Most Americans Ill-Prepared for the “Great Wealth Transfer”
As Baby Boomers, the most financially prosperous generation in history, are set to transfer $84 trillion in assets over the next few decades, according to Cerulli Associates, subsequent generations are bracing for “The Great Wealth Transfer.”
As the Great Wealth Transfer accelerates, 31% of Americans expect to receive an inheritance within the next five years, with Millennials (55%) and Gen Z (41%) believing it is most likely in their future, according to a survey by Citizens.
Yet nearly three-quarters of Americans (72%) lack the financial confidence required to manage a large sum of money on their own.
“Despite the fact that the majority of Americans acknowledge the importance of having an experienced financial advisor, our new survey shows that more than 50% of Millennials and Gen Z adults have received poor advice in the past,” said Brendan Coughlin, vice chair and head of consumer banking at Citizens.
The study of over 1,500 Americans, including an oversample of 500 small and mid-market business owners (SMBs), finds a huge gap in financial confidence and an urgent need for education on the benefits of working with a financial advisor.
Most Americans (61%) would seek advice from a financial expert if they received a significant amount of money, but the probability varies by generation: Gen X (67%), Millennials (61%) and Gen Z (59%) would meet with an advisor following an inheritance.
Nearly one-third (29%) of Americans said they would need to receive an inheritance of at least $1 million before seeking expert advice on how to manage it.
While many Americans are unsure how they would handle a windfall, they do have ideas about how they would spend it: 34% would start a new business, and 33% would invest in a family member’s education.
More than a third of respondents (36%) are considering purchasing a new automobile, while more than a quarter of Americans (26%) want to travel the world and 20% want to buy a vacation property.
Meanwhile, most SMB owners (69%) are not completely confident they could manage a financial windfall on their own, and 60% of SMB owners have experienced negative consequences due to bad financial advice, including lost revenue (35%) and increased debt (25%).
“Even seasoned business owners can face challenges in managing sudden financial windfalls,” said Don McCree, vice chair and head of commercial banking at Citizens. “High quality financial advice is critical to long-term success, especially for small and mid-market businesses who may have less margin for error within their balance sheets.”