As a child, I grew up thinking my parents knew everything and had it all figured out. It wasn’t until I started working in financial services after college and, later, advanced planning, that I realized how far off my childhood impressions were. My parents tried their best, but with finite resources and limited knowledge, there was a ceiling on the amount of financial planning they could do. They were raising a family in a new country with new laws and systems without enough professionals to educate people like them.
The financial services industry is on the brink of a monumental transformation. Unlike previous changes driven by regulations or corporate strategies, this shift is societal and has the potential to reshape the entire landscape. The marketplace is evolving rapidly, and those who fail to appreciate the magnitude of this shift risk being left behind. Market segments that were previously underserved, such as the one that includes my parents, are becoming increasingly pertinent and at an accelerating pace. Financial professionals today must recognize and adapt to these seismic changes to stay relevant and effective.
Seismic shifts of wealth ownership
Let’s start with the most obvious shift otherwise known as “the great wealth transfer.” It’s not enough that advisors know that it’s coming; rather, they need to know it will happen. Market research firm Cerulli Associates projects that wealth transferred through 2045 will total $84.4 trillion, of which $72.6 trillion in assets will be transferred to heirs and $11.9 trillion will be donated to charity. More than $53 trillion will be transferred from Baby Boomer, representing 63% of all transfers. $35.8 trillion of the transfers is expected to come from high-net-worth and ultra-high-net-worth households, which make up only 1.5% of all U.S. households.
The feminization of wealth and influence
We’ll see the “horizontal wealth transfer” and the shift of assets to surviving spouses. In the case of Baby Boomers, chances are good the surviving spouse will be a woman given that in the U.S., women outlive men by 5 to ten years and now make up 51% of the population. That means women will be responsible for making most of the decisions regarding 70% of the intergenerational wealth transfers over the next 20 years, expected to be worth almost $90 trillion. Nielsen and MIT AgeLab recognize the growing influence of women. Nielsen identifies women as “the world’s greatest influencers” and AgeLab refers to women’s primary role as the “Chief Purchasing Officer” for their households.
The primary beneficiaries
Gen Xers will be the first generation to benefit from the wealth transfer from their Baby Boomer parents. This generation has experienced financial challenges. In a 2023 Experian survey, 74% of Gen Xers were most likely among all generations to report having experienced “financial trauma.” This generation is popularly known as the “sandwich generation” for providing financial support to their adult children and taking care of their aging parents. All the while, Gen Xers are experiencing peak earnings without having saved sufficiently for retirement. Inherited wealth will be most welcome.
There are several sources fragmenting the market. Changes in our society stemming from political polarization, lowering expectations of behavioral norms, and a growing lack of trust in our institutions are in plain view. The rules seem to be changing and disrupting our sense of who we are as individuals, neighbors, community members and citizens.
We are an increasingly multicultural nation. According to the U.S. Census, the Hispanic population grew by 1.8% over the past year, accounting for almost 71% of overall population growth in the U.S. The numbers of Black Americans and Asian Americans grew last year as well and will continue to do so.
Family structures are changing. We’ve experienced explosive growth in non-traditional households. Multigenerational households have grown from 7% to 26% in just ten years, according to a report from Generations United. Gay and Lesbian households now total just under 1 million, according to Census.gov. Females heading households represent 13% of all households; males represent 6%.
The timing of significant life events appears to be changing. These life events often trigger the need for life insurance. A recent LIMRA study presents a stark contrast in the timing of marriage, children and home ownership between 1980 and today. Among today’s 25-year-olds, 22% are married and 17% have children. In 1980, 63% were married and 39% had children. As for home purchases, research by Maxwell, a real estate consultant, indicates that more than half of single women who are buying homes are under 35. Meanwhile, more young men are staying single longer and are twice as likely to live at home than women.
Growing Wealth Divide
Today, the average Millennial has 30% less wealth at age 35 than Baby Boomers did at that age. Yet the top 10% of Millennials have 20% more wealth than did Baby Boomers when they were 35. According to an article in the American Journal of Sociology, Millennials are less likely to enter high-status occupations and more likely to work in low-skilled service jobs. This is likely a contributing factor to Millennials postponing marriage and children. And the distribution of wealth is growing more unequal because the economic returns to typical middle-class individuals have increased while returns to typical working-class individuals have stagnated or declined. Inheritances and the Great Wealth Transfer will only deepen the divide.
Financial Information Sources
A 2023 survey of Millennials and Gen Zers found that 79% of all respondents said they receive financial advice from social media, 35% receive information from family members, and 33% from internet sources.
Financial Literacy Levels Falling
There is a growing need for financial literacy in the U.S. According to the World Economic Forum (April 2024), financial literacy among Americans across all generations has hovered around 50% over the past eight years. In a March 2024 FINRA survey, only 24% of Gen Zers could answer basic financial questions. The survey pointed to unacceptably low levels of comprehension of risk and the need to insure risk among Gen Xers and Gen Zers. Keep in mind that Gen Z (born between 1997 and 2012) is the first generation that has never known life without the internet. It is also the generation whose families were hit hard by the Great Recession and the Covid-induced recession. It’s not surprising that 57% of surveyed Gen Zers prefer to put their money in savings accounts versus investments.
With the falling levels of financial literacy and the growing reliance on social media for financial information, financial professionals will recognize the importance of their financial knowledge and experience. And while people who need expertise will likely come from different cultures and have different lived experiences, they will all have something in common. They will all want to avoid financial hardship, protect the ones they love, and achieve peace of mind. It’s up to financial professionals to learn how to approach people and provide much needed information for these new markets representing growing opportunities.
Financial Professionals – Adapt & Grow with Change
I believe one of the biggest challenges to our industry is that most of us have not given much thought to how this glut of change is impacting our profession. The changes I’ve briefly described are certain to affect the status quo. Still, I don’t bring them up to sound the alarm; I’d rather this be a wake-up call to our industry for the momentous opportunities that lie ahead.
To that end, I see three categories of change required for financial professionals to adapt to these seismic shifts.
First, financial professionals should re-examine their presence, or how they interact with clients. This includes intentional adjustments for outreach, meeting setting, and standard meeting rapport. All interactions should respect the client perspective, cultural differences and the solutions people need. Could one’s standard communications and meeting settings be changed to put these growing markets more at ease or open to a productive conversation?
Second, a change in mindset will be required. Before any discussion, it’s important to understand cultural differences and the unique perspectives of the various market segments. The financial professional needs to be ready to think of female clients, not as beneficiaries but as the primary decision makers. Advice and education for younger generations needs to consider the special circumstances under which they grew up (ex. post-9/11, the Great Recessions, the coronavirus pandemic, etc.) and the unique challenges they face.
Third, financial professionals will need new or different support than they’ve relied on in the past. They’ll need to better understand the motivations of these growing markets and to adapt to the above presence and mindset. Strategies, tools and solutions will need to better connect to and address these unique market needs.
The team at MassMutual Strategic Distributors is excited to bring access to insights, strategies, and solutions to more financial professionals so that they are ready for these changes and able to adapt their businesses to grow. There are more opportunities to help people secure their future and protect the ones they love.
My sincere hope is that financial professionals do not ignore these seismic shifts and continue with business as usual or, worse, become disillusioned and resentful of the changing world around them. Instead, I want financial professionals to see this as a chance to do what the best of us have always done: adapt to the changes, modify our methods, and be the resilient pioneers that meet the challenge head on. I have great faith in our industry and its cadre of dedicated professionals. I, for one, am excited about what lies ahead.
Head of Advanced SalesatMassMutual Strategic Distributors
As Head of Advanced Sales at MassMutual Strategic Distributors (MMSD), Joel Liu leads a team of highly qualified sales support professionals in estate and business planning, to help identify business opportunities, explore options, and tailor innovative solutions for your most challenging cases. For more information, visit MMSD Advanced Sales.
Head of Advanced SalesatMassMutual Strategic Distributors
As Head of Advanced Sales at MassMutual Strategic Distributors (MMSD), Joel Liu leads a team of highly qualified sales support professionals in estate and business planning, to help identify business opportunities, explore options, and tailor innovative solutions for your most challenging cases. For more information, visit MMSD Advanced Sales.
