Don’t Overlook the Silent-to-Gen X Generational Wealth Transfer

In contrast to the common focus on inheritances by Millennials from Baby Boomers, most wealth transfers over the next 10 years will go to Generation X from the Silent Generation, according to research firm Hearts & Wallets’ “Portrait of U.S. Household Wealth 2024.”

Hearts & Wallets’ report, released Wednesday, noted that the largest cohort of households (26.3 million homes) is homes with inhabitants younger than 35 years old and with a combined $2.2 trillion investable assets. That is actually a relatively small amount of assets when compared with the Silent Generation (those born from 1928 through 1945), made up of 10.5 million households and holding $11.2 trillion in assets. Hearts & Wallets predicted the Silent Generation will see a decline of 7.4 million households to 3.1 million over the next decade.

“People are living longer,” says Laura Varas, CEO and founder of Hearts & Wallets. That means “the Silent Generation will be dying off over the next decade, especially in the next five years, more than Boomers.”

That will likely mean a shift of assets to families in the Generation X age range of about 43 through 58 as of 2023, whose ages will from 53 through 68 in 2033. The Silent Generation, as identified by Hearts & Wallets, are age 78 through 95 in 2023 and will be 88 through 105 in 2033. Varas suggests advisers recognize these two generations will be most active in terms of upcoming wealth transfers.

“Encourage conversations,” Vargas says to advisers working with both young and older clients. “Be supportive of the younger generation who are dealing with more trusts, often smaller ones, including inherited [individual retirement accounts]. Accounts registered to trusts are becoming more common, up to at least one in four households. Incidence is consistent across investable asset ranges.”

Varas also recommends retaining assets with programs for beneficiaries. Engagement can begin while donors are still alive. Beneficiaries, especially executors, may need more intensive support from the advisers as assets change hands and may need advice that reflects their new reality.

Navigating Wealth Transfer

The Baby Boomer shift will be massive when it comes. But Baby Boomers, those aged 65 through 74 in 2023, currently represent the next wave of wealth transfers, according to the researchers, not the present one.

“Baby Boomers are the larger numbers in terms of wealth and households,” Varas says. “Ages 65 to 74 currently control $22.4 trillion, more than any other age range.”

When it comes to population, the 21.2 million households aged 65 through 74 are up from 13.5 million in 2011. Households aged 65 through 74 have expanded faster than any other group, compounding at nearly 4% per year over 12 years, according to Varas.

As older clients discuss wealth transfers, they often ask about setting up trusts for their beneficiaries, says Amy Barber, a senior financial adviser at Multnomah Group.

As an adviser, Barber takes this opportunity to educate clients about the impact direct gifting can have on the financial literacy of younger generations. She says gifting strategies can not only accomplish the clients’ goals but can also help the next generation learn to become financially responsible investors.

“We often work with clients to make gifts and then begin to work on planning and investment strategies directly with those beneficiaries,” she says.

Advisers Step In

Based on Heart & Wallets’ study, customers reported getting both advice and service in only 45% of the relationships they have with their financial institutions, which included banks, brokerage and retirement firms with which they have accounts.

Hearts & Wallets’ Varas says if customers reported getting just one type of either advice or service, but not a second, they are most likely to report use of self-service tools (17%), which they do not consider advice.

Meanwhile, customers with one primary financial institution that meets all their needs are more likely to use it for advice and service. Therefore, Varas encourages firms to strive to be the primary provider,  often connected with being the main source of retirement advice. Being the primary relationship can be a challenge today, she acknowledges, as customers, especially wealthier ones, continue to increase the number of firms they use for their variety of needs.

“Weigh the benefits and costs of delivery to expand capabilities for households who want more help but do not qualify on assets,” Varas says. “That might be by improving capabilities to balance multiple goals or other options that provide higher-touch [services].”

The report from Hearts & Wallets was fielded from September 11 through October 6, 2023, drawing responses from 5,846 U.S. households.