Joel Liu, J.D. Head of Advanced Sales MassMutual Strategic Distributors (follow on LinkedIn)
Q. We’ve all heard a lot about the pending wealth transfer of between $70 and $90 trillion. Explain how longevity will impact the exchange of wealth.
While it’s true that Americans are living longer, it’s also true that women will outlive men by five to 10 years. Women also make up 51% of the population. What that means is we’re going to see a horizontal wealth transfer with the shift of assets to women. That means women will be responsible for making most of the decisions regarding 70% of the intergenerational wealth transfers over the next 20 years. This amounts to almost $90 trillion. (Forbes, March 1, 2024 / Knight Frank Report)
Q. Tell us what we should know about the generations who’ll primarily be receiving the wealth: Gen X and millennials. How are they different? What do they have in common?
Gen Xers have experienced financial challenges. In a 2023 Experian survey, 74% of participants from this generation were most likely to report having experienced financial trauma. This came largely during the “great recession.” Also known as the “sandwich generation,” Gen Xers are providing some degree of financial support to their adult children while taking care of their aging parents. Born from 1965 to 1980, they are experiencing peak earnings though they’ve likely not saved sufficiently for retirement.
Millennials (1981 to 1996) have now replaced baby boomers as the largest generation. Millennials have been slow to create their own households. This generation depicts the growing wealth divide in the U.S. The average millennial has 30% of the wealth at age 35 that baby boomers did at that age. Yet the top 10% of millennials has 20% more wealth than baby boomers had when they were 35. Millennials are more likely to change jobs rather than remain in ones which makes them unhappy. Fortunately, they are savers.
It's important to keep in mind that these are generalized characterizations of differences between the two generations. It will be important to remember they will all want to avoid financial hardship, protect the ones they love, and achieve peace of mind as the recipients of inherited wealth.
Q. What is your biggest concern about the generations who’ll be receiving significant wealth?
I am concerned about need for financial literacy in the U.S. According to the World Economic Forum (April 2024), only 50% of Americans across all generations are considered financially literate. It’s important for financial advisors to be aware. It will be important for people to understand risk and the importance of protecting against risk.
Q. How can financial professionals help alleviate this growing concern?
There is a role for financial professionals to play in making sure people appreciate the significance of the money they will be receiving but understand how to make the money grow securely for the next generation — just as their parents did before them.
Q. How are societal changes impacting what clients expect from financial professionals?
I believe clients of all generations have the expectation that their financial advisor will be respectful of differences — whether they be cultural, racial, or sexual orientation. They will expect financial advisors to demonstrate their financial knowledge and expertise in a respectful manner, not in any way condescending. And the financial advisor will be working to seek a meaningful solution and not to sell a product. It’s important to remember that only 33% to 35% of Americans work with a financial advisor (Insurance NewsNet, August 26, 2024). People are tapping into a world of financial resources available on digital platforms. Financial advisors will need to create a trusting, respectful relationship with people to gain their business.
Q. You and your team are developing adaptive client strategies for advisors. How are these different from the status quo?
Since active listening is so imperative in a good client conversation, we are equipping financial professionals with conversation starters that begin with asking the right questions. Understanding the unique needs of the client will help a proactive planning review and aid the financial professional in determining the appropriate strategy and solution to meet those needs.
Another difference in our support is access. Independent financial professionals haven’t always had access to the adaptive insights and tools that will help them connect with this growing client base. MassMutual Strategic Distributors brings the strength and stability of MassMutual’s 173 years to more industry professionals and helps them secure more financial futures.
For more client strategies from MassMutual Strategic Distributors, go online, call (844) 321-3146 or follow MassMutual Strategic Distributors on LinkedIn.
For more news, information, and strategy, visit ETF Trends.
