The Great Wealth Transfer: The Future of Advice

As we teeter on the precipice of one of the greatest wealth transfers in history — in which U.S. baby boomers are expected to pass down a collective $68 trillion to Generation X and Millennials — asset managers must plan for the future of an aging client set. 

To help them do so, Bill McManus, CIMA, Managing Director – Strategic Markets, Hartford Funds, shared insights from the firm’s partnership with the MIT AgeLab during NICSA’s 2019 Strategic Leadership Forum in Ponte Vedra Beach, Florida.

The MIT AgeLab was created in 1999 to study changing demographics, and specifically the impact of increasing life expectancies. The multidisciplinary research program works with businesses, governments, and NGOs to improve the quality of life of the aging population and their caregivers. 

“If you go back to 1900, which in the grand scheme of history is not that long ago, life expectancy in the industrialized world was less than 50 years,” McManus said. “Fast forward to today, and the prospect of living into our ’80s, ’90s, and beyond is pretty much expected. At the AgeLab, they call that a longevity bonus.”

That bonus is mostly uncharted territory for today’s asset managers, who must find a way to navigate clients’ newfound longevity. According to McManus, MIT research indicates that aging populations will continue to be lifelong learners in their pursuit of a fulfilling existence. From a client standpoint — especially within female populations — that means that they’re likely to research product solutions and form ideas for what their futures will look like. 

McManus said healthcare should be factored into the client conversation when planning and modeling for income needs, future distribution, and cost.

“For example, if an advisor doesn’t know that a client is, let’s say a Type 2 Diabetic, they could be three or four times off in terms of the estimation of cost over the life of that client,” he said. “It’s a fine line to walk, but advisors need to understand the impact of having conversations around healthcare because of the impact it can ultimately have on the plan.”

The AgeLab suggests that every financial advisor ask every client three questions predicative of their future quality of life: 1) Who will change your light bulbs? 2) How do you get an ice cream cone? 3) Who am I going to have lunch with?

“These questions have proven to be extremely effective at starting the conversation around what the AgeLab considers the most crucially important topics that we needed to be planning for,” McManus said.

Ultimately, McManus encouraged the audience to find ways to elevate the advisor-client experience. “We go to work every day to think about outcomes and experiences of our clients, and improving the conversations we have with them can be really beneficial,” he said. 

Note: Although the observations contained in this work represent the best thoughts of the individuals comprising the NICSA panel, they do not necessarily reflect the views of NICSA or any of its member organizations. Matters addressed in this work may touch upon legal or regulatory matters, however nothing herein is intended to be or should be construed as legal advice. You should contact your own counsel in order to obtain legal advice regarding these or any other matters.

Leave a Reply

NICSA: 8400 Westpark Drive, 2nd Floor McLean, VA 22102 • Tel: 508.485.1500 • Fax: 508.485.1560