Majority believe their children will have more difficulty financially; almost half concerned about readiness to manage inheritance
Canada’s millionaires are worried about the next generation’s financial future with 58 per cent believing their children will have a more difficult time making it financially than they did, according to new research by RBC Wealth Management. Furthermore, almost half (49 per cent) of those surveyed are concerned about their children’s readiness to successfully manage a potential inheritance and one-third (35 per cent) believe their children are too focused on the short term and may take wealth for granted.
Over half (53 per cent) of Canadian millionaires – and 67 per cent of those with assets of over $5 million – feels a responsibility to preserve wealth for future generations. At the same time, many have not yet made any formal efforts to ensure the successful transfer of their assets: 39 per cent do not have an estate plan in place and one-in-five (22 per cent) have not even considered getting one.
“Effectively managing and protecting wealth is a challenge for everyone – millionaire or not,” said Anthony Maiorino, VP and head, RBC Wealth Management Services. “It is critical to have a long-term plan that reflects personal goals and what is needed to achieve them. We work closely with our clients to develop wealth management strategies that meet their goals of preserving wealth for their children and grandchildren, while also building for a rewarding retirement.”
Seventy-nine per cent of Canada’s high net worth individuals are proud of what they have accomplished financially and the vast majority (90 per cent) think it is important for children to learn the value of money through hard work. The wealth of Canadian millionaires is by and large self-made, with wages and investment gains accounting for the largest source of assets for 25 per cent, while only eight per cent inherited the bulk of their wealth.
When asked about the critical factors to their financial success, 60 per cent of Canadian millionaires cite a diligent focus on long-term financial security, 54 per cent note a strong influence of parents or grandparents in instilling the value of a dollar and more than a quarter acknowledge luck, an entrepreneurial spirit and a strong investment advisor relationship (29, 28 and 25 per cent). Only 10 per cent feel that a fear of a failure was a key driver for them.
“Second and third generations can learn a lot from those who succeeded financially before them,” said Maiorino. “Wealth can erode quickly, but taking a long-term view, having an engrained recognition of value, and establishing strong advisor relationships will help to ensure financial success.”
Canada’s millionaires: facts and figures:
- Their average age is 54
- The majority (59 per cent) are married with grown children
- They are well educated – 28 per cent have post grad degrees
- They accumulated their first $1 million in assets by age 42
- 31 per cent have household incomes under $150k, one-third (33 per cent) $150k-$300k and 30 per cent $300k + (seven per cent preferred not to say)
- 40 per cent are business owners
- 21 per cent were born outside of Canada (and 29 per cent of those with assets of more than $5 million)
Younger millionaires (under 45 with more than $1 million in investable assets):
- are generally wealthier with 35 per cent having accumulated assets of more than $5 million
- are increasingly entrepreneurial with over half (53 per cent) owning a business
- are more likely to have been born outside of Canada (27 per cent, compared to 20 per cent of those aged 45 and over).
These are some of the findings from a survey conducted by wealth marketing firm HNW, Inc. through July and August 2010. A national sample of 399 adults with investable assets of at least $1 million was surveyed via an online questionnaire. Questions specifically related to children are based on a sample of 279. The margin of error for a sample of 399 is ±4.9 per cent in 95 out of 100 cases.
About RBC Wealth Management
RBC Wealth Management directly serves affluent and high net worth clients in Canada, the United States, Latin America, Europe and Asia. RBC Wealth Management provides integrated and diversified international wealth management expertise and solutions, asset management and trust services to high net worth individuals and to corporate and institutional clients. Services provided by RBC Wealth Management consultants, advisors, private bankers and trust officers include trust and estate planning, tax advice, discretionary investment management and investment advisory services, structured solutions, banking, lending and global custody. RBC Wealth Management has more than C$490 billion of assets under administration, nearly C$240 billion of assets under management and more than 4,500 financial consultants, advisors, private bankers and trust officers.
About HNW, Inc.
HNW, Inc. is a strategic marketing services firm focused exclusively on the high-net-worth segment. Its deep understanding of the wealthy – including their investments, lifestyle and philanthropy – paired with a powerful suite of software services make the firm a trusted advisor to the world’s leading financial services and luxury brands.
For further information:
Claire Holland, RBC, 416-974-9334
Chris Dotson, RBC, 604-408-6009