The Great Wealth Transfer

When I was first starting out in the financial services industry there was a popular book by Harry S. Dent Jr. titled The Great Boom Ahead. Written in 1994, Dent detailed the impact the waves of maturing Baby Boomers would have on all aspects of American life. Data from the U.S. Census Bureau show that there were over 76 million born during the “baby boom” between 1946 and 1964. Of particular interest to me at the time was the impact their retirement savings would have on capital markets and the creation of wealth. Now, over 30 years later, economists are talking about the Great Wealth Transfer.

According to those economists, Baby Boomers, the youngest of whom are 61 years old and the oldest are 79 years old, will be transferring massive amounts of wealth they created to their heirs over the next two decades. Estimated amounts range from $100 to $124 trillion. Their heirs will mostly include Gen X (born between 1965 and 1980) and the Millennials (born between 1981 and 1996).

From “Boom” to “Transfer,” my interest remains on the impact on capital markets but has shifted from creation to inheritance of wealth. How are we preparing the next generation of clients? What will those younger generations want and need? How charitably inclined are they?

According to the 2024 Bank of America Private Bank Study of Wealthy Americans, the younger generations get most of their financial information from social media, are looking beyond traditional capital markets for investments (i.e. alternative assets), use a financial advisor as their primary advisor and are just as charitably inclined but potentially in different ways than their parents. Interestingly, about 30% of the respondents say their families have experienced strain over inheritance mostly due to interpersonal family dynamics. The survey included 1007 respondents with at least $3 million in investable assets who were over 21 years old.

So, as we think about our own situations, how do we mitigate the potential strain caused by this transfer of wealth? It doesn’t have to be complicated. Starting with a thoughtful wealth transfer plan and lots of communication can go a long way.

For our clients, a wealth transfer plan is an important component of their overall wealth management plan. Coordination with their estate planning attorney and accountant during the plan’s construction and execution is also essential. And as tax laws, philanthropic desires, asset amounts and potentially family dynamics change, so should the plan.

When it comes to communication, our clients have found Greenleaf’s facilitation of family meetings very valuable over the years. The focus of the meeting is directed by the client and can include anything they feel is important to discuss with their family. Often, they include discussions on specific topics such as wealth transitions, next generation financial literacy, philanthropic planning, estate tax management, estate settlement actions, etc. Or they can include a simple review of their wealth management plan. We recognize that family dynamics and needs are not static and change as they grow and evolve.

I hope everyone has an opportunity to give thanks and spend their Thanksgiving holiday with family and friends, or both. I am thankful for my family, friends, teammates and the trust our clients put in us.