With the majority changing hands in North America, advisors must accommodate different priorities and preferences
Wealth management professionals with an eye or a hand on the high-net-worth space should be prepared to guide clients through legacy planning — and they shouldn’t expect it to be a one-off activity.
According to a recent report by Wealth-X, over half a million high-net-worth individuals will be transferring US$15.4 trillion in assets by 2030, with the average bequest amounting to US$28.2 million. The majority of that activity is projected to come from 360,000 individuals in North America, most of whom reside in the US.
“Many wealthy individuals are likely to be party to, or considering, the transfer of substantial wealth for the first time,” the report said, noting varied opportunities for wealth managers to offer guidance including sales of businesses and property, setting up foundations, donating art collections.
Instead of treating the task as a one-off endeavour, the report added, professionals assisting the wealthy should regard it as an ongoing process. This is particularly true as wealthy individuals become increasingly inclined to pass on their wealth before they pass away, with some aiming “to empower or gradually prepare the next generation by giving them limited amounts of wealth to oversee,” and others focused on practical, logistical, or tax-planning considerations.
The age groups set to receive those assets, Gen Xers and millennials, tend to be more digitally savvy than the previous generation. With that in mind, wealth managers would do well to collaborate on their terms. “They ask us to interact virtually; they want to be empowered via immediate access and smart tools,” Rolf Bauer, head of Family Solutions Switzerland at Credit Suisse told WealthManagement.com. “They want a more active role in the service they are engaged with, and more information.”
Another escalating trend, according to the report, is the desire to “place greater importance on feeling some connection with their investments and to seek meaning in the way they use their wealth.” Mirroring a trend in the investing industry, beneficiaries of wealth transfers are increasingly paying attention to ESG factors.
“The ESG sector was something very few of our clients were interested in a handful of years ago,” said Scott Hasley, managing director and head of BlackRock’s U.S. and Canada family office business. Clarifying that ESG commands a small but rapidly growing proportion of assets, he estimated that around 80% of the clients served by his business are either exploring or investing directly in equity, fixed-income, and/or alternative ESG solutions.
Aside from common-sense recommendations like taking a pro-active and long-term approach to wealth planning, the report advised wealth managers to be ready for the different priorities that recipients of riches may hold.
