Private Banks Prepare For The Great Wealth Transfer

A $72 trillion global avalanche of inheritance is coming. Are private banks and wealth managers up to meeting the next generation’s needs?

Two notable statistics keep private bankers awake at night: $72 trillion and 70% to 80%. The first is the estimated wealth that high-net-worth individuals in the US alone will leave to their heirs over the next two decades. The second is the percentage of those heirs who might take their business from their parents’ trusted advisor to a new wealth manager. The figures, accepted as industry standard, come from Boston-based Cerulli Associates, and include liquid assets and the value of businesses that will be passed down.

Cerulli predicts blood will prove thicker than good works for rich baby boomers when doling out that $72 trillion total worth of expected bequests. They will leave a mere $12 trillion to charity, the bulk to family.

So far, this “great wealth transfer” is a relative trickle—about $2 trillion a year, says Chayce Horton, a senior wealth management analyst at Cerulli. However, “transfers are definitely increasing beyond our expectations,” he adds.

Start Prepping Early

Wealth managers who are unprepared for the gathering flood may be swept away by it.

To compete for clients—and the fees these mind-boggling sums of wealth transference will generate, private banks might have to nudge their investment focus away from meat-and-potatoes stocks and bonds toward private equity and other alternative instruments, which are more popular with the younger set. And they will have to continually raise their technology game to keep up with “digital native” and globally mobile clients.

Verbenyi, Legacy Atelier: If the family is not in harmony, the
wealth will disappear.

However, the biggest challenge for banks will be expanding their traditional financial and legal planning skill sets to a broader semi-therapeutic role in holding far-flung 21st-century rich families together as they grapple with dividing money and business responsibilities.

“Our most critical task is uniting the generations and helping them find a common purpose,” says Benjamin Cavalli, head of Strategic Clients at UBS based in Zurich and Singapore. “Strategic clients” for the world’s biggest wealth manager means “the top few percent of clients” —aka, the superrich. “It is never easy,” he adds.

The great wealth transfer will bring with it a profound shift of perspective. The client base of most private banks is dominated by wealth creators who built successful businesses. Most of the next generation will be heirs. “For the first time, we are seeing more wealth that has been inherited than created,” Cavalli notes.

If banks are unprepared for this transformation, so are many of their clients. The right way to structure succession in a high-net-worth family is to start early, hammering out an acceptable greement with the key players and institutionalizing it through financial and legal structures. The wrong way is to keep everyone in suspense until the patriarch’s or matriarch’s will is cracked open.

How many rich families get it right depends on who you talk to, Cerulli’s Horton says. Three-quarters of aging parents say they have an inheritance plan in advance. Half of all children report that they only learn the details of their inheritance after the parent passes.

In any case, banks should be helping their clients do better. About half of all inheritors still wait by the deathbed to learn their inheritance, Cerulli’s Horton estimates. “The ideal way to transfer wealth is through trusts for the children or spouse,” he says. “Most of the time, it’s passed down in a less-than-ideal way.”

Dialogue between parents and successors may be particularly difficult in Asia, says Zita Verbenyi, founder of The Legacy Atelier in London. Contradicting the head of the family often is taboo. Heirs are often educated and live in the West, absorbing very different cultural values and financial reasoning than their elders. “In the Middle East or India, the younger generation may not say anything about how the business is run,” Verbenyi says. “That’s not real engagement.”


The connecting trait of next-generation inheritors across the globe is their passion for independence—personal and financial. As a first consequence, many want to leave the family enterprise that their parents or grandparents built. “We see many examples where the younger generation may not want to inherit the business,” Cavalli notes. “They have their own views, preferences and ambitions.”

Chayce Horton, Cerulli Associates: The Great Wealth Transfer is about $2 trillon annually, but is expected to increase dramatically.

In these circumstances, challenge No. 1 for families and their advisers is selling the business or arranging a passive dividend stream for the uninterested heir­—without sacrificing that precious unity and common purpose. “Families that are centered around a business or set of assets tend to stick together,” Horton observes. For families who lose that, togetherness can get more difficult.

Younger generations’ independent streak extends to investment attitudes. Simply buying and holding public securities is out. Three-quarters of wealthy investors under age 43 believe “it’s not possible to achieve above-average returns solely on traditional stocks and bonds,” a recent survey by Bank of America’s private bank found. Just a third of their elders agreed.

Next-gens gravitate instead toward private equity and other vehicles they see as more hands-on.

“They are more confident in their ability to direct their own investment,” says Lauren Sanfilippo, a senior investment strategist at BofA—at least for now. And they are demanding the technology to do it, 24/7 and globally. “They want to have everything instantly at their fingertips,” UBS’ Cavalli adds.

Those under the age of 43 were also disproportionately interested in sustainable investments, BofA found, with three-quarters of them marking that as a priority, compared to one-quarter of all survey respondents. 

A more awkward consideration is that the heirs may fall out of “strategic client” status as fortunes divide with succession, entitling them to less lavish private banking treatment than their parents. “Different wealth tiers require different services,” Cerulli’s Horton says. “You can’t service four $12 million accounts for the children the same as one $50 million account held by the parents.” On Steroids

Adjusting investment portfolios or service levels falls within private banks’ established capabilities, however. The essential mission of uniting generations around a common purpose in a modern world of personal autonomy and perceived endless possibility will stretch wealth managers. They may have to dip into skills more associated with historians and curators, not to mention therapists.

Verbenyi at The Legacy Atelier brings extended families together to explore their heritage, achievements and “family culture”—a sort of on steroids that also looks to determine “what each family member brings to the table.”

One example: When a Middle Eastern clan gathered to celebrate a milestone, Verbenyi used the occasion to start work on a family museum, recording memories and cataloging artifacts. A similar project with a Western Hemisphere family focused on grandparents forced to flee Europe, exploring how they rebuilt their lives and the family fortune in the New World. “Bankers only talk about governance from a financial point of view,” Verbenyi argues. “But if the family is not in harmony, the wealth will disappear.”

Private banks are aware of the wealth transfer challenge. “The proportion of wealth management relationships where the children are engaged has shifted from well below 50% to well above,” Horton says.

The global spread of family offices and their collaboration with private banks could be a big help. The family office revolution first took hold in the us, but has spread globally in recent decades. “When I first came to Asia in the 1990s and 2000s, family offices were the exception,” UBS’ Cavalli says. “Now they are more the rule.”

Family offices can create an institutional framework for intergenerational wealth management: boards, investment councils and other decision-making bodies with a mix of family members and outside professionals. Such structures can reduce the competitive, winner-takes-all aspect of inheritance, whereby one sibling or cousin assumes control of the family assets and the rest are cashed out, according to Verbenyi.

“These days, there can be many heirs,” she says. “You may not be engaged in the business but may want to sit on the family council. Everyone can try to find what they are good at.”

Big, global private banks may find a competitive advantage as rich families become progressively more dispersed and diversified, both geographically and philosophically. At least, that’s what the biggest of them all, UBS, is hoping. “Wealth transfer is a tremendous opportunity for a bank like ours,” Cavalli says. “Our global expertise is there to support and guide our clients.”

Horton agrees that the established banking names have a potential edge in holding onto the next generation. They can segment services as fortunes divide – that one theoretical $50 million account morphing into four $12 million accounts. “the private banks are well positioned because they can provide a range of services without giving up profitability,” he says.

The bigger houses, particularly those with a retail banking or brokerage affiliate, also have a wider pipeline of younger relationship managers, who might relate better to next-gen clients. “it’s tough to bring entry-level talent into a private bank or family office,” Horton says. “the retail branch is an excellent training ground.”

Stereotypes in the TV series “Succession” and other popular entertainment frame high-net-worth families as fractious, conniving and destructive of what their forbears have built. The best news on the Great Wealth Transfer is that not all clans are like that.

“Families do face an identity crisis after a liquidity event,” Verbenyi says. “But they still have a great opportunity, if they make it work: wealth, networks, intelligence. I’ve seen hundreds of cases where they want to make it work.”