The much-hyped “great wealth transfer” is coming, but it may take a slightly more bumpy road than many advisers expect.
Cerulli's last US High Net Worth and Ultra High Net Worth Markets 2024 report projects that about $124 trillion will change hands by 2048. (It looks like that date keeps getting pushed back.) And, while $105 trillion of that will trickle down to heirs, that doesn't necessarily mean the next generation , at least not immediately.
According to the report, approximately $54 trillion of that estimated $124 trillion will pass to spouses before being transferred between generations. This represents another in a growing set of ratios highlighting the role that intergenerational transfers will play in what is predicted to be the largest intergenerational transfer of wealth ever. The main beneficiaries (of no surprise to anyone who regularly deals with transfers after death) will be women. In total, $40 trillion of the $54 trillion will go to young widows.
For advisers, this means there is a slight shift in focus from current, older male clients to their spouses (mostly female) and the next generation of their families.
“Ultimately, there are marked differences in service and product preferences between women and next-generation customers compared to current customer 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 better prepared to meet the needs of those recipients.”
That said, while the impact of the “horizontal” transfer will certainly be felt, it's important to remember that the spouses in question are still primarily members of the baby boom generation. (Nearly $100 trillion will be transferred by baby boomers and older generations, representing 81% of all transfers, according to the report.) They are likely to hold that money for only a relatively short period. So a next-gen focus is likely to take precedence (although focusing more on serving female customers and their unique needs will help on both counts).
In the short term, over the next 10 years, the report predicts that Gen X will inherit the most ($14 trillion), but over the next 25 years, Millennials will receive the bulk ($46 trillion).
“Eventually, much of the wealth held by older generations in the U.S. will either be given away or passed down to Gen X or Millennial heirs,” Horton said. “Suppliers that can build relationships and adequately address the needs of these new investors will be well positioned for success.”