There is a growing gap between what wealthy people value and how they choose to protect it against a myriad of risks through appropriate insurance, risk management and loss control programs, according to a Chubb survey of 800 affluent North Americans who were asked how they view their wealth, what they value most, whom they turn to for financial advice and what keeps them up at night.
Below is an excerpt of the report:
Whether their wealth was inherited (25%), self-made (40%) or a mix (35%), respondents to our survey stand out for working hard and playing hard. The vast majority (83%) are working, and almost a third say they would prefer never to retire. There are more millionaires in North America than ever before. Between 2019 and 2022, the number of U.S. households with net assets over US$1 million leapt by 63%, according to the U.S. Federal Reserve. In Canada, the number jumped by 23% in 2021 alone, according to Credit Suisse estimates.
But making it into the millionaires’ club is not what it used to be. A Chubb survey of affluent individuals finds that despite achieving considerable financial success, two-thirds do not consider themselves wealthy, including many with investable assets of more than $10 million.
Turbulent times globally — including geopolitical pressures and changing weather patterns — and greater risks from lawsuits all seem to leave most wealthy North Americans feeling less wealthy and far more insecure about their future. Two-thirds of respondents in the Chubb survey say that building wealth today is more challenging than ever before; and 62% say they are concerned that the current economic climate will impact their wealth, even though the economy continues to grow at a fast clip, unemployment remains low and fears of an imminent recession are receding. They worry particularly about their investments losing value and the impact of inflation, as both stock and bond markets face continued volatility.
“A lot of our clients, even those who were born into wealth, continue to work because they enjoy the work they do,” says Gary Pasternack, head of insurance advisory, Bessemer Trust. “Their wealth allows them to do work that they really enjoy.”
Wealth today means more than accumulating assets. “The real value for the families we work with has to do with something more than what they own. It has to do with education and finding their own way in the world,” says Pasternack. Wealth building and investing has always been linked to the pursuit of passions and values, even as those passions and values shift over time — from pursuing a higher quality of life to creating new experiences.
Over the next 12 months, wealthy North Americans plan to spend more on their homes, their collections, travel, education and entertainment than last year. As they invest more in creating a sanctuary at home, collecting fine art and luxury goods, and enjoying some of the experiences they missed during the pandemic, they face a complex set of risks to their wealth and lifestyle — and a growing gap in how they protect against those risks.
Beyond Owning Things: Building Sanctuaries, Creating Experiences
For successful people, wealth is more than the financial assets on their balance sheet. It is also the memories and stories behind the things they collect, the way they style their homes and the experiences they choose to create. The pandemic accelerated a shift away from simply owning things and toward investments in entertainment, travel and education — areas where respondents plan to increase spending over the next 12 months.
They also plan to devote even more resources to their homes. Home is seen first and foremost as an investment for 62% of respondents, but it also represents comfort, security and family for nearly as many. The average value of respondents’ primary homes is $6 million, and 46% already own more than one home — a number that is likely to rise. Nearly three-quarters of wealthy individuals plan to increase discretionary spending on real estate in the next 12 months, with 43% planning to upgrade or renovate their properties and 38% looking to increase the number of homes they own, continuing two trends that began during the pandemic.
This is an excerpt of Chubb's "The Wealth Report: Closing the protection gap in a time of increasing risk"