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Reaping the rewards of the US$84.4 trillion wealth transfer
Firms must stay on the cutting edge of complex planning and wealth structuring strategies
The Asset 20 Jan 2022

Multi-generational wealth transfer is one of the most significant factors affecting the high-net-worth (HNW) and ultra-high-net-worth (UHNW) segments in the next two decades, and firms that are able to sustainably establish advisory relationships with younger clients will reap the rewards of this rising trend.

Wealth transferred through 2045 will reach US$84.4 trillion – US$72.6 trillion in assets will be transferred to heirs while US$11.9 trillion will be donated to charities, Cerulli Associates projects in a new report.

More than US$53 trillion will be transferred from households in the Baby Boomer (1946 to 1964) generation, representing 63% of all transfers. Silent Generation (1928 to 1945) households and older stand to transfer US$15.8 trillion, which will primarily take place over the next decade.

An estimated US$35.8 trillion (42%) of the total volume of transfers is expected to come from HNW and UHNW households, which together only make up 1.5% of all households.

As a result, firms that can remain on the cutting edge of complex planning and wealth structuring tactics will be invaluable to clients as taxation becomes a more pressing concern.

According to Cerulli, grantor trusts (77%) are by far the most common way to increase the tax efficiency of HNW wealth transfer events, followed by spousal lifetime access trusts (54%) and strategic gifting (46%).

“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,” says Cerulli analyst Chayce Horton.

As transfers lead to changes in family dynamics as well as engagement preferences, financial services providers across the wealth management spectrum must adapt their business models. “Winners of walletshare will need to be prepared for changes to their business model and open to evolving with the needs of a younger demographic,” Horton says.

Family meetings and regular communication (81%) are considered the most effective wealth transfer planning strategy by HNW practices, followed by educational support (59%) and organized succession planning (31%), the research finds.

To improve relationships across generations, Cerulli recommends making family events a regular part of the advisory process. “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 says.

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