Big Four accounting firm Ernst & Young (EY) says the greatest transfer of wealth in human history is in motion, with trillions of dollars in assets passed down this year.
In its Global Wealth Management Industry Report, EY estimates baby boomers will hand down up to $3 trillion in assets to their kin this year.
EY expects the “tidal wave” of wealth transfer from baby boomers to their families to continue until the dawn of a new decade.
“It can be estimated that US$2 trillion – $3 trillion will be inherited from wealthy donors during 2024; in many markets, tens or even hundreds of billions [of dollars] will change hands this year. In 2023, more billionaires were created by inheritance than by entrepreneurship.
The inheritance of baby boomers’ wealth is not only the largest transfer of assets in world history; it will also have a transformative effect on female and next-generation inheritors. Wealthy donors will pass a staggering US$18 trillion, roughly equivalent to the annual GDP of China, to beneficiaries by 2030.”
The firm’s $18 trillion wealth transfer is significantly lower than estimates released by other firms. Global real estate consultancy firm Knight Frank believes baby boomers will pass down $90 trillion to millennials in the next two decades while others estimate the number to be between $53 trillion and $84 trillion.
Amid the “unprecedented” movement of assets, EY warns that the beneficiaries are not equipped with the necessary knowledge, experience and network to manage their new-found wealth.
“No two clients are alike, but many wealthy donors have features in common. Most are male, aged 70 or over, have benefited from decades of favorable markets and have long-standing wealth manager relationships.
In contrast, inheritors’ needs and values – and banking relationships – are far more diverse and underserved.
The first beneficiaries are often female, frequently with less exposure to managing wealth. This is a client segment whose requirements and preferences have often been less well-served than their male counterparts in the past. Younger generations, too, typically have very different goals from older donors. This includes factors such as the internationalization of wealthy families, less traditional family structures, lower financial literacy and more idiosyncratic investment beliefs.”
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