There’s Almost 600K More Millionaires. That’s Not Necessarily a Good Thing

If you love something, let it go, the old saying goes … but an advisor probably didn’t come up with that.

The Great Wealth Transfer is already upon us, and while it’s debatable exactly how much money will change hands over the next quarter of a century, most agree it is at least in the tens of trillions. Market researcher Capgemini estimates that $84 trillion will transfer to inheritors over the next 23 years. Additionally, the world’s millionaire population increased by 600,000 last year — 94% of whom were in the US. 

That’s good news for older clients’ children, but the concern for advisors is that the vast majority of next-gen high net worth clients —  81% — will switch from their parents’ wealth manager within two years after receiving their inheritance, according to Capgemini’s latest World Wealth Report. Advisors are recognizing that what worked for a client might not work for their kids, who often want more aggressive investment strategies in their portfolios and access to digital interfaces with their wealth managers. 

“The attrition rate should be a wake-up call for the industry,” said Kyle DePaolo, co-founder of DePaolo & May Strategic Wealth. “Too many advisors focus solely on the primary wealth holder and neglect building trust and relevance with the next generation.”

The Kids are Alright

While 81% does sound like a lot, it’s not surprising that clients and their younger children would have different financial concerns and goals. While baby boomers are focused on wealth preservation, next-gen HNW clients are predominantly risk-takers, interested in assets such as private equity and cryptocurrency, the report found:

• Next-gen HNW clients look for comprehensive financial planning, or concierge service, and they seek out wealth managers who can advise on everything from portfolio management, to travel, to education, the report found. 
• Younger clients also want an advisor they can seamlessly communicate with via multiple channels including phone calls, emails, and digital platforms. They have a strong preference for video calls. 

“Firms that can successfully integrate digital-first services and enhance omnichannel experiences will have the upper hand in retaining, attracting, and

delighting this population,” according to Capgemini.

What Women Want. One thing to keep in mind is that before clients’ children receive their inheritances, assets are often transferred to wives first as women tend to live longer than men. “They also are likely to make a change in advisors if the current advisor has not been engaging and addressing her,” said Lisa Kirchenbauer, senior advisor at Omega Wealth Management.