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Many of us have something that holds a special significance. Maybe it’s grandma’s wedding ring or a silver dollar your dad gave you that his father once gave to him. We treasure these things because it was important to the donor to pass them from their generation to the next. We’re on the threshold of a remarkable generational shift, and it carries an incredible opportunity for you and your firm.
Every generation has understood the importance of passing on a legacy to those who come after them. While sharing family keepsakes matters, the most common type of transfer from one generation to another is financial wealth. This isn’t new. But what will make the next decade so remarkable is the sheer number of people – and the correspondingly large amount of money – transferring their wealth to their children and grandchildren.
A close look at the demographics reveals a major generational shift is well underway. At last count, America had nearly 70 million Baby Boomers, folks born between 1946 and 1964. They were followed by Generation X (born 1965-1980) and then by Millennials (born 1981-1996).
As recently as 2015, Boomers held 50% of this country’s wealth, while Gen Xers and Millennials accounted for a combined total of just 18%. However, those numbers will shift dramatically this decade. By 2030, Boomers will still retain 45% of all wealth; but Gen X and Millennials will have surpassed them with 47%.
By any measurement, that’s a remarkable realignment.
Age will account for much of it. With the first Boomers now 75, we’re beginning to see millions of dollars being transferred to their children and grandchildren. This is where a significant opportunity for your firm comes into play. This generational transfer of personal wealth is creating a strong tailwind for your business since the trend will grow even stronger very soon. Taking advantage of it now can put yourself in a strong position by the middle of this century.
Consider the multiplier effect. Let’s say Grandpa Boomer passes away. In his will, he leaves an inheritance to each of his three children and five grandkids. That means his wealth has not only shifted from a single generation to two others; it has transferred from one person into the hands of eight, which creates an opportunity for you to gain seven new clients.
Count your Baby Boomer clients. Consider what would happen if you could gain three to five new clients from each of them. These clients will not only inherit wealth but grow their own. See what I mean about a strong tailwind? However, pilots will tell you it’s not enough to simply catch a tailwind; you must know how to properly navigate it to your advantage. You cannot assume the Gen Xers and Millennials who’re receiving that wealth will automatically turn to you for help managing it.
My firm made the most of this opportunity, and you can, too. Here’s how we did it.
We took the resources available through our high-net-worth RIA and leveraged that into something new: a highly personalized experience for the next generation of investors. Adding that to our menu of services ensured we will continue servicing the full range of investors, while also making sure the new wealth of Gen Xers and Millennials stays within our family of companies. We started out by taking a good look at our current business and asking, “What are we doing that will keep us from serving these new clients?”
The first order of business was making a fresh start with technology. We realized a more integrated approach with streamlined processes was needed so the next generation of clients could receive the personalized service they desire at scale. That meant adopting – and embracing – an entirely new portfolio management system, enabling our younger (and more computer-friendly) clients to access their account information online (and doing this before it was an industry wide theme). But we weren’t finished yet.
Next came making the investment process itself simpler. We understood Gen Xers and Millennials have higher planning needs, so we simplified our investment process to model-based portfolios, allowing advisers to spend more time with the new generation of investors and help them devise the right strategy for achieving their personal financial goals.
We’re now positioned to take full advantage of the coming generational wealth transfer. It worked for us, and this approach can work for your firm, too.
Missing out on this unprecedented opportunity could be the greatest regret of your entire career. By acting right now you won’t be left out. And trust me, the rewards will far outweigh owning grandpa’s old silver dollar.
Matt Reiner is a CFA, CFP®, and partner at Capital Investment Advisors, a $2.8+ Billion RIA in Atlanta. Reiner is also CEO of Wela Strategies, a sister company to Capital Investment Advisors, and is the founder and CEO of Benjamin™. Benjamin is an AI technology created by Reiner after seeing the gaps in technology used in his own firm. Reiner's true passion is using his vast experience to coach other advisors across the country, helping them evaluate their firms' practices and find the best strategies for future success. To reach Matt Reiner, visit www.MattReiner.com.
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Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
