High net worth individuals in Canada are falling short in their estate planning efforts, and are displaying a growing need for financial advice, new research from RBC Wealth Management shows.

In a study conducted in collaboration with New York-based wealth marketing firm HNW, Inc. in July and August, RBC found that many individuals with investible assets of at least $1 million are facing challenges managing their money and preparing for the looming intergenerational transfer of wealth.

“Having this type of wealth certainly solves a lot of issues that an individual might face, but we discovered that many of them reported that it creates a whole additional set of circumstances which need to be addressed, which are no less important than the ones that were solved,” said Anthony Maiorino, vice-president and head of RBC Wealth Management Services.

The study involved a survey of 399 high net worth adults across the country. Only 49% of respondents said they feel that they’ve grown happier as they have accumulated more wealth.

Those with at least $5 million in investible assets were more likely to report feeling happier, but nearly one-third of them said they feel as though their wealth brings about as many problems as it solves.

“The wealthier you get, it can create happiness, but also additional problems,” said Stacey Haefele, president and CEO of HNW, Inc.

Forty per cent do not have an estate plan

More than half of the respondents said they felt a strong responsibility to preserve wealth for future generations. But half of respondents said they were concerned that their children may not be ready to successfully manage an inheritance, and more than a third worry that their children may take money for granted and make financial decisions based on short-term, rather than long-term, considerations.

Despite their concerns about the looming transfer of wealth, many of the high net worth adults surveyed said they have not yet made any formal efforts to plan for this transfer. Forty per cent of the respondents do not have an estate plan in place, and 22% said they haven’t even considered putting one together.

“Far too many of them aren’t doing that type of planning,” said Maiorino.

They may be putting off this task partly because their financial circumstances are highly complex, according to Haefele.

“It’s easy for someone who’s merely affluent or middle class to think about what they might leave behind,” she said. “It gets much more complicated when someone has a lot of money.”

For example, a high proportion of high net worth individuals are business owners – at 40% of those surveyed by RBC – which means they must think about succession planning in addition to the transfer of their wealth. They also have more considerations in terms of dividing their assets between heirs and charities.

“All of those things combine to make facing estate planning perhaps just marginally tougher for the wealthy,” Haefele said.

Maiorino said these families should be putting comprehensive estate plans into place, then reviewing and updating them every two to three years.

More HNW individuals want advice

The average millionaire in Canada is 54 years of age, according to RBC’s research. This indicates that a large proportion of this segment is approaching retirement and a point in their lives where succession planning will become top of mind.

“They’re now looking at their future,” said Maiorino. “They’re within five to 10 years of retirement, and that begins the genesis of the conversation of ‘What am I going to do when I sell, when I retire?’”

As high net worth individuals begin to seek out professional advice on these matters, RBC has witnessed a boost in demand for wealth management services from this segment.

“The number of individuals that are seeking and receiving advice and guidance is growing,” said Maiorino.

IE