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4 Ways Advisors Are Capturing Money in Motion

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Related: The $84T Wealth Transfer Underway Now, by the Numbers: Cerulli

Multigenerational wealth transfer is underway in the U.S., and will total $84.4 trillion through 2045, according to projections in a new report from Cerulli Associates.

Forty-two percent of the overall total volume of transfers is expected to come from ultra-high-net-worth and high-net-worth households; together they make up a minuscule 1.5% of all households.

Taxation will become more concerning for these elite households, and a boon to wealth managers that can stay on the cutting edge of complex planning and wealth structuring tactics.

Cerulli research shows that 77% of high-net-worth practices use grantor trusts to increase the tax-efficiency of wealth transfer events. Fifty-four percent use spousal lifetime access trusts, and 46% employ strategic gifting.

“As taxes become an increasingly pressing regulatory issue among legislators, wealth managers will need to keep a pulse on the latest developments at the state and federal levels,” according to Chayce Horton, an analyst at Cerulli.

Horton says that as transfers lead to changes in both family dynamics and engagement preferences, financial services providers across the wealth spectrum must adapt their business models and be open to evolving with the needs of a younger clientele.

The research shows that high-net-worth practices consider family meetings and regular communication the most effective wealth transfer planning strategy, followed by educational support and organized succession planning.

To improve relationships across generations, Cerulli recommends making family events a regular part of the advisory process.

“Extending interfamily relationships to involve the entire range of stakeholders rather than just the current controllers of that wealth will create a greater sense of responsibility and inclusion among heirs that will help in the likely case that more complex discussions about management of the family’s wealth occur in the future,” says Horton.

Heightened service expectations, technological innovation/implementation and wealth transfer strategies are still top-of-mind for wealth managers, Cerulli says. Addressing these issues demands thoughtful strategic planning and investments for practices operating in an increasingly competitive environment.

See the gallery for four top strategic initiatives of high-net-worth practices as they prepare for impending wealth transfer events and adjust to the pandemic’s effect on the industry.