The increase in the number of affluent Americans continues.
Our Market Insights 2016 reveals that for the seventh year in a row, the number of Millionaires in the United States has grown. After topping the 10 million mark in 2014, the number of Millionaire Americans reached 10.4 million in 2015.
Similar growth was recorded in other wealth segments, up to and including investors with a net worth over $25 million.
The percentage of Millionaires also continues to climb. Among the more than 122 million households in America, 8.5 percent have a net worth of at least $1 million. That percentage was as low as 5.9 percent when the nation suffered its more recent recession in 2008.
Eventually, those investors with significant wealth will pass that wealth on to someone else. According to our research related to wealth transfer, there is a significant percentage of wealthy Americans who have not yet dealt with the issue of wealth transfer.
Our Perspective titled Money in Motion: Asset Transfer and the UHNW determined that more than one-third of affluent investors say estate planning is the component of financial planning they need help with from their financial advisor. That percentage is close to double the percentage of affluent investors who seek assistance related to the Social Security benefits (19 percent).
Surprisingly, most investors do not intend to include their financial advisor in their estate planning. Sixty-four percent of investors overall do not plan to have their financial advisor involved in executing their estate plan, and that includes 57 percent of investors with a net worth between 55 million and $25 million.
“Even when investors choose not to include their financial advisor in plans regarding asset transfer and eventual wealth distribution, there are ways advisors can assist investors with their financial futures,’’ said Spectrem president George H. Walper Jr. “Almost every decision an investor makes and an advisor considers has some ramifications on the investor’s future.”
Sixty-nine percent of affluent investors leave their assets to their spouse and 70 percent intend to leave their assets to their children. Less than one-quarter have grandchildren in their sights, while 20 percent are leaving assets to a church or other charitable organization and 19 percent are leaving assets to another family member.
There are ways advisors can assist investors with their future decisions even when they are not included in estate planning discussions.
An advisor can suggest to investors to make or update their will. A last will and testament allows an investor to state how their money and possessions are distributed upon their passing, and can include details on the guardianship of their minor children.
At the same time, advisors can suggest to investors that they consider establishing a personal trust in order to avoid the difficulty of probate court for survivors.
Life insurance is another investment vehicle advisors can assist investors with. While very wealthy investors often believe they have assets in other vehicles that can provide the same benefits of life insurance, less wealthy investors can be encouraged to consider policies that will benefit offspring when an investor passes.