The great handover: Financial planning for the next generation

The coming inheritance from the children of Boomers represents the greatest transfer of wealth in history. Here’s how everybody can get prepared.

A lot has been made about the great inheritance that the Boomer Generation will realize in the coming years, as aged parents pass away—and pass along wealth to their kids. According to a 2016 survey by CIBC, an estimated $750 billion is expected to change hands over the next few years—with more than 2.5 million people in Canada now counted over the age of 75. The number of elderly, incidentally, represents a 25 per cent jump over the level seen a decade ago.

That’s what’s on the near horizon, much of which has already been accounted for in wills and financial planning decisions. But how about the next—and not-so-far-off—transfer of wealth? Within two decades, maybe less, those Boomers will start to pass away, and that wealth will pass on yet again—but this time, combined with the massive earnings of the wealthiest generation in history. How prepared are the Boomer children for this seismic event—and how prepared is the financial planning industry?

All across North America, financial planners are thinking long and hard about the challenging road ahead. According to a 2015 study by Accenture, an estimated $30 trillion in financial and non-financial assets is expected to pass from Boomers to their heirs in the next 30 to 40 years; at its peak, between 2031 and 2045, 10 per cent of wealth will be changing hands every five years.

It’s a bounty for investors and planners, of course, but there are also built-in challenges for both. Such as: How to make sure to leave enough aside for the growing costs of homecare and medical care? In Canada, for both sexes, average life expectancy has jumped from 77 in 1990 to 82 by 2012; in another 12 years’ time, by 2030, researchers expect life expectancy to jump again to 87 for women and 84 for men in Canada. More living means more (and extensive) expenses.

That’s the obvious challenge, from an estate-planning standpoint: helping to preserve and enhance the nest egg for the kids while having enough to pay the growing bills of an aging population. But there’s also an existential challenge for planners too: How do you earn and maintain the trust of this next generation of clients? As Accenture puts it in its report, “With the average age of advisors at just over 49 in the U.S. and 54 in Canada, many current advisors are nearing retirement and might be less motivated to build foundational relationships with their clients’ children.” The authors go on to argue that “capturing the heirs and earning their long-term loyalty—even though many of these prospective clients are not yet in what are seen as desirable client segments—is going to be crucial for firms as they navigate this transfer.”

Bottom line: if you’re a Boomer, don’t think that you’re immortal—but start planning for a long life ahead, what those expenses might be, and what will be left for your heirs at the end of the road. Also consider dispersing some of your wealth before the very end. And if you’re a financial planner, think ahead to the next generation of clients: they may not have the money for decades, but they need your advice right now.


Any other financial planning issues to consider? Post a comment below.


The views and opinions expressed in this article are those of the author and do not necessarily reflect that of CPA Canada.

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