Estate Planning Correlation to Wealth Distribution in America

In his article Where Do You Stand on America’s Wealth Spectrum?, finance.yahoo.com, Nov. 1, 2007, Lee Eisenberg discusses the statistics of wealth distribution in the United States based on a national survey conducted by the Federal Reserve Board. He also describes various estate planning resources available to people in different wealth categories. Eisenberg analogizes financial success to a garage parking ramp, with the top of the ramp being the highest income and net worth. Below are excerpts from his article:

Wall Street firms told their brokers they would no longer receive commissions on accounts holding less than $50,000.*** The greater the household assets, the more fees and transaction costs can be extracted from an account.***

The biggest and broadest affluent segment consists of people with investable assets of between $200,000 and $1 million to $2 million. This group is sometimes referred to as mass affluent[.]***[I]f you have, say, $300,000 in your accounts — you’re definitely of prime interest to the brokers and customer reps at Merrill Lynch, Smith Barney, Vanguard and the rest. But they need to be careful lest you cost them money.***

To assign a real live broker (oops, financial consultant) to a client who keeps too low a Number is tantamount to Safeway assigning a personal shopper to anyone who comes in to buy a quart of milk.***

The next segment up from mass affluent is where the action gets white hot. This parking level belongs to those designated as high net worth individuals (or NWIs).***Generally, HNWIs have invested assets of at least $1 million[.]***

If you’ve made it onto the top levels of the ramp — say you have at least $5 million in investments — you are deemed to be an ultra high net worth individual (or UHNWI).*** The Boston Consulting Group reports that 3,000 new households a year lay claim to $20 million or more in invested assets.***

There is yet one more place to park, higher up and more exclusive still. This spot is for people for whom even discreet, private banking is déclassé. On this level of the ramp you forgo the wealth managers at even the toniest trust companies and rely instead on your own “family office,” complete with its own in-house investment manager and staff.

Typically, families with family offices have $100 million, $500 million, $1 billion[.]*** At present, there are approximately 5,000 family offices around the country.*** People with only 20 million Numbers have begun to band together to create, in effect, multifamily offices to oversee their investments and estate planning.

Special thanks to Joel Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.