According to a report from Cerulli Associates, $38.2 trillion will be passed from the Silent Generation and first-wave Baby Boomers to heirs and charities between 2011 and 2035.
“The demographic trends that drove the financial industry to develop and distribute retirement income solutions will also lead to the necessity for products and services that address wealth transfer,’ said Lisa Plotnick, associate director and co-author of the report, in a news release.
Cerulli said advisers should consider wealth transfer in retirement income planning. “Several emerging strategies, such as the increasing use of annuities both inside and outside of trusts, can provide retirement income for beneficiaries. In essence, this is bringing retirement income planning full-circle and linking it with wealth transfer and wealth preservation,’ Plotnick said. “In a perfect world, planning for both retirement income and wealth transfer would be done in tandem. Practically speaking, however, this is not often the case.’
Life insurance has traditionally served as the basis for wealth transfer needs. Cerulli data show that the majority of advisers use universal, variable, and whole life insurance projects some or all of the time. According to Cerulli, the insurance industry is most closely aligned with wealth transfer due to the myriad applications of life insurance in this market, and the expertise and infrastructure within the insurance companies that have been performing this function for many years.
However, the products can be too complex and difficult for advisers to communicate. “Advisers are reluctant to sell something they don’t understand,’ said Jing Sun, analyst and co-author of the report. Training programs should help with this issue, and insurance firms are urged to lead the way in these efforts.’
More information about obtaining “Wealth Transfer: Sizing, Trends, and Opportunities” is available at www.cerulli.com.