Want Your Wealth to Last for Generations?

In a study done by Merrill Lynch’s Private Banking and Investment Group it was found that a great deal of generational wealth does not surpass three generations. Please see the below excerpt:

Seven out of 10 (69 percent) high net worth Americans want their wealth to last at least through their children’s lifetimes, 43 percent through at least their grandchildren’s, and 17 percent would just as soon want it to last forever. This is according to new research from Merrill Lynch’s Private Banking and Investment Group published in a report titled “ Can You Make the Money Last? The Road to Sustainable Wealth

In more than two out of three instances, family wealth fails to outlive the generation following the one that created it, and 90 percent of the time, assets are exhausted before the end of the third generation – often referred to as the “shirtsleeves to shirtsleeves” phenomenon.1 This new Merrill Lynch study of wealthy individuals with at least $5 million in investable assets explores people’s desire to make their money last, risks that can derail this goal, and when and how wealth is discussed and transferred to future generations.

“Most families don’t make the grade when it comes to preserving wealth across generations,” said Stacy Allred, managing director and wealth strategist for Merrill Lynch’s Private Banking and Investment Group. “This unfortunate reality can often be avoided by understanding pitfalls and developing a strategy. Determining the purpose of your wealth, including how long you’d like it to last, is a critical first step. With these insights, you can establish certain safeguards and back into a spending rate that may not deplete the family assets.”

Many people have unrealistic notions about what constitutes a sustainable spending strategy should they want their wealth to last for several generations. For instance, two out of five people surveyed (39 percent) believe a portfolio could last forever with an annual distribution rate of 6 percent or more, while another one out of five (20 percent) simply has no idea what an appropriate distribution rate would be. In reality, data suggests that, even for the wealthiest families, true wealth sustainability may require an average distribution rate as low as 2 percent per year 2 – a fact understood by only 16 percent of those surveyed.

“Establishing a plan for wealth sustainability, and rallying a family to stick with it, can take comprehensive, cross-generational conversations about spending, saving and giving priorities,” said Michael Liersch, Ph.D., head of behavioral finance for Merrill Lynch. “In some cases, families may have to temper lifestyle expectations and sort through complex dynamics and emotions in order to clear the way for such candid, productive discussions.”

To read the whole article please click here.

Integrity Financial Corporation offers a holistic approach to legacy planning and wealth management that is unique and unparallel. Unlike large wealth management firms, Integrity Financial Corporation is a boutique firm driven by understanding client needs and creating genuine, lasting, relationships between advisors and clients. We strive to work with families for an effective transfer of wealth from generation to generation to aid in the longevity of wealth across countless generations. The holistic approach caters to the family and the importance of communication and education, as well as a shared family vision.

At Integrity Financial Corporation, our clients can expect to receive personalized service and expertise, built on a foundation of trust. To contact an advisor and discuss planning your financial legacy, please call us at 1.800.794.4015 or visit our website at www.ifclegacy.com.