The "Greater" Wealth Transfer - Wealth and Asset Management Services l Point of View - Accenture
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Wealth and Asset Management Services l Point of View The “Greater” Wealth Transfer Capitalizing on the Intergenerational Shift in Wealth
While the “Great Transfer” from the Greatest Generation to the
Baby Boomers is still taking place, a second and even larger wealth
transfer from the Boomers to their heirs is starting now and will
continue over the next 30 to 40 years.
While the “Great Transfer” will see over Figure 1. US Investable Assets Transferred by Year
$12 trillion shift1,2, the “Greater” wealth Investable Assets ($ Trillions) % of Total US Investable Assets
transfer is much larger, estimated at
over $30 trillion3 in financial and non- $3.0 12%
financial assets in North America (See
$2.5 10%
Figure 1). At its peak between 2031 and
2045, 10 percent of total wealth in the $2.0 8%
United States will be changing hands
every five years 4. The accelerating pace $1.5 6%
of this transfer, combined with the $1.0 4%
generational differences in the demands
and expectations of wealth management $0.5 2%
service providers, makes this massive $0 0%
transfer of wealth between generations 2011E- 2016E- 2021E- 2026E- 2031E- 2036E- 2041E- 2046E-
a defining issue for the wealth 2015E 2020E 2025E 2030E 2035E 2040E 2045E 2050E
management industry.
Besides the scale of the transfer, what Investable Assets Transferred
makes this transfer strategically difficult % of total US Investable Assets
to manage is that firms cannot rely solely
on their advisors to manage this transfer Source: Cerulli Associates: Cerulli Quantitative Update - Retail Investor Product Usage 2011
of assets between generations. With the (based on data from Cerulli Associates, Federal Reserve, Center for Disease Prevention and
average age of advisors at just over 49 in Control, Current Population Study, Internal Revenue Service)
the US5 and 54 in Canada6, many current
advisors are nearing retirement and might
be less motivated to build foundational
All transfers of assets create risks and Greatest Generation: those
opportunities for wealth management
relationships with their clients’ children. firms. However, the scale of the born in the 1920s and 1930s
“Greater” transfer and the generational
Capturing the heirs and earning their
long-term loyalty – even though many
gap in expectations raises the stakes Baby Boomers: those born
significantly. Firms that focus on
of these prospective clients are not deliberate strategies and effectively between 1946 to 1964
yet in what are seen as desirable client implement their plans will be in the
segments – is going to be crucial for
firms as they navigate this transfer. Firms
position to capture a huge base of assets. Heirs: those born in the late
Conversely, firms that fail to act or miss
can gain this loyalty by understanding the next generation’s expectations of 1960s and later
and acting upon the heirs’ needs and wealth service providers run the risk of
expectations, including creating client losing assets at an accelerating rate.
experiences in both advisor-led and
direct channels that can profitably meet
those needs and expectations today.
The result is an opportunity to increase
the chances of retaining the assets
eventually transferred.
1
Yes, the Boomers Meanwhile, some Boomers are expected to
“spend down” some of their wealth as they
Boomers’ attitudes toward advisors
are more like those of their parents,
Are Different progress from an “accumulation” period
to an “income” period. The implications
and less like those of their children
Addressing the needs of the Boomers of longer life expectancy and different Like their parents, Boomers tend to have
remains vitally important, as Boomers attitudes towards retirement means that strong existing relationships with their
are still making decisions about the firms must adequately respond to the financial advisors and they are relatively
wealth they have accumulated, as well Boomers’ changing needs for advice as comfortable with the advisor-led model.
as the wealth they still stand to inherit. well as to the reality that some heirs will We do not see a massive shift in their
All the capabilities firms have developed not stand to inherit the full value of the expectations taking place, though some
and continue to refine to meet this Boomers’ current portfolios. will continue to push for greater value
group’s demands remain integral to and more control and transparency within
medium-term profitability. In the They may distribute their wealth those relationships. The next generation
context of the wealth shift, there are differently of investors, however, is showing different
some key points that firms should be preferences and is questioning the
mindful of regarding the Boomers and Depending on the needs of their children traditional value propositions. Keeping
their attitudes towards investing: and grandchildren, Boomers may make up to date with the Boomers’ client
gifts of assets while they are alive to experience expectations is important, but
They will be around for enjoy and influence how they are used. firms cannot assume that the heirs will
In addition, they may plan on leaving share these same expectations.
a long time lump-sum bequests to institutions and
Boomers turning 65 now can expect to charities that are important to them.
live another 18 years on average (a little The advice they seek to maximize
over 16 years for men and more than 20 their independence and individuality
for women)7 and will retire later in their while minimizing tax exposure will
lives than previous generations. What’s be increasingly sophisticated. The
more, affluent Boomers’ attitudes toward strategies Boomers use for gifting or
aging are different from their parents’ distributing wealth will be influenced
generation. Affluent Boomers expect by tax and estate transfer laws. The
to remain healthy, travel and continue various methods Boomers may choose
working (for fulfillment, if not necessity), to distribute wealth create the need for
which means that their heirs will be older firms to step up their estate planning
when they receive the transferred assets. offerings within all business models.
2
Getting Ready for Figure 2. US Investable Assets by Service Tier and Age Group (trillions)
Service Tiers
the Big Shift UHNW
In the face of this large-scale shift, (>$20m)
$0.3 $1.6
there is evidence that most wealth
management firms are unprepared. Many
firms struggle to effectively manage
the estate execution process on a one- HNW $3.6
off basis today. In fact, only 6 percent ($5m-$20m) $0.7
of households use estate planning
services with their primary advisor and
the primary cause of attrition is a client
passing away and assets leaving as estates $2.4 $7.2
Affluent
are executed8. Wealth management firms ($500k-$5m)
face a two-part challenge: retaining the
loyalty and the assets of the Boomers,
while also developing a value proposition
that is relevant to the next generation $2.9 $3.0
of inheritors. Mass Affluent
(
Figure 3. Reason for Leaving Previous Provider, 2011 Since workforce licensing requirements
influence who can offer estate planning
Current provider Service
6% relationship
advice and how firms incorporate estate
6% planning into their offerings and client
interactions, firms will have to increase
Convenience
9% the development of teaming capabilities
39% Previous provider and firm-wide referral programs to
relationship
Pricing encourage collaboration. Improving
10%
planning tools and client data solutions is
a start, but putting the operating model
11% and business process elements in place is
Products Performance
19% just as important and, in some cases, the
harder piece to get right.
Establish go-to-market strategies
Source: Cerulli Associates: Cerulli Quantitative Update-Retail Investor Provider Relationships to “catch” heirs now
2011 (based on data from Phoenix Marketing International, Cerulli Associates)
Matching the heirs with their offerings
What Wealth and customer relationship management
(CRM) systems. While the primary focus of
of choice and “wowing” them is an
important step towards retaining assets
Management Firms these systems is to support the proposal
process and improve the depth of current
transferred across generations. According
to research done by Phoenix Marketing
Should Be Doing relationships, some of the same information
can be leveraged to increase client
International and Cerulli Associates,
dissatisfaction with current and previous
To succeed in retaining and engagement on topics related to estate provider relationships is the main reason
capturing assets during the coming planning. Firms can move beyond basic investors left their providers (see Figure
intergenerational wealth transfer, firms house-holding and use strong predictive 3), and only one out of every two wealth
should develop end-to-end strategies modeling capabilities to identify the “most management clients in the 30-49 age
rather than disconnected solutions, valuable families” and to detect assets with group, which stands to inherit from
focusing on the following key areas: high attrition risk. This is common practice the Boomers, is satisfied with their
within Private Banking and Ultra High primary wealth provider11. To strengthen
Build capabilities to enable family Net-Worth (UHNW) family offices, but is the relationships with the heirs, firms
estate planning at scale not currently well executed across the Mass can consider multiple approaches in
Affluent, Affluent, and even HNW service catering their offerings including creating
Family estate planning is critical during tiers. We believe that firms should make collective allocation models that enable
the wealth transfer period and will be an family estate planning a priority to prepare managing self-directed assets alongside
effective tool in attracting and retaining for both sides of the wealth transfer, and, in managed assets, bundling products
clients. The more a firm knows about the process, become the brand of choice for around life stages, and expanding the
the Boomers’ and their heirs’ plans, the the heirs. The goal is to enable advisors to product set to include cash management,
more they can do to proactively retain offer valuable advice, which will help create debt management, and insurance.
their assets. Firms have been investing a more holistic and effective portfolio
in advancing their wealth planning tools management conversation.
4
Another step that firms can take to Figure 4. Client life stage by Advisor age range, 2011
attract heirs is to draw younger advisors
to their practices, as there is a strong 100%
correlation between the ages of advisors 90%
and their clients (see Figure 4). Getting 80%
the right rookies on board and ensuring
70%
the training and compensation model in
place for them is sustainable in the future 60%
should be considered. 50%
40%
Younger investors in the 30 to 39 age
30%
bracket typically will not have much in
the way of financial assets for a number 20%
of years, but to capture the Boomers’ 10%
heirs, firms will first need to deepen 0%
relationships with the heirs as early as
Accenture believes that the “Greater” transfer of wealth will force
wealth management firms to make difficult decisions about the
right business model for long-term success.
With the wide array of models that Some firms may choose alternate
can be used to compete in the wealth strategies, such as a combination
management industry (i.e. traditional of both “catching” and “retention”
banks, private banks, direct and full- strategies through launching new brands
service brokers, etc.), firms should decide across different offerings or acquiring
how they can differentiate themselves complementary competitors. Other
in a converging market. Many firms will players may make a dramatic push for
cater to both sides of the wealth transfer the population of heirs, and these players
– the Boomers and heirs. However, to be would likely come from non-traditional
successful, they must clearly define their wealth players who are willing to test the
competitive positions and strategies for boundaries of existing business models
each of these investor groups. by pursuing disruptive strategies that
reshape the industry.
A primary factor in the internal
assessment would center on the current Accenture believes, however, that
relationships they have with the Boomers no matter which course a wealth
and the heirs. Firms that have a strong management firm pursues, its chances
base with the Boomers can leverage those of success will increase if they begin
relationships to connect with the heirs. planning now for the “Greater” transfer.
These firms may choose a “retention” Ultimately, wealth management firms
strategy to hold onto the Boomers’ can opt to change course through
assets as they are transferred by various approaches. Firms with a
optimizing the firm’s wealth management coherent strategy and the supporting
capabilities and lines of business while capabilities in place to implement
taking a deliberate, family-oriented that strategy can build a significant
approach. On the other hand, firms that competitive advantage over firms that
already have relationships with the heirs scramble to define themselves in a
can circumvent the Boomer relationship rapidly changing marketplace.
and focus instead on serving their core
client base. These firms will see the
transfer as an opportunity to take over
inheritor clients and their newly acquired
assets by creating a “catching” strategy
to attract those prospective clients who
are not satisfied with their parents’
wealth management provider.
6
Notes Contacts About Accenture
1. http://www.metlife.com/assets/cao/mmi/ Alex Pigliucci Accenture is a global management
publications/studies/2010/mmi-inheritance Accenture Wealth and Asset Management consulting, technology services and
-wealth-transfer-baby-boomers.pdf Services, Global Lead outsourcing company, with more than
alex.pigliucci@accenture.com 323,000 people serving clients in more
2. http://www.bmo.com/pdf/mf/prospectus/
en/09-429_Retirement_Institute_Report_E_ than 120 countries. Combining unparalleled
final.pdf experience, comprehensive capabilities
Kendra Thompson across all industries and business functions,
3. http://www.bankinvestmentconsultant.
Accenture Wealth and Asset Management and extensive research on the world’s
com/news/limra-loma-gen-x-gen-y- Services, Canada most successful companies, Accenture
retirement-2672706-1.html kendra.thompson@accenture.com collaborates with clients to help them
become high-performance businesses and
4. Cerulli Associates: Cerulli Quantitative
Update – Retail Investor Product Usage 2011 Mark Halverson governments. The company generated net
Accenture Wealth and Asset Management revenues of US$30.0 billion for the fiscal
5. http://www.forbes.com/sites/ Services, Sales and Distribution Lead year ended Aug. 31, 2014. Its home page is
halahtouryalai/2011/04/06/faced-with-talent mark.a.halverson@accenture.com www.accenture.com.
-shortage-merrill-wells-fargo-hire-new-blood/
Accenture team members
6. http://www.advisor.ca/my-practice/ Karime Abdel-Hay, Edward Blomquist,
succession-planning-securing-your-future-1579 Alistair Clark, Patrick Heath, Gregory Mak,
7. http://www.federalreserve.gov/boarddocs/ and Riley Nelko contributed to this paper.
testimony/2003/20030227/default.htm
8. Cerulli Associates: Cerulli Quantitative
Update – Retail Investor Product Usage 2011
9. Cerulli Associates: Cerulli Quantitative
Update – Retail Investor Provider Relationships
2011
10. Accenture: New Realities, New Approaches
- Changing the Client-Advisor Relationship in
Wealth Management
11. Cerulli Associates: Cerulli Quantitative
Update – Retail Investor Provider Relationships
2011
12. http://www.newswire.ca/en/story/917781/
trillion-dollar-wealth-transfer-myth-or-reality
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