Creating A Mass Affluent Division At Your Firm

If you’re a fan of classic rock, you know that  Steve Miller sang, “Time keeps on slippin’, slippin’, slippin’ into the future.” The Baby Boomers who danced to that song in the 1970s are today’s retirees. Soon, many of them will be ending their life journey. And the amount of money they will pass along to their Gen X children and Millennial grandkids is already making financial heads spin.

Forbes magazine estimates between $30 and $68 trillion will change hands in the coming years. That’s trillion with a “t,” roughly four times the European Union’s Gross Domestic Product.     

No wonder it’s called the Great Wealth Transfer.

So, just what does that mean? Let’s do the math. When you divide $30 trillion (and remember, that’s the low-end estimate) by the approximately 136 million combined Gen X and Millennial population, it comes to $220,000 per person. For a married couple, where each spouse receives an inheritance, it’s just under half a million dollars. And for some folks, it could be considerably more.

As Wes Moss, host of the popular Retire Sooner with Wes Moss podcast says, “Some people will be affected more than others, but the jolt will be felt far and wide. The question isn’t will The Great Wealth Transfer happen? We know it will. The question is how will you handle it most effectively?”

Is your firm positioned to take full advantage of this remarkable opportunity? Are you, as a financial advisor?

If the answer is no, don’t worry. You haven’t missed the boat. But there’s no time to lose, either. 

The first step is to create a mass affluent division. This group should be the go-to people at your firm for handling the situation. Next, have that team prepare strategies for both those who want to pass on their money and those who will receive it. 

Begin by doing what we do so often in our field: Talk with your clients. For aging Baby Boomers, make sure they know you can handle their estate planning. You assisted them in managing their wealth while they were accumulating it; now you can help them prepare a plan to pass it on to the next generations.

As always, ask plenty of questions. As you got to know your clients, you came to understand what they wanted to achieve with their wealth. Keep on asking about what they want that wealth to do after they’re gone.

Don’t assume that your client’s transferred wealth will automatically stay with you for management. The recipient family member probably was working with their own advisor, banker, or attorney—and they’ll probably have their own ideas for how that money should be handled. You will need to sell them on the benefits of investing their inheritance with you. 

Your mass affluent division will want to start cultivating new business as well. Remember, while around 30% of American adults have a financial plan in place, the other 70% don’t. As a result, when that wealth is transferred, a lot of people will suddenly need help managing their newly-acquired funds. So, make sure you have an updated marketing plan to reach them and make them your clients.

Be willing to adjust your thinking to this new situation as well. You will be inheriting a group of people who have little or no experience with finance or wealth management. You’ll need to become their teacher and patiently explain both the basics of how investing works and how your services can benefit them.

This is also a time for your creativity to shine. That 70% I just mentioned who’ve never utilized financial planning may be arriving late to the party. They may be toward the upper end of middle age and not far from retirement themselves. They will require a different investing strategy than a young married couple in their late twenties. 

Finally, the coming Great Wealth Transfer will be a big change from business as usual. And change can be scary at times. Don’t be intimidated by it; be prepared for it. Remember, that wealth has to be managed by someone. Don’t be afraid to get your share of it. Your competitors won’t be.