The much-ballyhooed ‘Great Wealth Transfer’ is coming, but it may just take a slightly more circuitous route than many advisors expect.
Cerulli’s recent U.S. High-Net-Worth and Ultra-High-Net-Worth Markets 2024 report projects that some $124 trillion will change hands by 2048. (It seems like that date keeps getting pushed back.) And, while $105 trillion of that will flow to heirs, that doesn’t necessarily mean the next generation, at least not immediately.
According to the report, roughly $54 trillion of that estimated $124 trillion will pass to spouses before transferring intergenerationally. This represents another in a growing set of reports highlighting the role intra-generational transfers will play in what’s projected to be the largest inter-generational wealth transfer ever. The main beneficiaries (unsurprisingly for anyone who regularly deals with transfers at death) will be women. In all, $40 trillion of the $54 trillion will go to newly widowed women.
For advisors, that means a bit of a shift in focus is in order from current, older male clients to their spouses (largely female) and the next generation of their families.
“Ultimately, there are notable differences in service and product preferences among women and next-generation clients compared to current client demographics,” Cerulli Senior Analyst Chayce Horton said in a statement. “And as wealth moves, these differences are likely to shift market share in favor of firms that are best prepared to meet the needs of those recipients.”
That said, while the impact of ‘horizontal’ transfer will certainly be felt, it’s important to remember that the spouses in question are still largely members of the baby boomer generation. (Nearly $100 trillion will be transferred from baby boomers and older generations, representing 81% of all transfers, according to the report.) They will likely only be holding that money for a comparatively brief period. So, a next-generation focus should likely take priority (though focusing more on serving female clients and their unique needs will help in both regards).
In the short term, over the next 10 years, the report projects that Gen X will likely inherit the most ($14 trillion), but over the next 25 years, Millennials will receive the bulk ($46 trillion).
“Eventually, most of the wealth owned by older generations in the U.S. will be either donated or passed down to Gen X or Millennial heirs,” said Horton. “Providers that can establish relationships with, and adequately address the needs of, these younger investors will be well positioned for success.”
