries. Bank of America Corporation stockis a component of the Dow Jones
Industrial Average and is listed on the New York Stock Exchange.

For more Bank of America news, visit the Bank of America newsroom.

U.S. Trust operates through Bank of America, N.A., and other subsidiaries of
Bank of America Corporation.

Bank of America, N.A., Member FDIC.

© 2012 Bank of America Corporation. All rights reserved.

Contact:

Reporters may contact:
Lauren Sambrotto, Bank of America, 1.646.743.0812
l.sambrotto@bankofamerica.com
 
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