Much has been made about the greatest multigenerational wealth transfer in history, numbers that started to circulate as baby boomers began to retire. Cerulli Associates is out with new numbers that now peg the amount at a whopping $84 trillion.
Cerulli projects that wealth transferred through 2045 will breakdown as follows:
- $72.6 trillion in assets will be transferred to heirs,
- $11.9 trillion will be donated to charities,
- More than $53 trillion will be transferred from households in the Baby Boomer generation, representing 63% of all transfers,
- Silent Generation households and older stand to transfer $15.8 trillion, primarily taking place over the next decade,
- $35.8 trillion (42%) of the overall total volume of transfers is expected to come from high-net-worth and ultra-high-net-worth households, which together only make up 1.5% of all households.
As a result, wealth management and retirement saving firms that can remain on the cutting edge of complex planning and wealth structuring tactics for high-net-worth individuals and families, in particular, will be invaluable to clients as taxation becomes a more pressing worry.
Sophisticated planning strategies
According to the research, grantor trusts (77%) are far and away the most common way to increase the tax-efficiency of wealth transfer events among HNW practices, followed by spousal lifetime access trusts (54%) and strategic gifting (46%).
“Financial services providers across the wealth spectrum must adapt their business models.”
“As taxes become an increasingly pressing regulatory issue among legislators, wealth managers will need to keep a pulse on the latest developments at the state and federal levels,” Chayce Horton, an analyst at Cerulli, said in a statement.
As transfers lead to changes in family dynamics and engagement preferences, financial services providers across the wealth spectrum must adapt their business models.
“Winners of wallet share will need to be prepared for changes to their business model and open to evolving with the needs of a younger demographic,” Horton added.
According to the research, family meetings and regular communication (81%) is considered the most-effective wealth transfer planning strategy by HNW practices, followed by educational support (59%), and organized succession planning (31%).
Cerulli recommends making family events a regular part of the advisory process to improve relationships across generations.
“Extending interfamily relationships to involve the entire range of stakeholders rather than just the current controllers of that wealth will create a greater sense of responsibility and inclusion among heirs that will help in the likely case that more complex discussions about management of the family’s wealth occur in the future,” Horton concluded.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
