How to Help Clients After the $124T Great Wealth Transfer

There’s a whole bunch of money changing hands in the coming years, but how can advisors help their clients who have inherited their parents’ wealth?

Much ado has been made about the Great Wealth Transfer, the roughly $124 trillion estimated to change hands over the coming decade as the Baby Boomers retire and pass on their wealth to Gen Xers and millennials. About a third of wealthy families have already begun the transfer process, according to a UBS poll. But the broader shift has only just begun, said Shannon Spotswood, CEO of RFG Advisory, particularly when that figure is expanded to include businesses still owned by Boomers. It’s a major opportunity for advisors that has been talked about for decades, but is now actually taking place.

“We’re maybe in the bottom of the first inning,” she said. “I don’t think we’ve seen the full effect [of] a third of the wealth already making its move.”

One Step Ahead

While inheritances are changing hands, it’s difficult to know just how much since it’s such a slow-going process, said Dave Alison, president of wealth management at Prosperity Capital Advisors. Rather than one big event where parents pass away and “the kids get a check,” families are increasingly engaging in proactive planning, so that the next generation knows what to expect. This is how it should be, he added, since families who don’t plan ahead experience “a shock to the system.” “The money shows up at the worst possible moment emotionally, and the heirs are processing grief and a major financial event at the same time,” he said.

Experts said the most important things advisors should have their clients do post-transfer are:

• Update their estate plan with the new assets added in, as well as the beneficiaries.
• Reorganize their overall financial plan, as well as their tax plan, particularly if the client inherits an individual retirement account.
• Reconfigure their investment profiles to match their time horizons and risk tolerance, since older clients tend to have more conservative portfolios.

Stay a While. Keep in mind that when a client dies, inherited assets often leave the firm soon after. An advisor may have worked with a client for 20 years, only to see a spouse or children move those assets elsewhere within months. “That’s why it’s so important to build relationships with as many family members as possible while everyone is still around,” said Cohen Taylor, a behavioral wealth specialist with Mission Wealth. She encourages married couples to attend client meetings together and works with clients’ adult children on early financial education and college planning.

Another way to help the next generation and keep assets in house is to encourage clients to pass on those assets sooner, said Dave Pulcini, CEO of SixPoint Financial Partners. Pulcini, who also has a podcast and YouTube series, said one of his most popular videos focused on how parents can gift funds now, so they can see their children enjoy it.

“I don’t need $6 million when I’m 75 and inheriting it, right?” Pulcini said. “A lot of folks want a gift while they’re alive.”

Additional reporting by Griffin Kelly.