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The Great Wealth Transfer: Why Advisors Should Be Paying Attention to Millennials

Learn about the Great Wealth Transfer, how it will affect millennials, and why financial advisors need to pay attention.

Over the next two decades, the largest wealth transfer in the history of our nation will take place. The event is so significant that economists and journalists are calling it “The Great Wealth Transfer,” and it begins now. 

Who is passing on this wealth, and where will these funds end up? Who will play key roles in ensuring that this wealth transfer will go smoothly? Keep reading to find out just how large of an impact the Great Wealth Transfer will have on our demographics and economy, and why financial advisors should be paying close attention.

The great wealth transfer: the facts

Over the next two decades, nearly $70 trillion in assets will be inherited through the Great Wealth Transfer. It’s nearly impossible to wrap your mind around this number. For instance, Forbes created a list of the world’s wealthiest individuals, including Elon Musk and Jeff Bezos. It reports that the 2,668 wealthiest people on this planet own a collective $12.7 trillion. The Great Wealth Transfer will be over five times this amount. To say that this wealth transfer is astronomical is an understatement at best.

So who owns this astronomical amount of wealth?

At the conclusion of World War II, the United States experienced a population and economic boom. Americans born during this time period belong to the Baby Boomer generation. Aged 58 to 76 today, this generation enjoyed decades of economic growth and amassed a jaw-dropping amount of wealth. Today, they control 70 percent of the nation’s disposable income.

As they age further into their golden years, roughly 45 million Baby Boomer households are finalizing their estate plans and making arrangements to pass down their wealth.

So who will be on the receiving end of this $70 trillion? The answer: millennials.

Some Gen Xers stand to inherit part of the Great Wealth Transfer, but the majority of heirs are millennials. To put things into perspective, millennials currently own less than 5 percent of the nation’s wealth. In a matter of years, the dynamic will completely flip. They are expected to inherit $5 trillion over the next decade. By 2045, they’ll begin to inherit over $2.5 trillion annually.

However, this begs the important question: who will be there to support this historical intergenerational wealth transfer? This is where advisors come in. 

Millennial attitudes toward estate and financial planning

Traditional financial advisement firms primarily focus on older clients who have already amassed a significant amount of wealth. However, the Great Wealth Transfer statistics clearly show us that the tides will quickly turn. The next generation of American wealth owners will be millennials. Although they may not hold significant wealth today, the data shows that it’s time to begin understanding millennial attitudes and begin cultivating relationships and adapting to their needs.

Millennial attitudes toward estate planning

For the first time in history, millennials are creating more estate plans than individuals over the age of 50. This proves that the generation as a whole cares about and is prioritizing “future planning”, and financial advisors can and should be helping them do so. A recent study found that 60% of millennials who expect to receive at least $1 million from their parents would be interested in working with their parents’ financial advisors. 90% said it would be valuable to meet with the advisor some time in the future. And only those forward-thinking advisors who can speak to estate planning will be able to capture this massively untapped business.    

Millennial attitudes toward financial planning

While millennials have become more proactive regarding their estate planning, their attitudes toward financial planning stand to be cultivated further.

Millennials currently have no money (no offense.) With less than 5 percent of the nation’s wealth, they are less likely to own homes and have less interest in investing their money. Keep in mind that millennials came of age during the 2008 financial crisis. With tight budgets amidst soaring costs of living, they are more focused on surviving in the present than investing toward their future. The U.S. Trust and Insights report surmises that millennials prefer to grow their income instead of building long-term capital. 

Millennials who do invest show a strong preference for digital tools. They tend to utilize user-intuitive investment apps and robo-advisors. Further, many millennial investors mostly hold digital currencies such as crypto and NFTs. 

The Great Wealth Transfer: the next big opportunity for financial advisors

Historically, close to 90 percent of assets leave an advisor (and thus their firm) when a client passes away. With The Great Wealth Transfer in the pipeline, financial advisors and firms cannot afford this loss. With the correct strategies, this socioeconomic phenomenon can be turned into a huge opportunity. This is where the missing piece of the financial wellness puzzle comes into play: estate planning.

Mentioned earlier, millennial attitudes toward estate planning have shifted quickly. The global pandemic served as a major reality-check for young adults who realized that life can change drastically in an instant, and it’s critical to have protections in place. Although Millennials may not have amassed significant wealth to protect, estate planning allows them to secure their future medical care and make important arrangements such as Guardianships for their children. Through the Great Wealth Transfer, however, the financial piece will take the center stage.

The estate planning industry adapted to millennial needs and the financial planning industry can follow suit

Now, you may be wondering how the estate planning industry managed to capture the attention of millennials. It’s not like millennials suddenly turned onto estate planning on their own. Rather, the proper tools and resources were available when the need became acute due to the pandemic.

Companies like Trust & Will leveraged technology to revolutionize the estate planning industry. They turned something that used to feel archaic and inaccessible into something tangible that millennials could understand. Further, we created online tools and educational resources so that millennials could follow the self-starter, self-help pathway that they tend to prefer. 

The financial planning industry also has a ripe opportunity to follow suit if they haven’t done so already. The Great Wealth Transfer is creating an acute need for millennials, and thus the industry can capture their attention by being ready with millennial-friendly tools and resources. 

They can help foster a more financially-literate generation by making educational resources widely available. Further, they can develop digital tools to make financial planning more attractive, practical, and affordable for younger clients. Last but not least, financial planning can be made more accessible by lowering investment minimums. Firms that can modernize the holistic process of financial planning, which should include estate planning, will surely engage millennials more successfully relative to their more traditional counterparts. 

How financial advisors can (and are) adopting estate planning

Trillions of dollars are about to change hands, and financial advisors have an incredible opportunity to position themselves to support millennials, who will predominantly be new to owning wealth and investing. 

Estate planning brings two different opportunity pathways to financial advisors. The first opportunity is to hook millennials who already have estate plans in place and will now need to figure out the financial component. The second opportunity is to focus on Baby Boomers who need to preserve the generational wealth they are preparing for. Estate taxes can eat up as much as 40 percent of an inheritance, so financial advisors can leverage estate planning strategies to help their older clients preserve as much wealth as possible so that it can be handed down to the next generation.

Forward-thinking financial advisors are seeing that investment planning services no longer suffice. An increasing number are incorporating true financial planning strategies into their practice, including estate planning services. For instance, T3 Technology Hub’s 2022 Inside Information Survey reported that advisory firms are adopting new software categories at higher rates. Estate planning showed the second highest increase in advisor adoption between 2021 and 2022, after document management. The 2021 Kitces Report titled “The Technology That Independent Financial Advisors Actually Use (And Like)”revealed that surveyed advisors placed a 7.3 out of 10 on the importance of estate planning. 

There are several reasons for which estate planning is experiencing a high adoption rate by financial advisors. While many millennials don’t currently have a traditional financial advisor, the majority of them are willing to speak with their parents’ financial advisor. Advisors have an opportunity to build relationships with the next generation by leveraging estate planning to have legacy planning conversations. Many millennials are also interested in services that take a more holistic approach. By providing them with true comprehensive financial planning that address multiple facets of their lives (such as tax planning, student debt planning, and estate planning), advisors can add value to their services and provide increased peace of mind.

Trust & Will: software solution trusted by financial advisors

If you are considering incorporating estate planning as a part of your financial planning services, you’ll need to find a software that provides the most value for your clients. Trust & Will is popular amongst millennials and financial advisors alike.

The 2021 Kitces Report named Trust & Will as one of the estate planning softwares to watch. Further, advisors who have already adopted Trust & Will gave it one of the highest satisfaction ratings with a score of 7.5 out of 10. Here are what some real financial advisors are saying about Trust & Will:

“Getting clients to complete their wills and estate plans is often a difficult job for financial advisors.  Clients are busy and often they will de-prioritize getting a will or estate plan in place in favor of their day-to-day activities. With a fully virtual process, not only can we maintain visibility throughout and ensure completion but it’s also cheaper and more user-friendly.” – Nirav Batavia, Co-Managing Partner, Forum Financial

Trust & Will is by far the best resource for creating an estate plan. If you're looking for a simple and fast way to create a comprehensive estate plan, look no further. It only takes a few minutes to protect your family and your assets with Trust & Will.” – Samuel Deanne, Financial Advisor

Trust & Will provides an online platform that allows users to set up their estate plans from the comfort of their home homes. Further, its mission is to make estate planning easier and more accessible for new users. Accessibility in the context of pricing, as well in the context of education and resources. An individual can get started by setting up a Will-based estate plan for $199. There is a quiz for those who aren’t sure where to start, or what type of estate plan is right for them, helping them navigate where to begin. The platform is easy to navigate and uses a series of questions and prompts to guide users through the process of creating their estate planning documents, taking out a lot of the confusion and guesswork. Last but not least, Trust & Will’s Learn Center is a robust learning environment where users and guests alike can read easy-to-understand articles and guides to get the most of their estate planning experiences and come away feeling more knowledgeable and empowered.

Interested in incorporating Trust & Will’s estate planning platform into your advising practice? Want to hear more about why Trust & Will is the trusted platform amongst financial advisors, and why they give it such a high satisfaction score? Schedule a free demo to find out how Trust & Will has removed price and access barriers, allowing financial advisors to be proactive about their clients’ estate plans! You can also get started here; it’s as simple as receiving your custom referral link and we’ll handle the rest!

Trust & Will is an online service providing legal forms and information. We are not a law firm and we do not provide legal advice.