Lack of family engagement is one of the biggest challenges facing high net worth Americans with regard to family wealth. Family financial disputes are among the biggest hurdles to achieving financial goals and young family members are in the dark when it comes to understanding and managing the wealth they will eventually inherit, according to a new report by SEI.
The report, Algorithms of Wealth: Family, also revealed that a significant portion of survey participants lack confidence about their plan for passing along wealth.
SEI Private Wealth Management managing director Michael Farrell said: "Our survey uncovered an alarming lack of communication within wealthy American families. Despite viewing the family as an important financial sounding board and being anxious about successfully passing wealth to future generations, high net worth individuals are not consistently engaging with their family members on the topic of wealth.
According to the survey report, 46% of the survey participants said they would rank disputes with family over financial strategy as a top factor in holding them back from reaching their wealth goals.
While the assumption might be that communication leads to friction, it is a lack of clear, consistent communication that results in these disputes, the report says.
Despite family clashes, 21% of the respondents said that they feel most confident about financial decisions when relying on family members for advice. Yet nearly the same amount (20%) feel most confident when relying on their own intuition. While 43% said they are most confident following the advice of a wealth manager.
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Millennial confidence, however, sits in relatively stark contrast to that of their peers. 40% of this group are most confident about their wealth choices when relying on family for advice. Only 10% rely on their own intuition and 38% are most confident when following the advice of a wealth manager.
"The best financial decisions are made with input from family and trusted advisors as well as relying on personal intuition and knowledge. Balanced participation results in better communication practices and a more successful approach to wealth management," Farrell added.
Family also revealed that beyond automatic distribution between respondents and their spouses, successful individuals anticipate distributing 74% of inheritance to the next two generations, with children receiving 65% and grandchildren receiving 9%.
With the survey participants averaging $18 million in financial assets, upcoming generations are slated to inherit significant wealth. However, an overwhelming 81% of heirs do not know how much wealth they will inherit, the survey report revealed.