The highly anticipated Great Wealth Transfer, where an estimated $124 trillion in assets from the baby-boomer generation is expected to pass to subsequent generations, has captured the attention of Gen X, Millennials, and Gen Z. However, Tim Gerend, the chief executive of the prominent financial planning firm Northwestern Mutual, which manages $366 billion in customer funds, cautions that the actual process will likely occur at a slower pace and involve more intricate factors than popular narratives and aspirations indicate.
TL;DR
- The Great Wealth Transfer of $124 trillion will be slower and more complex than anticipated.
- Wealth will first transfer to surviving spouses before reaching Gen X and Millennials.
- Financial anxiety is high due to extended lifespans and personal responsibility for financial futures.
- Northwestern Mutual focuses on multi-generational advisory groups to navigate wealth transitions.
“I think the wealth transfer isn’t going to be just a big bang,” Gerend told Coins2Day. “It’s not like, we just passed peak age 65 and now all the money is going to move.”
The explanation is straightforward. Individuals are experiencing extended lifespans, and females typically survive males, a pattern that Northwestern Mutual meticulously monitors in its mortality data. This Milwaukee-headquartered mutual insurer stands as the leading supplier of individual life insurance across the United States, managing close to $2.4 trillion in active contracts. Prior to wealth transitioning from the baby boomer cohort to subsequent generations, a significant amount will initially move to surviving partners within that same demographic, Gerend elaborated.
“There’s going to be a significant transfer across spouses first,” he said. “And so then you think about what is the time period when Gen X and Millennials will be on the other end of that inheritance, it’s more complicated than how people are commonly talking about it.”
The idea of a significant shift in wealth emerges as Americans are experiencing increasing financial strain and a continuous stream of disruptions, according to Gerend.
“It’s crazy out there and people are really anxious,” he said. First there was Covid, then “inflation and tariffs and the market and all of these things.”
Anxiety is elevated for a specific reason in Gerend’s view.
“People appreciate they’re more responsible for their own financial futures than they’ve ever been,” he said. “Employers are important, the government is important, but fundamentally people are really responsible for their own financial security for themselves and for their families all the way through their retirements, which today could last decades.”
Data points show a bleak outlook.
“People aren’t saving enough for retirement,” said Gerend. “They don’t have the protection products they need. They, by and large, don’t have advisors or they don’t have financial plans or not enough people do.”
For younger generations, this means the challenges are compounding. Gerend pointed to “lots of student debt,” “really daunting” housing affordability issues, and the psychological remnants of the 2008 Financial Crisis, widespread lack of trust in institutions including Wall Street, government, business and insurance. The stakes extend beyond the balance in your bank account, he added.
“People who are financially anxious actually suffer in all areas of their life,” Gerend said, “relationships, jobs, and health.”
The Great Wealth Transfer presents a comforting story, yet Gerend stated that Northwestern Mutual views it as a significant chance to cultivate intergenerational connections, ensuring families are aware of when assets will transition. He suggested that financial advisors and companies ought to be ready to establish rapport—or face client attrition if such connections are absent—during the process of inheritance. Should they fail to do so, he indicated that younger clientele will probably swiftly find alternative service providers capable of more effectively addressing their requirements.
Gerend stated that Northwestern Mutual's present emphasis is on developing advisory groups that serve multiple generations. These groups themselves are increasingly diverse in age, featuring Gen X and Millennial financial professionals collaborating with baby boomer advisors to reflect the family dynamics of the clients they increasingly assist. The advisors are providing financial instruction to clients' offspring and striving to forge relationships with grandchildren, he remarked.
A notable change Gerend has witnessed, stemming from the anticipated transfer of generational wealth, is an increasing candor regarding family finances and future hopes.
Discussing finances has occasionally been a sensitive subject within households, yet open conversations regarding monetary matters are now occurring more readily. Furthermore, increased openness addresses the long-standing issue where surviving partners or beneficiaries lacked clarity regarding their inheritances or how to handle them, according to him.
“Instead of seeing this as an event, the opportunity is to view it as a multi-generational relationship where you’re helping the family meet their financial goals over time,” said Gerend.