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A version of this article first appeared in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly guide to high net worth investors and consumers. Sign up to receive future editions straight to your inbox. More than $100 trillion in household wealth is expected to be transferred as part of the Great Wealth Transfer, the largest in US history, according to a new report. With personal wealth doubling in the past 12 years, and more wealth concentrated at the top, especially among the aging baby boomers, financial leaps are expected to accelerate in the coming years. By 2048, about $124 billion is expected to be passed on to family members and charities, according to a report by Cerulli Associates. In total, $18 billion will go to charity and $106 billion will go to families and heirs. Much of that will come from the rich: About $62 trillion will go from the richest 2% of Americans, or those with a net worth of more than $5 billion. While the largest transfers are a decade or two away, about $2.5 trillion a year is passed down to next generations and spouses, according to the report. Annual revenue will reach $3 trillion by 2030 and $4 trillion in 2036, eventually reaching more than $5 trillion. “It’s already happening,” said Chayce Horton, senior analyst at Cerulli wealth management. As more women, millennials and Gen Zers are poised to join the ranks of the new rich, the face of American wealth is set to undergo the most radical change in decades, with far-reaching implications for wealth management, luxury, fundraising and philanthropy. Women will gain an increasing share of wealth in the coming years. According to Cerulli, $54 billion will go to spouses, most of whom are women. These “horizontal transfers,” where one spouse inherits wealth before passing it on to younger generations, will be particularly prominent over the next decade. Generation X will be the biggest beneficiary over the next decade, demographically speaking. Generation X is expected to inherit $14 trillion by 2034 and $39 trillion by 2048. Put another way, of the $2.5 trillion that passes through each year, about $1 trillion goes to Xer Xers. Millennials will receive their inheritance around 2038, expecting to inherit $46 trillion over the next 25 years. Generation Z is next, with $15 trillion expected to be given over the same period. Calculating inherited wealth, especially over decades, is as much art as science. Current trends in asset values, bequests, charitable giving, and the life expectancies and spending rates of the wealthy are subject to change. Whether the Great Wealth Transfer will be as profitable for heirs (and the wealth planning industry) as advertised remains to be seen. So far, estimates and forecasts are growing. Cerulli’s previous estimate of the Great Wealth Transfer in 2021 projected a total of $84 trillion to flow over 25 years. The nearly 50% increase in the estimate was driven by three powerful economic forces: inflation, rising asset values and increased concentration of wealth. To make his calculations, Cerulli uses the Federal Reserve’s Survey of Consumer Finances, the most comprehensive federal data on the financial well-being and wealth of American households. It then takes savings rates, retirement spending, equity, bond and real estate forecasts and applies expectations about life expectancy, taxes and benefits, and wealth transfer patterns to create a forecast. Horton said that $84 trillion adjusted for inflation would be $100 trillion today. Asset prices have also risen in value since Cerulli’s last valuation, with shares up 27% and property values up 39%. Because assets are concentrated at the top in the US, most of the post-pandemic gains have gone to the wealthy. According to the report, the share of wealth held by those worth $10 million or more increased from 40% in 2020 to 44% in 2023. In 2020, up to 61% in 2023. “High-net-worth households are more likely to have a replacement for assets. the end of their lives,” Horton said. While spread over 25 years, the Great Wealth Transfer will create tectonic shifts in the wealth economy. In the short term, wealth management firms, family offices, trust and estate attorneys, and other wealth advisors to the wealthy They will focus on planning and structuring the most effective and efficient ways to transmit. Educating the next generation will also be essential. “The first step is to prepare the current customers is,” said Horton. In the longer term, the wealth management industry, luxury brands and nonprofits will have to adapt to a completely different customer base, shifting from older male wealth creators to more female and next-generation customers. “The second step beyond the core customer it’s about reaching out to spouses, significant others, children and business partners to build a consulting practice that can sustainably engage with those stakeholders,” Horton said. “And finally bring them in as active customers.” To accommodate the new client base, firms serving affluent clients need to hire more women and younger advisers to better reflect and relate to new clients, Horton said. “It’s mirroring the consulting practice with the client,” Horton said.
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A version of this article first appeared in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly guide to high net worth investors and consumers. Sign up to receive future editions straight to your inbox.
More than $100 trillion in household wealth is expected to be transferred as part of the Great Wealth Transfer, the largest in US history, according to a new report.
