How big is the scale of this huge generational wealth transfer? Estimates range from 36 trillion to more than 100 trillion US dollars
Cerulli Consulting predicts that the aging population will pass on more than $100 trillion in wealth to heirs in the next few decades; while Visa ( ) New research suggests that baby boomers will leave a legacy of just $36 trillion. There is a significant difference in the calculation caliber of the two reports, which also makes the market re-examine the scale and far-reaching impact of this large-scale intergenerational wealth transfer. Wealth management institutions and various financial companies are comprehensively adjusting their business layout to welcome the next generation of wealth holders. Therefore, the two types of calculation data have extremely high industry reference value. A new intergenerational wealth transfer calculation report has triggered heated discussions in the market: How many trillions of wealth will the baby boomer generation pass on to future generations, and how this money will be consumed and invested. Last week, Visa Business and Economic Research released a wealth transfer forecast: In the next 20 years, baby boomers will pass on $36 trillion in wealth to Generation X and Millennials. That figure is far lower than Cerulli Consulting’s data, widely cited in the industry, which estimates that by 2048, aging people of all generations will transfer $105 trillion in assets to heirs. The two reports estimated that the difference exceeded US$60 trillion, prompting the market to re-examine the true scale and actual impact of this intergenerational wealth transfer. Some people believe that this will be the largest wealth transfer in human history, completely reshaping wealth management, the philanthropy industry, and the global wealth pattern; others believe that its impact will be limited and that it is just a continuation of the long-term legacy inheritance trend. The vastly different calculation results from Visa and Cerulli also highlight the importance of such forecasts to wealth management institutions: institutions are restructuring their businesses to adapt to the needs of a new generation of wealth heirs. The core perspectives of the two studies are completely different: As a payment institution, Visa focuses on measuring the scale of inherited assets that ordinary people can use for daily consumption; Cerulli, a financial consulting firm, compiles statistics on all inheritable wealth, including the huge assets held by ultra-high-net-worth individuals. In addition, Cerulli calculates the wealth transfer of all generations in the next few decades, while Visa only focuses on the asset transfer of the baby boomer generation. Wayne Best, chief economist at Visa, said: "We hope to clarify the amount of funds that can really flow into the consumer side. Many people see figures like $93 trillion and $124 trillion and mistakenly believe that all funds can be used for consumption, and the expectations are extremely optimistic. Therefore, we adopt a step-by-step dismantling of the calculation model." Visa calculation logic breakdown: The current total wealth of the baby boom generation is about $93 trillion; Excluding $5 trillion in various liabilities (primarily residential mortgages); Excluding the $28 trillion held by the top 1%. Best explained that the consumption logic of the top 1% of high-net-worth individuals with an asset threshold of more than US$12 million is completely different from that of ordinary people. The proportion of wealth consumption is extremely low, and the categories of consumption are also very different. "Their consumption patterns are completely different from ordinary people. They purchase yachts and private jets. Although this type of consumption can stimulate the economy, it is not the daily consumption recognized by the public, so we eliminate this group of people and focus on the wealth of ordinary families." Excluding the retirement and pension expenditures of the baby boomers, which amounted to US$16 trillion; modern people live longer and their pension consumption far exceeds that of the previous generation; Subtract another $8 trillion in charitable donations and taxes. In addition, Visa only counts the assets passed down by the baby boomers in the next 20 years; Cerulli calculates the period until 2048, covering the cross-generational asset transfers of all people including the Silent Generation and Generation X currently aged 46-61. After many deductions, Visa concluded that only $36 trillion of the baby boomers' total assets of $93 trillion would be passed down as inheritance to future generations. Of the US$36 trillion, US$28 trillion will be used for savings and investment, and the remaining US$8 trillion will flow to the consumer side, mainly in automobiles, real estate, tourism and retail. Best said: "8 trillion in consumer funds is by no means a small amount and will continue to add to the economy. However, the market is easily misled by 'trillion' numbers. We dismantle the calculations to restore the true reference dimension." In contrast, Cerulli’s calculations cover all inheritable assets of all age groups and all wealth levels up to 2048.
Chase Horton, deputy director of Cerulli Wealth Management, said that the biggest beneficiary of this huge intergenerational wealth transfer is the wealth management industry, not consumer goods companies. Half of the over 100 billion worth of wealth to be inherited comes from high-net-worth and ultra-high-net-worth families. In the future, the first batch of asset transfers will be given to spouses (mainly women); Cerulli estimates that approximately US$4 trillion in assets will be inherited by spouses first and then passed on to children and other relatives. "Looking at the age structure of the population, the spouse is generally several years younger than the asset holder, and the average life span is longer. The assets will remain in the hands of the spouse for a period of time and then be passed down." Cerulli's complete caliber calculation The calculation has included pension expenses, taxes, and debt deductions; the total inheritable wealth totals 124 trillion U.S. dollars, of which approximately 18 trillion is used for charity, and the remaining 106 trillion flows to spouses and children. The order of inheritance is Generation X, Millennials, and Generation Z: Gen X will inherit $14 trillion over the next 10 years; Millennials will ultimately inherit the most inheritances over the next 25 years, totaling $46 trillion. Horton reminded that the wealth management industry and companies serving high-net-worth clients must not underestimate the changes brought about by the acceleration of intergenerational wealth transfer. Currently, one quarter of wealth management clients’ assets come from inheritance. This group is second only to corporate founders and larger than corporate executives. "The core goal of our report is to clarify the current wealth distribution, predict the future flow of assets, and help the asset management industry complete business adaptation. The industry must pay attention to the maintenance of two types of customer relationships: spouses and cross-generational families."
Chase Horton, deputy director of Cerulli Wealth Management, said that the biggest beneficiary of this huge intergenerational wealth transfer is the wealth management industry, not consumer goods companies. Half of the over 100 billion worth of wealth to be inherited comes from high-net-worth and ultra-high-net-worth families. In the future, the first batch of asset transfers will be given to spouses (mainly women); Cerulli estimates that approximately US$4 trillion in assets will be inherited by spouses first and then passed on to children and other relatives. "Looking at the age structure of the population, the spouse is generally several years younger than the asset holder, and the average life span is longer. The assets will remain in the hands of the spouse for a period of time and then be passed down." Cerulli's complete caliber calculation The calculation has included pension expenses, taxes, and debt deductions; the total inheritable wealth totals 124 trillion U.S. dollars, of which approximately 18 trillion is used for charity, and the remaining 106 trillion flows to spouses and children. The order of inheritance is Generation X, Millennials, and Generation Z: Gen X will inherit $14 trillion over the next 10 years; Millennials will ultimately inherit the most inheritances over the next 25 years, totaling $46 trillion. Horton reminded that the wealth management industry and companies serving high-net-worth clients must not underestimate the changes brought about by the acceleration of intergenerational wealth transfer. Currently, one quarter of wealth management clients’ assets come from inheritance. This group is second only to corporate founders and larger than corporate executives. "The core goal of our report is to clarify the current wealth distribution, predict the future flow of assets, and help the asset management industry complete business adaptation. The industry must pay attention to the maintenance of two types of customer relationships: spouses and cross-generational families."