From Investment News — By Emile Hallez — 

Trillions of dollars stand to be passed via inheritance from the Silent Generation to Gen Xers over the next 10 years, and that will mean a lot of hirings and firings of financial advisors.

Currently, people aged 65 to 74 have wealth totaling $22.4 trillion, which is the highest amount among any age group, according to a report today from consumer research firm Hearts & Wallets. In 10 years, an estimated 23 million households will be 75 or older, and another 5.6 million will be at least 85.

“This [wealth transfer] is not about Boomers and Millennials,” said Laura Varas, CEO of Hearts & Wallets. Assuming most people die by 80 or 85, and that the adult children of the Silent Generation today are around age 50, most of the inherited assets will go to Gen Xers, Varas said.

Among the nearly 16 million people who today are 75 or older, there are about $15.5 trillion in assets they control, she said.

With all of the inheritances that will be happening, people will need help managing assets, even if what they receive is not necessarily a windfall, according to the firm. Receiving an inheritance and experiencing the death of a family member tends to get people focused on their own financial planning, Varas said.

People who inherit $500,000 are often experienced with financial services, with 35 percent having taxable brokerages and generally having higher levels of equity in real estate than average. Nearly 60 percent also consider themselves to be at least somewhat familiar with investing. Those people may have been skeptical of some financial services providers in the past, and, if they didn’t like the arrangement, have often already fired them, Varas said.

“The people who have experienced [an inheritance] are not afraid of getting ripped off anymore,” she said. “They’re very open to getting advice.”

She has been there, she said. After losing several family members over the past couple of years, handling estates was a complicated process made worse by bad service and advice, she said.

“It’s the Wild West out there right now,” she said. “It’s interesting that more of the damage could be done before the person dies rather than after they die.”

Her father, who was diagnosed with leukemia in 2018 and died last year, had been advised to pay for medical expenses using assets in a taxable account rather than from his 403(b), she said. And even after he died, a firm continued sending him letters urging him to keep contributing to the 403(b), even as his retirement savings were overfunded, she said.

“When I see bad advice like that, I can barely contain the words I would like to use with those people,” she said.

Among the 15 different firms she had to interact with to handle her father’s and aunt’s estates, some were wonderful and showed good compliance practices, and some treated her with some level of suspicion, she said.

Those experiences aside, financial advisors can do a lot to help people with inheritance and wealth transfers, she said. Among the quarter of US households that report having received an inheritance, over half are less than $100,000, while 30 percent are between $100,000 and $500,000, and 14 percent are higher, according to the report. Even if trusts are small, they can have the same level of complexity as with handling larger ones, Varas said.

There is “an opportunity for the advisors of older people to do a better job getting to know the younger people,” she said.

Even if Gen Xers already have their own preferred financial services companies, they may be open to working with a parent’s advisor if the service is great, she said. In the past, people worked with only one to three financial services providers, but that has expanded to a range of eight to 13, she said.

“There is going to be a consolidation, but the relationships they get exposed to from their parents – they enter the consideration set.”


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