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The Lede: How should we prepare for the Great Wealth Transfer?

In July’s edition of the Lede, Adam Gale discusses the great wealth transfer. As things start to change with more next-gens becoming family principals, the private client sector is going to need to adapt. Families should be encouraged to talk regularly about their values and vision, so that they can clearly see their differences and try to understand each other.

Young people sunset

This article is an extract from Transmission Private’s monthly newsletter, The Lede, which tracks the world of reputation management for private clients. You can sign up for the newsletter on our website via the tab at the bottom of this article or by completing the form here.

What do we mean by the Great Wealth Transfer? In the UK, £5.5 trillion is expected to pass between the generations by 2047. As next-gens become family principals, this will in turn have profound implications for the private client sector as a whole.

Why is this happening now? It’s a matter of demographics first, economics second. Baby boomers not only created an unprecedented amount of wealth, they have also (fortunately) lived a lot longer on average than their predecessors, which has delayed intergenerational inheritance. But with the oldest boomers approaching 80, time is starting to catch up.

That’s a bit morbid isn’t it? Death is a fact of life, as anyone who’s ever had to construct a family succession plan will know, and ignoring it can cause all sorts of problems. As Macfarlanes’ Mark Hunter explains in our IMHO section, if you don’t prepare adequately, the family can fracture, and its wealth and legacy can dissipate remarkably quickly.

What should we expect? New people bring fresh ideas. In our Table Talk section, veteran advisor Rosalyn Breedy describes how next gens are pushing towards high innovation sectors, direct investments and venture capital, while increasing the priority given to ESG and impact investing.

This isn’t one of those ‘millennials are from Mars, baby boomers are from Venus’ things, is it? Certainly not. There’s a risk of lazy stereotyping when talking about generational tribes. Of course there will be some average differences, reflecting both stage of life and life experiences, but there are plenty of boomers who are more radical than their grandkids, and vice versa. Besides, many of the older next gens are Gen X-ers or late millennials, with 15-30 years of professional experience. Don’t assume they’re naive.

How should we prepare? Families should talk regularly about values, vision and mission, what wealth means to them, and what legacy they want. It may surface legitimate differences of opinion, or indeed change the odd mind. Two generations of the same family are unlikely to be so culturally far apart that they can’t see where the other is coming from. In any case, they’re more likely to find common ground once their differences are out in the open.

And advisors? Advisors also need to adapt. Many next-gen clients will want next gen advisors, who can bring a different perspective themselves. This doesn’t mean all the older advisors will get ‘transferred’ out the way once the will gets read, but it does mean the same process of intergenerational dialogue and learning must happen outside the family as well as inside.

Takeaway… As Sam Cooke sang, a change is gonna come. But this shouldn’t be seen as a threat. It is an opportunity for families to preserve their wealth and legacy with fresh ideas. It just needs to be handled carefully.

Transmission Private publishes a monthly newsletter that tracks the future of reputation management for private clients.

Sign up to The Lede

Transmission Private publishes a monthly newsletter that tracks the future of reputation management for private clients.