Latest news with #CerulliAssociates
CNBC
05-06-2025
- Business
- CNBC
Wealthy inheritors plan to fire their parents' wealth advisors
The $100 trillion wealth transfer from older to younger generations is set to reshape the wealth management industry, as younger investors plan to move their money to new advisors, according to a new report. A new survey from Capgemini shows that 81% of "next generation millionaires," or those set to inherit large wealth from their families, plan to replace their parents' wealth management firms. Most cited poor digital offerings or a lack of services and products. "We were staggered when our research came back with that number," said Kartik Ramakrishnan, CEO of financial services at Capgemini. "What that generation looks for is different from what that previous generations have looked for." Understanding the next generation of inheritors will become increasingly critical to wealth managers as a historic transfer of wealth gets underway. According to Cerulli Associates, more than $100 trillion is expected to flow from baby boomers and older generations to heirs and spouses. A majority of the transfers (over $60 trillion) will come from millionaires and billionaires, representing the top 2% of households by wealth. And most of the flows will be in the U.S. The firms that can best attract, retain and cater to the future of wealth will be best positioned for the future. More than two-thirds of wealth-management executives surveyed by Capgemini said they were focused on engaging the next generations. Yet the gap remains wide. A majority (58%) of executives surveyed admitted it was "challenging" to build relationships with the next gen. Beyond age differences, the new breed of inherited wealth (those born between 1965 and 2012) are dramatically different from boomers when it comes to investing, priorities and lifestyles. Here are five of the top priorities of the next generation and how wealth managers can best adapt: Young investors traditionally take more risk, given their timelines and age. Yet even adjusted for age, millennials and Gen Zers like to live further out on the risk curve, with meme stocks, stock options, cryptocurrencies and other more speculative asset classes. While the chief goal for wealthy boomers is wealth preservation, the next gen seeks aggressive growth, according to the Capgemini survey. The flood of online investing videos and explainers have also given younger investors more confidence taking risk. "It's a combination of both age, risk propensity and awareness," Ramakrishnan said. "It's the ability to find out more, to learn more, to get better knowledge of how they could invest." While older investors lean toward stocks and bonds, younger investors want more crypto, private equity and overseas investments. Fully 88% of investors say the next gen has more interest in private equity than baby boomers. Capgemini said younger investors believe strong returns can no longer be driven by just stocks and bonds, and that private equity and other alternatives can provide better long-term growth. Private equity is also becoming more widely available through lower minimums and third-party asset managers. While young investors want more crypto, two-thirds of wealth managers surveyed by Capgemini say they don't have investment options for emerging asset classes, including crypto. Young investors are also more likely to venture overseas with their portfolios. A majority of millennials and Gen Zers say they want "enhanced offshore investments," according to the survey. Of particular interest are the new wealth hubs around the world, including Singapore, the UAE and Saudi Arabia. The next generations "are more global," Ramakrishnan said. "They have traveled more. They understand global dynamics. That enables them to be interested and get some of the returns that they're seeing in in these in these markets." Young investors are digital natives, yet wealth management firms have been slow to adapt — still leaning on in-person meetings or phone calls for many client interactions. While 78% of baby boomers prefer face-to-face meetings over video calls, millennials want mobile apps that allow them to access and trade their portfolios. "This is not a 'let's sit down with you once a year and walk you through how your portfolio is doing,' or once a quarter and walking through your portfolio is doing," Ramakrishnan said. "This is an active engagement channel and with consumable nuggets of information that they should get." Two-thirds of millennials say they expect advanced digital offerings from their wealth managers. Nearly half complain of a lack of services available on their preferred digital channels. Aside from useful content in short "nuggets," next generation investors want real-time access to all their financial information in one place, according to the report. They also want "intuitive tools for decision making and secure transaction capabilities," according to Capgemini. More than two-thirds of baby boomers want the next generation of inheritors to receive financial education to manage their inheritances responsibly. Yet many of the education programs from wealth management firms aren't proving effective. Some say the programs are too dry, or talk down to younger investors, or feel outdated. "It's not just putting out these huge reports that talk about the impact of interest rates and what is happening with the market," Ramakrishnan said. "That's hard for people to consume. It's got to be something that's simplified, that that people can pick up and something that's actionable." Josh Brown, the CEO of Ritholtz Wealth Management, which has built a large following among GenZers with its podcasts, blogs and social media, said young clients want more authentic, personal communications. ""The new generation grew up following people, not companies," Brown said. "The winners in today's world are the firms that marry personalities and people the audience cares about with great products and services. We figured out years ago that it's make someone into a fan first and those fans become your potential clients." The Inside Wealth newsletter by Robert Frank is your weekly guide to high-net-worth investors and the industries that serve them. Subscribe here to get access today. Along with tailored investment strategies, young investors are looking for a broader range of services related to their wealth. Estate and tax planning are key, along with philanthropy advice, according to Capgemini. They also want a growing list of concierge services, from luxury travel and bespoke experiences, to advice and insights into luxury purchases, including fashion, beauty, jewelry, wine and spirits. Despite their youth, next generations are also looking for quality advice on medical care and wellness, along with education advisory (i.e., admissions). Goldman Sachs, for instance, partners with a London-based concierge to offer medical concierge support, in-home consultations with doctors and education advisory. Cybersecurity advice is also a fast-growing service for wealth management firms. "It's that ability to get something that may be exclusive, that they may not be able to get otherwise," Ramakrishnan said. "The next generations are more experience-driven than product-driven. So it's not about just buying luxury goods; it's luxury experiences, tailored experiences. Those are the kinds of partnerships that the wealth management firms can provide that will make and increase loyalty among that customer."
Yahoo
22-05-2025
- Business
- Yahoo
Trillions in SMA assets ripe for tax-friendly ETF 'exit valve'
The appreciated assets locked in tax limbo from the capital gains in separately managed accounts amount to a massive opportunity for ETF conversions, a new study said. About $2.7 trillion in SMA holdings, including $1.6 trillion among wirehouse clients and $484 billion with customers of registered investment advisory firms, could use "a rotation into a more tax-efficient solution, given how much advisors' clients dislike paying taxes on investments," according to a report last month by research and consulting firm Cerulli Associates. The increasingly popular Section 351 conversions of assets into ETFs defer capital gains and bring much more efficiency and lower costs for financial advisors, fund companies and wealth management service providers. Consolidation at RIAs is fueling the ETF transfers, too. However, experts caution that the process poses technical challenges and involves strict compliance rules requiring diversification of the holdings. While Section 351 conversions are "not something that every advisor could or should do," the move (named after a provision of the tax code) has generated "so much demand for the service that we don't need salespeople," said Wes Gray, CEO of ETF technology firm ETF Architect and asset management company Alpha Architect. The 351 conversions have become essentially "all we do on a go-forward basis" at the tech firm, noted Gray, whom Bloomberg has described as a "tax-slashing ETF trailblazer." "It's extremely complex, and it's very useful for people who manage money for high net worth, taxable types and deal with hodgepodge portfolios all the time," Gray said. "It's a lot of work, a lot of effort, and it's not easy. It's not like you just press buttons." READ MORE: Using tax-aware long-short vehicles to track down alpha So-called white-labeling services, such as ETF Architect, Tidal Financial Group and other wealth and investment technology firms like SEI and Ultimus Fund Solutions, assist portfolio managers with ETF launches and help advisors and their firms carry out the migration of assets, according to Cerulli. Last March, asset manager Eagle Capital Management "ignited industry interest" with the conversion of $1.8 billion in SMA assets into the EAGL ETF, the report noted. Rockefeller Capital Management and Nicholas Wealth Management have also created ETFs through the conversions of SMAs and other kinds of holdings. The method can act as "an exit valve for some separate accounts that have exhausted tax-loss harvesting or simply become too operationally burdensome for the advisor or asset manager" and "serve as an efficiency tool for the advisor, including as a way to deliver their strategy to clients and charge fees for it," the report said. Direct indexing available through the SMAs "had been considered a competitor to ETFs," but the conversions are getting more attention because of those capabilities, it noted. Besides the assets in SMAs, another pool of client holdings in the form of $9.5 trillion of individual securities could flow into ETFs. "While not all of this can or will be converted, the top-level asset pool is huge," the report said. "Cerulli finds a particularly applicable archetype of advisor who may be running their own SMA strategies for clients. These advisors, classified by Cerulli as insourcers, may believe they have strong investment selection abilities and in functioning as de facto asset managers, at times create separate account portfolios for their clients — a task difficult to scale and one from which wealth management firm owners will seek to shift away." READ MORE: How to unlock tax savings in incoming client portfolios And those scenarios could especially play out in the case of the frequent RIA M&A deals, since the transfers enable acquirers to "combine assets across the firm" into an ETF and "gather scale for the strategy," said Daniil Shapiro, a director with Cerulli's product development unit. The SMA transfers to ETFs represent "an interesting theme to keep an eye on in the medium term," Shapiro said. But the technical constraints will slow the process down at many firms. "You probably have discussions that are happening right now between ETF issuers and scaled RIA firms," he said. "It's important to consider this within the scope of the broader ETF industry. This is going to take a significant amount of time before we see scaled conversions of tens of billions of dollars." SMA conversions to ETFs entail jumping over at least seven logistical hurdles and navigating four types of regulatory factors, according to another report on the process by ETF Architect. For example, the current SMA clients must give their formal permission, and the firms need to keep thorough records on the transaction and coordinate it with one or more custodians. In addition, they'll have to ensure there are sufficient assets to make the process feasible and that the makeup of the new ETF aligns with the fund prospectus and complies with the regulations for investment companies, diversification mandates and formal "control" of the holdings. "It's actually really complicated and takes a lot of work. It's not like we just whip it up," Gray said. "I would say, today, a lot of people still don't know how ETFs operate. A 351, it's even more complicated, more esoteric." READ MORE: Wall Street brokers risk losing billions in fees on SEC shift For SMA investors, the problem lies in the fact that, "Once you've got low basis in these things, you can't do much," and "all 351 does — and the reason it's so disruptive — is it allows capital to flow freely" without any tax hits, Gray continued. The conversions are "going to rip out tons of operational complexity that the RIA is dealing with" as a result of "managing all of these Frankenstein portfolios," he said. Cerulli's $2.7 trillion estimate of the possible amount of SMA assets ripe for conversion sounded correct to Gray. Further transfers are likely, if the Securities and Exchange Commission approves the creation of ETF share classes in mutual funds sought by all of the largest asset managers after the expiration of Vanguard's patent. "What they don't know, because they're not that smart, is that all that's going to do is open them up to massive 351 exposure," Gray said. "It's just not looking good for people who don't have a real value proposition anymore. You can't lean on the sunk tax cost, which is a real problem."
USA Today
20-05-2025
- Business
- USA Today
American women are about to inherit $50 trillion. What is the Great Wealth Transfer?
American women are about to inherit $50 trillion. What is the Great Wealth Transfer? Show Caption Hide Caption The wealth gap: $400 billion versus the median American net worth The world's richest person had a net worth of $400 billion. This is the visual comparison of the U.S. wealth gap. Much has been written about the Great Wealth Transfer, a historic passing of assets from the oldest Americans to younger generations over the next two decades. But the kids may have to wait. Between 2024 and 2048, an estimated $54 trillion will pass from one spouse to another, rather than to children or grandchildren, in a wave of 'horizontal' transfers that follow the death of a husband or wife. And more than 95% of that wealth will go to women. Many young adults are pinning their hopes on the Great Wealth Transfer, a generational exchange of riches that could pass $84 trillion from older Americans to their children and other beneficiaries. The money is coming from aging baby boomers and members of the silent generation, who have amassed a staggering sum in home equity, investments and other assets over the years. Much of the wealth will eventually pass to children. But first, trillions of dollars will transfer from one spouse to the other within the same generation: In most cases, from a dying husband to a surviving wife. Roughly $54 trillion will pass through 'inter-spousal' transfers by 2048, according to a recent report from Cerulli Associates, a research and consulting firm for the asset and wealth management industry. Because wives tend to outlive husbands, nearly all the wealth will go to women. 'When we talk about 'next-gen,' it doesn't always mean younger people. It often means the wife,' said Alvina Low, chief wealth strategist at Wilmington Trust. Banking on an inheritance? You may have to wait. For younger Americans, the coming wave of spouse-to-spouse transfers provides a timely reminder: If you are banking on an inheritance to get you through life, you may be in for a shock. 'Even if you have wealthy parents, you might not be seeing any amount of that until you're almost retiring yourself,' said Chayce Horton, a senior analyst at Cerulli. Americans are most likely to inherit between the ages of 56 and 65, according to a 2021 analysis by researchers at the Wharton School of the University of Pennsylvania. But most Americans never inherit a dime. Men handle the finances in many marriages The Great Wealth Transfer to widows has implications, too, for millions of older Americans. Men handle the finances in many marriages, especially among older Americans. Spouses might know little or nothing of investment and retirement accounts, bill-paying routines and estate plans. 'There has always been a more traditional gender role. Men often made a lot of financial decisions in the partnerships,' said Candace Dellacona, an estates and trusts attorney in New York. 'I'm hopeful that women will take more ownership over being involved in that wealth transfer,' she said. 'Because, you know, we are responsible for a lot of it. We earn it.' Women are rapidly gaining confidence in household finance. A 2023 survey by Allianz Life found that 43% of married women considered themselves the chief financial officer at home, up from 34% in 2021. But men have long been viewed as experts on household finance, especially in wealthy households. A 2021 academic study found that husbands were considered most knowledgeable on finance in 90% of the wealthiest households, those in the top 1% by net worth. Financial advisers should talk to wives, too One aim of the Cerulli report, Horton said, is to alert financial advisers and estate planners that they should talk to both partners in a household, not just husbands. 'It's really important to establish relationships with families, rather than individuals,' he said. Dellacona put it more bluntly: 'If the financial adviser is only talking to the husband,' she said, 'get a new financial adviser.' The problem with leaving one spouse in charge of family finance will become obvious, experts say, if that partner dies first. 'You have to plan for widowhood, whether it's male or female,' said Angie O'Leary, head of wealth strategies and solutions at RBC Wealth Management-U.S. Here are a few tips for couples to prepare for the potential death of the partner who pays the bills. Work together on an estate plan Many financial advisers say Americans should have a will or trust, which instructs how to distribute property and other assets upon your death. That document is part of a larger estate plan, which also dictates who will manage your affairs in an emergency while you are alive, among other provisions. Spouses should work together on estate plans, experts say. Collaborate on naming beneficiaries Investment accounts and life insurance policies often require you to name beneficiaries, who get the money upon your death. For many Americans, beneficiary designations function as an estate plan: they're legally binding and dictate what happens to a large portion of your assets. Naming beneficiaries now will make life easier for a surviving spouse when one partner dies, experts say. Share intel on household accounts When a spouse dies, the surviving partner may be faced with a tangle of utility bills, passwords and pins to unravel. To simplify that process, create a file that contains all of that information, including printed statements for every household account. Update it as needed. Consider adding both spouses to every account, including utilities, streaming services and everyday banking. That way, if one partner dies, the other will have less trouble gaining access. Plan for long-term care More than 80% of Americans will require long-term care, according to the Center for Retirement Research at Boston College. Long-term care, such as assisted living, can swiftly drain your assets. Couples should plan together for how to cover the expense, said Anqi Chen, associate director of savings and household finance at the Center for Retirement Research. 'For widows especially, they will probably live a long time, and women are also more likely to need long-term care,' she said.
Yahoo
12-05-2025
- Business
- Yahoo
Inheritance tips: 4 things to discuss when transferring wealth
According to Cerulli Associates, older Americans are set to pass down $124 trillion in assets over the next 20 years, but many families still avoid conversations about inheritance. Tom Deans, author of "The Happy Inheritor," joins Wealth with Brad Smith to explain why discussing estate plans early can prevent chaos later. To watch more expert insights and analysis on the latest market action, check out more Wealth here. Financial consultants predict that older Americans will pass on $124 trillion in assets to their heirs over the next two decades. But let's face it. Talking about money can be uncomfortable. That's why we've got a few tips to help make those conversations a little easier. Joining me now, we've got Tom Deans, author of the Happy Inheritor. Tom, great to have you here with us. Let's let's just start there. How can families begin the conversation about inheritance and wealth transfer without creating tension or discomfort? Well, Brad, it's a great place to dive into a complex subject. I mean, we got, uh, I mean, you quoted that number there. It's roughly three hun- I mean, $300 billion dollars a day. I mean, it's a staggering amount of wealth that is transitioning between the generations. Most of it chaotically. We have a, you know, we have 137 million American adults without a will. I mean, the most important document in an estate plan is missing, roughly in half of all American adults. It's not good. Brad, um, so we know what. Um, it's an it is an uncomfortable subject. It's awkward. Culturally, parents don't really want to talk to their children about, you know, what they're going to inherit, the what the kids are going to inherit because that kind of feels like, I don't know, they're setting their kids up to receive a windfall and they don't want to take away their drive and ambition. And of course, kids don't know how to, you know, children know how to start this conversation with their parents. It feels awkward or like they're clamoring for stuff. So often, the result is silence, right? Parents and children find this kind of awkward ambivalence around this important subject called money. So my my advice is really straightforward. It's, first of all, I I think, I think when children can actually get their own, and when I say children, anyone over 18 needs a will. Uh, nothing says we die in order. So I I say to young adults all the time, if your parents aren't talking about this stuff, you can get your own will done and give your own will to your parents. You can maybe say, listen, I'm going to I'm going to be on a on a flight. I'm going to be traveling. Uh, nothing says we die in order. You should have my estate planning documents. Most parents will think, well, that's kind of weird, but, you know, you're kind of parenting us. When children parent their parents on an awkward subject like estate planning, many parents will reciprocate. There's that kind of reciprocity, and they may that may be the trigger that that causes them to kind of, you know, pass on their documents and start a family conversation. Uh, it's really, really important. Alternatively, um, Brad, I I would suggest that parents can say, listen, we'd like to talk about our long-term care. Right. So before we talk about who gets what, you know, in our estate, we also like to talk about our long-term care and who in the family is going to oversee our care. The two subjects are really intertwined. Yeah. So at what age should you have the wealth transfer talk with your kids? And and I like the strategy that you mentioned up in upfront, which is, you know, say your kids are old enough to have their own planning and, you know, put that in front of their parents. But, you know, what if your kids are not old enough to have that planning started up? So you're trying to figure out now as a parent when you begin kind of the familial conversation with your younger kids. Well, well this answer may shock you, Brad, but I think the age is five. Five at five years old, children are capable of understanding basic money concepts. They are not going to understand anything in detail, but they will they can be introduced to the idea of wealth and how it's earned versus gifting. General concepts, basic concepts. And as those children get older and older and older, then the level of detail that is shared can be comprehended slowly and absorbed. I think people want to go from zero to 100 miles an hour when it comes to money and teach everyone all in one moment in time. The reality is that moment rarely comes. And most adult children are left in the dark. It's why most wills in this country are revealed when someone dies, which is way too late. Way too late to teach people about, you know, the, you know, the power of compounding interest and the importance of saving early on and investing early on. All of these concepts can be taught at a young age, as young as five. So what are some things that parents should make sure to discuss with their children when it does come to transferring their wealth? Well, I I think first of all, um, you you absolutely need to, and this again is counterintuitive, but it is this idea of sharing your estate planning documents is absolutely crucial. Um, you know, 137 million Americans without an without a will, there is no estate plan. And to leave that conversation, um, right to the very end when someone dies, it's not just people learning about what they get. It's finding the backup documents that go, you know, the the title, the deeds to land, to real estate, insurance policies. It it is staggering the amount of questions that start getting fired when when someone dies. Of course, it's too late. Those conversations are irretrievable. So it's not just enough to do estate planning. It's important to get your family to participate in those conversations before you draft those documents. In other words, draft the documents with their input, and then go one step further and share those documents, so that the people who are named as beneficiaries will will be prepared. I mean, really my book, the Happy Inheritor, is really about preparing heirs for the smooth, calm transition of of wealth. Um, it's a it's an enormously complex subject that requires time and effort. Sign in to access your portfolio
Bloomberg
12-05-2025
- Business
- Bloomberg
Wall St. Brokers Risk Losing Billions in Fees on SEC Shift
A potential regulatory shift in favor of the ETF industry is expected to shake up the business models of Wall Street. Wirehouses and broker dealers risk losing between $15 billion and $30 billion a year in fees that they currently collect from the mutual funds they offer to customers, according to a recent report released by Cerulli Associates. Bloomberg's Emily Graffeo reports. (Source: Bloomberg)
