ST. PETERSBURG, Fla., Aug. 23, 2023 (GLOBE NEWSWIRE) -- 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 Methodology
This 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
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