Trillions of dollars at stake: don’t overlook the Great Wealth Transfer

Thursday, July 22, 2021 | By Stephanie Wilson, Product Manager, SS&C Institutional & Investment Management

Trillions of dollars at stake: don’t overlook the Great Wealth Transfer

In the decades ahead, the world will experience a significant change in demographics and finances as older individuals transfer large amounts of accumulated wealth to younger generations. In the U.S. alone, some $68 trillion in assets is estimated to be at stake. The Great Wealth Transfer, as it is nicknamed, presents a make-or-break opportunity for wealth management firms. Firms need to be proactive to make their offerings attractive to younger generations and create tailored solutions to meet their unique needs.

The generation that is inheriting the world’s wealth has grown up in an environment where social media spotlights causes, tweets can change history, and environmental products and services can charge a premium that many will pay for the good of the planet. In everyday life, this group has learned that they are powerful as a collective voice; how they spend and invest their assets needs to feel just as impactful.

Firms that will prosper in the future will be those that capture and manage to a client’s goals beyond an expected rate of return. Goals such as paying for education and planning for retirement will always exist, but to attract a broader segment of this wealth will require making investing impactful and providing options that fit with younger generations’ approach to investing and alternatives beyond the stock market.

Having systems that allow wealth managers to offer traditional investment management, sustainable investing models, and a hybrid of the two—all in one platform—provides the flexibility to run both traditional mandates as well as being able to pivot to offerings that attract future generations.

Managing investments beyond stocks and bonds will also become increasingly important as investors look to alternatives. Wealth managers can offer their clients specialty fund investments to satisfy the desire for alternative exposure, and use separately managed (SMA) or unified managed account (UMA) capabilities to manage investments at scale.

Wealth managers will also need to meet shifting service expectations.  Younger generations are accustomed to purchasing groceries, clothing and countless other items on their smartphones while walking to grab a coffee. Almost everything is quick and convenient, and the most successful companies are branching into multiple verticals to offer customers one-stop shopping with far less capital expenditure. The old adage that “you can’t be everything to everyone” is weakening.

The same is true in the wealth management industry. Firms that will prosper in the future will be those that can offer the best relationship management to their clients—not only in the context of a solid digital presence that meets the generation’s expectations but also through transparency and control. Firms that offer financial planning, insurance, debt repayment planning, and so on, above the traditional investment management model, stand to retain assets transferred from older to younger investors.  Investment management is increasingly becoming only part of the job and, with the increase of alternatives and externally managed models, it may soon become an even smaller proportion of the job for the advisor.

As investment options and service expectations increase, a firm’s operations and systems need to link seamlessly to internal and external systems for items such as enhanced risk, financial planning and client relationship management. SS&C Global Wealth Platform provides robust tools (RESTful APIs) that allow managers to link with other tools of choice so that they can provide their customers with a comprehensive solution and quickly address the shifting needs of their clients.

Many studies suggest that 80% or more of heirs will look for a new financial advisor after inheriting their parents’ wealth. Now is the time for wealth management firms to make sure they are reviewing and enhancing their capabilities with a system like Global Wealth Platform to meet the higher demands of the newly wealthy and keep the transfer of their clients’ wealth in-house.

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