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Wells Fargo: Millionaires' Children Lack Financial Literacy But Not Zeal for Wealth Planning

By Miriam Rozen January 10, 2019

Children of millionaires, surveyed recently by Wells Fargo’s Private Bank, give themselves “mediocre grades on financial literacy,” according to Katherine Dean, head of Wells Fargo Private Bank’s Family Dynamics unit.

The surveyed children’s self-assigned middling financial literacy grades — ranging from C- to B+ — were one among several trends Dean discovered after Wells Fargo pollsters questioned 1,003 respondents, ages 16 to 26, whose parents had at least $1 million, and, on average, $2.5 million in net worth.

Dean and her team help clients with at least $50 million in net worth, and $25 million of that managed by the bank, develop wealth-stewarding strategies across multiple generations of their families.

Her team also prepares online material and workshops for other Wells Fargo Private Bank advisors to use to help their clients with smaller AUMs with the same intergenerational issues.

A majority of the respondents (65%) — despite the lack of even A- grades — reported that they are confident they can manage their family’s wealth. Notably, the children whose parents had more assets gave themselves better financial literacy grades — B+ for those whose parents has more than $10 million in net worth, as compared to B+ for those with less asset-rich parents.

The research results may prompt Wells Fargo advisors and others to devise new strategies to successfully connect with the children of their clients — and, by doing so, increase the odds that the family’s assets stay under their management when those children inherit the wealth.

Almost half — 48% — of the respondents reported that their parents used a financial advisor and 22% of the children reported having met with their parents’ advisor. But only 3% reported meeting with the advisor regularly, even though 88% of those children say having “regular meetings with advisors would be valuable.”

If financial advisors similarly want to meet with their clients’ children more often and include them in their planning, they should start by encouraging their clients to share more about their wealth with their beneficiaries, according to Christopher Pegg, Well Fargo’s Private Bank senior director of planning for the California and Nevada region.

The advisors may do so not only because they hope more meetings will shore up their relationship with the next generation so the assets stay under their management, but also because wealth transitions tend to improve when parents have been more open with their children.

“When you ask if there has been a successful transition of wealth, the answer is never ‘Yes, because I kept all of the information to myself,’” Pegg says.