FloridaTrend.com, the Website for Florida Business


A Wealth of Information

PNC Financial Services Group surveyed 795 Americans with between $500,000 and $1 million in investable assets and 690 with more than $1 million, including 225 with more than $5 million and 116 with more than $10 million. Here are some of the results:

Holdings
High net worth investors have not made major shifts in their investment portfolios over the past year. On average, they have 46% in stocks and 16% in cash investments.

56% do not have any of their assets in investment real estate outside of their primary residence.

Threats
50% ranked declining U.S. economic competitiveness to other nations as the second-greatest threat to their family's wealth -- behind a major decline in the stock market.
About one-third say a lack of Social Security benefits would be a major wealth threat for them and their families.
One-third fear that healthcare costs will consume a larger portion of their assets.
One-quarter are providing direct financial support to their parents, with an average of $6,700 a year.

Retirement
When asked how much they would need to feel completely financially secure in retirement:

Those with less than $1 million in investable assets say on average $16 million.
Those with $1 million or more in assets say $10.8 million
Those with $5 million or more say $21.2 million.
Those with $10 million or more say $30.8 million.

Planning
One-quarter of all respondents -- and 31% of those with more than $10 million -- do not have a will. Almost half of all respondents don't have a trust.

Of 'Thrillionaires' and 'Willionaires'

Today's wealth advisers have more on their minds than the amount of money their firms can manage for you. Gone are the days of pure asset gathering as today's savvy advisers are just as interested in how you spend your money as in how much money you have.

J.P. Morgan Asset Management released a study conducted by a cultural anthropologist about the spending styles of the wealthy. It identified five archetypes -- each reflecting how those with at least $1 million in investable assets spend their time and money.

Larry Samuel, part-time Floridian and founder of Culture Planning, the consulting firm that collected the data, says that as individuals become wealthier, they also become more fragmented and specialized." It's just crazy because as you make more money and become more sophisticated, you tend to specialize more. It's not just about the megayacht you're buying, but its brand. And, not just any engine will do; it's got to have a particular type of engine."

Samuel's archetypes include:

"Thrillionaires:" Investors who like what money can buy, love spending it and see wealth as a means to privacy and exclusivity.
"Coolinaires:" Artisan-types who see creativity as the essence of life.
"Willionaires:" Those whose goal is to leave a legacy and give back to their communities.

Called "psychographics," research of this type has been around at least as long as behavioral finance has. Both attempt to arm investment advisers with more information about what makes their clients tick. The hope is that the more that's known about a wealthy investor's spending and investing habits, the better handle advisers will have in offering solutions to their wealthy clients' financial needs.

Kid Concerns

Generation Gap
The No. 1 worry
of affl uent Americans continues to be that the next generation will have a more diffi cult time fi nancially -- 83% expressed this concern vs. 81% in 2005.
Most married respondents (83%) plan to leave the bulk of their estates to their spouses. If there is no surviving spouse, their children will inherit nearly three-quarters (74%) of their parents' assets.

Impact of Inheritance
Affluent parents are not particularly concerned about the impact of an inheritance on their children. Less than a third worry that:
The inheritance you leave your children will undermine their self-reliance (29%).
Your children will squander their inheritance (22%).
Family members will fi ght over your assets and possessions (18%).
You or your spouse may remarry and your children will lose their inheritance (18%).

Special Factors
Only 32% would encourage their child to sign a prenuptial agreement. While most affl uent parents plan to treat their children "on a totally equal basis" in their wills, certain factors could affect how much a child inherits, including:
The child's mental health (73%).
The child's ability to manage money wisely (65%).
The child's physical health (64%).
The child's inability to get and keep a good job (52%).
Who parents can rely on (43%).
The child's choice of a spouse (37%).

The following were not important in determining the size of a child's inheritance:
The child's age (26%).
Who parents get along with (21%).
The child's sex (1%).
Affluent parents were evenly divided on whether they had discussed their estate plans with their children.
On average, they believe the youngest age an individual should be entrusted with a signifi cant inheritance is 26.

Bailing Out:
The Fiduciary Duty
Investing is a two-way street, as much a matter of knowing when to take profits as when to buy. "Under Florida's Prudent Investor Rule, you are required to monitor a portfolio and you're required to have a sell strategy," says John Pankauski, of the Pankauski Law Firm in West Palm Beach. "There were lessons learned from recent bear markets where money managers weren't selling and incurring excessive amounts of losses in portfolios. So as a fiduciary, knowing when or how to implement a sell strategy is very important."

No Will? No Way
Mellon Financial's private wealth management group says getting clients to think ahead and develop a comprehensive succession plan isn't as easy as it may seem. "You'd be surprised how many people we find who have gotten to a point where they have accumulated significant wealth but haven't really put in place an estate plan that accomplishes all of the objectives that they need for the succession of their money to the next generation," says Joe Fernandez, senior director of Mellon's private wealth management group in Miami.

Fernandez says it often takes a change in a client's life -- such as a major life event, contemplating retirement or thinking about his or her own mortality -- before he or she begins to seriously consider estate planning. More often than not, he says, clients have been too busy accumulating wealth to think about what they'd like to do with it.

"Lots of times people don't really know what they want their money to be when it grows up," he says. The sooner that discussion begins, the better for all concerned, Fernandez says.

Shifting Opportunities

A recent Merrill Lynch and Capgemini world wealth report cites three investment arenas in which high net worth individuals (HNWI) increased their fortunes from last year: Investments in the Asia Pacific region, Latin America and real estate.

Going forward, the report expects HNWIs to continue to transfer assets away from mature markets and into emerging ones.

"We live in a global environment where information is shared at a much greater speed than we've ever seen in the history of the world," says Kemp C. Stickney, president of Wilmington Trust FSB, Florida. "And we've got to keep that in mind when making asset allocation recommendations."

As for real estate, Stickney doesn't see Florida's bubble affecting his clients. He sees the wealthy in the state as so skilled in their real estate holdings, whether REITs, residential or commercial property, that it's not as big an issue as it is for those who bought on speculation and planned on flipping. "For the wealthy, it's kind of sit and wait."