NEW YORK, Nov. 10, 2015 /PRNewswire/ -- With household assets projected to increase to more than $140 trillion by 2030 – growing 60 percent over the next 15 years – as much as $240 billion in wealth management fees is expected to come up for grabs, according to new research from the Deloitte Center for Financial Services released today. In wealth managers' search to capture these dollars, though, they would be remiss to prematurely push aside the focus on their current clientbase of baby boomers and Generation X in favor of the much-talked-about millennial segment.
"Wealth management in the United States is a huge business today — and it is about to get even bigger," said Gauthier Vincent, a principal with Deloitte Consulting LLP and the leader of Deloitte's wealth management practice. "But this market is likely to become increasingly segmented by unique generational needs. Through this research, we set out to estimate how generational wealth will evolve over the next 15 years, with the purpose of providing a clear roadmap for financial institutions to help them position their businesses accordingly to capture the upside."
The report forecasts how generational wealth will evolve across today's four adult generations: the silent generation, baby boomers, Generation X and millennials through 2030, and provides strategic considerations for financial services firms as they look to adjust their business models to accommodate changing demographics.
Key among the report's forecasts is that baby boomers will continue to be the wealthiest generation in the U.S. through 2030, and remain the largest fee pool for financial services firms. According to the report:
- Boomers' share of net household wealth will peak at 50 percent by 2020 and decline to less than 45 percent by 2030, quickly tapering off thereafter as mortality rates escalate.
- Generation X will experience the highest increase in share of national wealth through the forecast period, growing from under 14 percent of total net wealth in 2015 to nearly 31 percent by 2030; in fact, firms that have not yet woken up to Generation X's potential may be too late to the party.
- On the other hand, while millennial wealth will grow the fastest, the demographic will account for less than 20 percent of national household wealth in 2030. Most millennials are therefore unlikely to become consumers of top-tier wealth services anytime soon.
"All that said, I don't recommend taking your eye off the ball on this new generation of investors, as Gen X and millennials will make up half of wealth in 2030," said Vincent.
Ultimately, the report notes that "generational segmentation is not a marketing gimmick" and that traditional cookie-cutter strategies will be ineffective in meeting clients' changing needs; diversity in wealth offerings and business models will be critical to success for industry players instead.
In line with projected demographic shifts, the report outlines four types of generational service offerings likely to emerge and become the cornerstones of the U.S. wealth management business within the next 15 years:
- Consolidated services for affluent clients: Wealthy baby boomers and Gen Xers, as well as some high-net-worth millennials, will require consolidated product offerings – including tax, retirement and estate planning – to help them accumulate wealth and meet complex midlife and retirement goals.
- Stewardship offerings for clients with decreasing assets: A large number of baby boomers and silent generation retirees will require advisory services – for calibrating spending levels and other financial needs – integrated with simplified estate planning services for less affluent customers.
- "Training wheels" for newcomers to wealth services: Starter services with varying pricing structures, usually built around robo-advisor platforms, will become valuable to millennials entering the workforce, less affluent millennials and young Generation X households — wealth firms will need to remember though to have a plan for when the "training wheels" need to come off.
- Debt management solutions for indebted households: To help young Generation X and millennial households burdened by debt wealth managers will need to offer solutions built around advice to change saving and spending behaviors, with a focus on cutting debt.
"Our forecast of debt raises a clear possibility that household assets could grow faster than liabilities over the next two decades, posing a structural reason for banks to make wealth management services core to their product offering," said Jim Eckenrode, executive director of the Deloitte Center for Financial Services. "Over the long term, client synergies from a strong wealth franchise could offer better growth opportunities to banks than a pure lending business. The wealth landscape in the United States is set to be dramatically different in the next 15 years."
The Deloitte Center for Financial Services report, titled "The Future of Wealth in the United States: Mapping Trends in Generational Wealth," is available for download here. An interactive graphic that shows how the report's four generations will define the evolving wealth landscape can also be accessed on Deloitte's website here.
Deloitte's forecast model of generational wealth, developed in association with Oxford Economics, was built using data from the "Federal Reserve's Survey of Consumer Finances" and other public sources. Further information on the forecasting methodology can be found in the report.
About the Deloitte Center for Financial Services
The Deloitte Center for Financial Services, launched in 2007, provides insight and research to help improve the business performance of banks and capital markets firms, private equity firms, hedge funds, mutual funds, insurance providers, and real estate organizations operating globally. Headquartered in New York City, the Center is staffed by a group of professionals with a wide array of in-depth industry experience, as well as cutting-edge research and analytical skills.
As used in this document, "Deloitte" means Deloitte LLP and its subsidiaries. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.