Tax increases is second only to the national debt among the national issues that most concern Ultra High Net Worth Investors with a net worth between $5 million and $24.9 million (not including primary residence). It is not surprising then that tax implications is the primary factor that nearly all of these investors (91 percent) consider when choosing new investments, according to new research by the Spectrem Group.
This is followed by risk level (89 percent) and the diversity of investments (88 percent). Three-quarters of UHNW households consider the reputation of the company where an investment is made. Nearly two-thirds consider an investment’s past track record. Less than a third overall at this wealth level consider the social responsibility of the investment.
Across wealth levels, investment factors take on different levels of importance. For example, in 81 percent of Mass Affluent households with a net worth between $100,000 and $1 million (not including primary residence) a company’s reputation is the most important investment selection factor, while 89 percent of Millionaire households most consider risk when choosing an investment.
The social responsibility of investments is more important to Mass Affluent investors than it is to Millionaires (43 percent vs. 36 percent), while Millionaires put more importance on tax implications (84 percent vs. 69 percent).
In UHNW households, there are not significant differences among age, wealth levels, and occupations in considering investment selection factors. The youngest investors ages 54 and under are slightly less likely to consider the tax implications of their investments, risk level, and diversity. They are just slightly more likely to consider a company’s reputation, an investment’s track record, and the social responsibility of their investments.
Baby boomers ages 55-64, the wealthiest UHNW households with a net worth between $15 million and $25 million and senior corporate executives are the most concerned about an investment’s tax implications and risk level.
Tax implications are also most important to those who rely on a professional advisor to make all of the decisions regarding their investments. Expectedly, risk level is of the greatest concern to those who are advisor dependent and those who regularly consult a professional, but make the final decisions regarding their investments.