First it was $18 trillion, then $35 trillion, then $41 trillion—and now?
Cerulli says cynical Gen X will seriously up the ante, transferring an astounding $68 trillion of wealth to heirs over the course of the next 25 years.
The eye-popping, Austin Powers sounding numbers are part of a new report from the global research and consulting firm, which defines a transfer of wealth as any shift of assets that occurs from one household to an heir or charitable cause either while alive or after death.
The $68 trillion can be broken down into four methods of transfer:
- gifting to heirs inter vivos (while alive),
- bequeathing to heirs (at death),
- donating to charity inter vivos, or
- bequeathing to charity.
Not surprisingly, Cerulli expects a large majority of wealth will be transferred at death, nearly 93 percent, and the rest to be donated to charity and gifted to heirs through inter vivos giving.
“This multigenerational shift in wealth will reshape the wealth management landscape over the next quarter century and will force firms to alter their existing business models and services,” Asher Cheses, an analyst at Cerulli, said in a statement. “Gen-Xers stand to be the primary beneficiary of wealth transferred from Baby Boomers.”
In fact, at the end of the 25-year period, Cerulli expects Baby Boomers will be replaced by Gen-X as the generation with the greatest wealth.
Despite the fact that it will take some time for these households to outgrow the Baby Boomer generation, building genuine and longstanding relationships with this cohort of inheritors needs to be top-of-mind among wealth management executives.
As Baby Boomers look to retire and transfer a significant portion of their wealth to the next generations (e.g., Gen-X and Millennials), high-net-worth (HNW) practices will be presented with both a major opportunity and a significant threat, notes Cheses.
Firms must respond by building multigenerational relationships with their clients and adapt to the new expectations and preferences of the next generation.
“Multigenerational wealth planning can be costly and requires a well-thought-out process. The firms that are able develop a successful strategy to not only service the evolving needs of Baby Boomers, but also effectively engage the next generation of inheritors will likely retain the greatest share assets in the coming years.”
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.
