The great global wealth transfer will see more than 500,000 people move their assets onto the next generation.
According to a report by investor services provider IQ-EQ, this equates to more than $15trn (£11.47trn, €12.68trn).
Regionally, 41% of this wealth will be transferred from the Americas, 32% from Emea and 27.5% from Asia Pacific.
The report says that the wealth transfer is likely to begin happening within the next five years, which means plans need to be in place to make sure issues do not arise.
Coronavirus push
The large quantities of wealth are difficult to handle spread out over a period of years, but it could be even more tough in a situation like a pandemic, which could force the transfer to happen quicker than expected.
Liz Palmer, partner specialising in private client work at Howard Kennedy, told International Adviser that the pandemic will certainly have accelerated the transfer for the following reasons:
- The number of excess deaths in recent months may well have accelerated the time at which wealth is passed onto the next generation;
- All of a sudden, the children of baby boomers are finding themselves as the centre of their parents estate planning in a way that they might not have done before. This is because the over 75s are suddenly finding themselves to be more vulnerable and are thinking about making their Wills and putting plans in place. They may also be reliant on their children in a way they have never been before because of the social distancing constraints we are all under. This may have shifted the emotional balance and given the adult children a way into their parents’ lives, and their planning, that has not happened before; and
- Parents and grandparents may find themselves having to help out financially those children and grandchildren who are suffering from job insecurity at the moment, a problem which will probably get worse before it gets better. This might mean an increase in equity release schemes if more liquid assets are not available to be gifted.
Cope
If the majority of the wealth transfers are now closer than expected, then financial advisers need to be ready.
“Managers and advisers will have had to react to this and provide their advice in a way that copes with the physical and emotional changes that these issues will have generated,” Palmer said. “There have been many stories about how difficult it has been to sign your Will in lockdown, the successful advisers will be those who have found a way to make these difficulties theoretical rather than actual.
“We may also see the rise of the family business. There is evidence to suggest that family firms which are listed on the stock exchange will outperform and that the insider ownership environment created by a robust and well-run family business will be in demand.
“More general investment uncertainty may be leading to the notion that the ‘family’ involvement in family businesses leads to outperformance. The key for advisers will be to work out how to harness those qualities and turn the situation to the family’s advantage.”
