Inheritance boom—it’s a topic that we’ve been talking about for some time now and one that’s earning more and more ink in the media. For good reason. In reading a recent New York Times Magazine article, I was reminded of the fact that 2031 is only 17 years away. What’s so significant about that? Our research indicates that starting in 2031, 10 percent of the total wealth in the United States will be changing hands from Boomers to their heirs every five years. And between 2031 and 2045, the transfer reaches its peak. While the “Great Transfer”—what we’re in the middle of right now—will see over $12 trillion shift, the “Greater” wealth transfer is estimated to see over $30 trillion shift.
In the Times “What Comes After Rich Baby Boomers? Kids with a Big Inheritance,” journalist Annie Lowrey points out that much of the money I mentioned above will flow into the bank accounts of Generation Xers and Generation Yers. In some cases, that transfer is already happening. The heirs to the Walmart fortune occupy six slots on the most recent Forbes 400 list, she adds.
Now the question is, are advisors ready for the influx?
The clock is ticking
Seventeen years might seem like a lot of time to prepare for this Greater Transfer, but it’s really not when you consider what firms have to contend with. In addition to its scale, what makes this wealth transfer particularly challenging is an aging advisor pool. Then there’s the challenge of differing attitudes toward investing. Heirs expect transparency and control, and unless their providers meet their current expectations, they’ll likely pull the assets out of the firms that their parents had relationships with.
Now is the time for wealth managers to get ready for the big shift. Build family estate planning capabilities to proactively retain assets. Establish go-to-market strategies for heirs, matching them with relevant offerings. Help clients navigate their inheritances by supporting heirs during the difficult experience of a death in the family. These strategies will enable firms to differentiate themselves in a converging market. To be successful, firms must clearly define their competitive positions and strategies for each Boomers and heirs.
The Times article argues that while there’s been a lot of talk about the inheritance boom for some time now, many are quick to point out that it hasn’t really materialized. What’s important to remember, however, is that the Boomers are only now retiring, meaning the inheritance boom is just around the corner.
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