Raymond James released the results of its recent survey of
investors with half a million dollars or more in investible assets,
revealing their priorities and concerns around transferring wealth
to the next generation. Some estimates predict that up to $84
trillion in assets will exchange hands over the next 20 years –
dubbed the Great Wealth Transfer – prior to which it’s essential to
identify potential gaps and opportunities for investors to execute
a successful transition, according to Joe Weaver, President of
Raymond James Trust.
Key findings:
- 71% of respondents said proactive communication of wealth
transfer plans would be important to them if they were receiving an
inheritance, while 45% report being “extremely transparent” with
their own heirs.
- 91% of respondents said that tax efficiency is “extremely” or
“somewhat” important, but 37% answered “no” or “not sure” when
asked if their wealth transfer plan includes tax efficient
strategies.
- 54% of respondents agree that having a positive philanthropic
impact is “extremely” or “somewhat” important to their
intergenerational wealth transfer plan.
- 84% of respondents who work with a financial advisor have a
documented intergenerational wealth transfer plan in place,
compared to 66% who do not work with an advisor.
“The most important factor in executing a smooth transfer of
wealth is having a documented plan in place and to regularly
revisit that plan over the years to make sure it’s properly
representing your current wishes,” said Weaver. “The most common
reasons for a break down in a client’s plan are, first, the absence
of preparation and taking the time to put appropriate documents in
place. Second is not thoroughly communicating their intentions to
those impacted.”
Communication with Heirs
Maintaining family harmony sits high on the list of priorities
for investors, 87% of respondents said it’s important to them (60%
“extremely”, 26% “somewhat”). This level of harmony is mainly
achieved through proactive communication (7 in 10 say it’s
important) and transparency. 89% indicated that, if they were
inheritors, having clear and transparent expectations for who would
receive what would be important.
However, understanding the value of communication is not the
same as taking steps to start a conversation around wealth. More
than half of American adults don’t talk about their finances and
23% would even rather talk about death, according to research from
Empower.
“For many, an ideal scenario would be to take a set dollar
amount and divide it equally among heirs, but that’s rarely the
case. With illiquid assets to consider such as property,
collectibles, businesses, heirlooms and so on, the task of dividing
assets equitably becomes more complex,” said Weaver. “This is where
discord in the family can begin if a client’s intentions aren’t
clearly communicated.”
Investors with $500,000 or more in assets appear to be more
comfortable discussing wealth than average, with 81% asserting that
they have been at least “somewhat” transparent with heirs (45% say
they have been “extremely” transparent). Consistent communication
might start small with discussions about monthly budgets or annual
donations and build on that foundation of financial values to help
heirs feel empowered to address changing circumstances, continued
Weaver.
Tax Efficient Estate Planning
Taxes are another top-of-mind issue among those passing on
wealth. 9 in 10 respondents said tax efficiency is a
somewhat-to-extremely important part of their wealth transfer
planning. However a significant number of investors (37%) either do
not, or do not know whether they have an estate plan that includes
tax-efficient strategies.
Given the complexities of tax code and the regularity of rule
changes, taxes may feel like a moving target to investors and
require the help of a professional. But only 26% of those surveyed
have consulted tax professionals as part of their planning. For
wealthy grantors, more complex vehicles such as trusts, specialized
insurance and structured giving may be necessary to maximize their
legacy, according to Weaver.
Imparting Charitable Values
More than half (54%) of respondents said having a positive
philanthropic impact is an important part of passing their legacy
successfully from one generation to the next. They aren’t alone in
the sentiment, with many of the world’s wealthiest pledging to give
away most of their significant wealth. While the majority of
investors take a more moderate approach, 1 in 10 respondents plan
to leave 25% or more of their wealth to charity.
If they were receiving an inheritance, 60% of respondents said
it would be important (24% “extremely,” 46% “somewhat”) to hear
impactful stories that shaped their grantor’s values and personal
character. This presents an opportunity for investors to share the
beliefs and philanthropic vision behind an inheritance with their
heirs.
“It’s difficult to memorialize your values and wishes in a legal
document, so one solution that’s becoming more prevalent is the
inclusion of a legacy letter. A client can sit down and write about
the lessons and stories that they want to be sure reach the next
generation. Then the letter is either attached to the planning
documents, or more often, read and recorded over video to be passed
on,” said Weaver.
Weaver also suggests that grantors may choose to create a
personal or family mission statement or develop a philanthropy
“board” amongst heirs to convey their goals. To maximize impact,
they might explore less-common gifts like appreciated stock or life
insurance and specialized vehicles like donor advised funds or
charitable trusts.
Guidance from a Team of Professionals
Given the complex and personal nature of wealth transfer
planning, professional guides are often enlisted to help. The three
most frequently tapped professionals for survey respondents’ teams
are financial advisors, estate planning attorneys and accountants.
Some also include family members or even spiritual advisors in
their planning.
To set themselves up for success, investors should take a
critical look at their professional team over the years and adjust
based on changing needs, says Weaver. For example, planning to
transfer assets beyond money such as art collections, luxury
vehicles or rare collectibles often requires specialized
knowledge.
Respondents who work with a financial advisor in particular were
more likely to have a documented wealth transfer plan in place
(84%) compared to those who don’t work with an advisor (66%).
Seeking guidance helped respondents address top concerns like
taxes, with 68% of those working with an advisor reporting that
they had tax-efficient strategies included in their wealth transfer
plan, versus 50% of those who don’t work with an advisor.
Overall, 93% of respondents working with financial advisors said
they feel prepared (52% “extremely,” 41% “somewhat”) in regard to
their wealth transfer planning. With preparation comes peace of
mind, as 82% report that working with a financial advisor increased
their confidence in their plans, and just over half (54%) say it
increased their confidence significantly.
“Financial advisors are in a unique position to guide the wealth
transfer process, from recommending the appropriate professionals
to walking a client through next steps,” said Weaver. “The advisor
often has an established relationship with the client and their
family and can lean on that experience to help build a custom
communication plan that will work best for the family’s personal
dynamics and expectations.”
Survey MethodologyThis survey was conducted by Raymond
James in partnership with Morning Consult between November 18 and
November 24, 2022. Responses were collected online from a sample of
1,000 U.S. investors with $500,000 or more in investible assets.
Results from the full survey have a margin of error of plus or
minus three percentage points.
About Raymond James Financial, Inc.Raymond James
Financial, Inc. (NYSE: RJF) is a leading diversified financial
services company providing private client group, capital markets,
asset management, banking and other services to individuals,
corporations and municipalities. The company has approximately
8,700 financial advisors. Total client assets are $1.28 trillion.
Public since 1983, the firm is listed on the New York Stock
Exchange under the symbol RJF. Additional information is available
at www.raymondjames.com.
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Lauren Drobisch
Raymond James
727.567.2824
Raymond James Financial (NYSE:RJF)
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