Sorry kids, but leaving a legacy for heirs doesn’t rank as high as it once did, even for those that are well-off. A new TIAA-CREF survey finds that 50 percent of affluent investors – those with at least $250,000 in investable assets – say their most important investment goal is to generate income in retirement, and 41 percent say their top goal is to accumulate savings for retirement.
Only 5 percent report that their first priority is to create a legacy for their heirs. Even among higher-net-worth investors (investors with $1 million or more in investable assets), only 10 percent say leaving a legacy is their top concern.
“Retirement looms large even for higher-net-worth Americans who recognize the importance of saving and investing,” said Kathie Andrade, executive vice president and head of individual advisory services (IAS) at TIAA-CREF. “Retirement can sometimes last 20 or 30 years or more, so individuals need to strike the right balance between shorter-term financial priorities and long-term planning to help ensure they’ll have income to last throughout their retirement.”
In addition, the survey found that more than half of affluent investors first met with a financial advisor at a relatively young age, rather than waiting until they approached retirement. Thirty-four percent who have met with a financial advisor first did so before the age of 35, and 26 percent had that first meeting between the ages of 35 and 44.
Market optimism among affluent investors
The majority of affluent investors believe the economy is strong. Sixty-three percent report they are bullish on the economy, with men far more optimistic than women (73 percent versus 51 percent), and those with greater assets more positive (70 percent of those with $5 million in assets or more versus 57 percent of those with $250,000-$500,000 in assets).
Affluent investors still have concerns, however. When asked what would be most likely to make them feel less confident about the economy, 28 percent say geopolitical instability, followed by market volatility (24 percent) and an increase in unemployment rates (17 percent).
Stocks (76 percent) and mutual funds (73 percent) are the most common investments within these individuals’ investment vehicles, and 63 percent say stocks offer the most opportunity for growing their wealth, with real estate a distant second at 12 percent. However, 35 percent of respondents say their greatest concern about their investments is losses due to market downturns.
Why do the affluent look to advisors?
These concerns, among others, may prompt many affluent investors to seek out financial advice. Sixty percent of affluent investors use an advisor, compared to 39 percent of the general population1 who say they rely on an advisor. Affluent investors also prefer the personal touch of a financial advisor to more static sources of financial information. More than half (57 percent) cite their financial advisor as their most reliable source of financial information – significantly more than financial newspapers (23 percent) and financial websites (20 percent).
During times of market turmoil, investors with financial advisors are more likely to be prepared: 53 percent of respondents with an advisor say they took no action during recent market volatility because their portfolio was positioned to ride it out, compared to 41 percent of respondents without an advisor.
“With so many factors to consider, it’s not surprising that the affluent individuals who consult with a financial advisor say they benefit from their advisors’ expertise,” Andrade added. “Advisors can offer individuals a long-term perspective on investing and help them make smart decisions when they experience market volatility or major life changes, so they can stay on the path to a secure financial future.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
