Millennial Investors Stand to Profit Handsomely from "Great Wealth Transfer"


But preserving inheritance will take hard work.

Millennial investors stand to collectively receive the largest inheritance in history when their parents’ generation passes on its accumulated wealth. Approximately $30 trillion will be inherited by millennials over the next two decades. And while $16 trillion belongs to ultra-high net worth individuals, the average millennial heir still could come into a significant sum from their parents’ properties.

“The large sums of wealth accumulated by older generations will provide a major boost to younger generations’ wealth accumulation and living standards in years to come,” said a 2017 report from The Resolution Foundation, an independent think tank that studies low- and middle-income families’ living standards.

Vickery quote550x400The foundation also reported that inheritances were set to more than double over the next two decades. Inheritances will peak in 2035, the report said, as the baby boomer generation – who have benefited most from increases in home values – progresses through old age. Inheritance planning, however, requires careful attention to taxes, family dynamics, and current retirement needs – and without a trusted advisor, millennial investors and their families may not maximize the opportunity presented by the great transfer.

“You review their parents’ situation and you involve them in the process,” said David Vickery, AIF, president of Vickery Financial LLC. “It can be a touchy situation especially when you’re dealing with siblings and wealth transfer, or who’s going to take care of mom or dad. There’s a lot of things that go into that conversation.”

Vickery Financial, based in Cadillac, Michigan, provides tailored wealth and investment management, as well as estate and retirement planning, services to clients. The firm does not require a minimum net worth to become a client but does often recommend that prospects in the early stages of asset accumulation focus on building their portfolio before signing on.
Client education comes first according to Vickery. Inheritance issues and wealth management present complex challenges that require investors to be comfortable making decisions with their hard-earned savings, and that means clients need to understand how their money works, he said. It also means that clients need financial concepts explained in easy to understand terms and stripped of industry jargon that serves mostly to puff up advisors and confuse investors.

vickery600x800“Get them comfortable enough to ask questions, but don’t overwhelm them. The more educated they become, the more comfortable they are,” Vickery said during a recent interview with “Advisors Magazine.” “You can start talking for hours, but you’re not addressing what they want to talk about. So, you have to listen to them and educate them on the areas that they’re concerned about.”

Client education will become even more important as the “Great Wealth Transfer” plays out. Media reports often focus on the wealthiest American families’ soon-to-come transfer of $16 trillion in the next two decades – nationally, $68 trillion will change hands within families – and note that even the ultra-wealthy remain unprepared.

“With two thirds of the world’s wealthiest being first generation wealth creators, the coming years will be the first time they have been involved in wealth succession planning,” said the 2015 Wealth-X and NFP Family Wealth Transfers Report. “Those in the second or third generation of wealth will have had greater experience with wealth transfers and will have most likely had the opportunity to learn about wealth succession planning from their parents.”

The current “Forbes” billionaires list includes more “self-made” individuals than ever before, and the Great Transfer will require careful diligence on their part. It also will require the receiving generation to be financially savvy and prepared to take on their parents’ wealth.

“As self-made [ultra high net worth] baby boomers start passing on their wealth to their children, the importance of entrepreneurship and hard work will be put to the test,” the Wealth-X report said.

The same concept applies to average Baby Boomer investors who are the first to have owned a home or invested in the market, they too will need considerable support in preparing their estates. And their millennial children, likewise, will need to be prepared to inherit investments, property, and even liquid assets without suffering a major tax blow or failing to preserve that wealth for the next generation. Vickery said that, for millennials, it helps to have an advisor with several decades of experience who has seen more than one major market correction.

“Eighty-five percent of the guys on Wall Street weren’t alive for Black Monday in 1987,” Vickery said, referencing the 23 percent stock market crash on October 19 of that year. “Some of the younger clients I talk to, I say to them ‘When [President Ronald] Reagan ...’ and they say ‘Who’s Reagan?’”

“There’s value in the experience of having gone through two or three major corrections … [Having] somebody who knows how to make an effective course correction and come out the other side,” Vickery said.

Vickery Financial works as a fiduciary, meaning clients’ best-interests come before bottom line considerations. It also means that Vickery has to disclose to prospective clients any conflicts of interest and how he is compensated. He helps clients understand not only how their money works, but how he operates with their needs in mind. Financial institutions in general, he said, need to improve the level of clarity in their interactions with clients.

“All financial institutions have to have material that’s easier to understand, written in plain English, regarding the different products that are out there to make it easier for the client to read something and get it,” Vickery said, adding that investors need to be aware of what a fiduciary is and why having one on their side is a boon. “People that just have an insurance license and are out there pushing what they call investment products; for a true professional, they should have a securities license and they should have to abide by the same rules that [fiduciary advisors] have to abide by. That’s something that I think needs to be cleaned up.”

Soon-to-be retirees require an advisor who will look at their full financial picture. A holistic approach, rather than a one-size-fits-all model, allows investors to approach retirement with less anxiety. Vickery Financial uses a number of financial tools to prepare clients for retirement, and techniques that are both designed to accumulate assets and aimed at protecting existing wealth.

vickery500x600“Typically, the number one concern they have is running out of money from living too long. And they don’t know how to combat that other than being frugal,” Vickery said. “That’s where we look at things, for example, like annuities that give them a basic floor so that they know no matter what they’re going to have a paycheck coming in.”

Many investors in recent years have turned to online financial tools – the so-called “robo-advisors” – that consider a range of factors and then allocate assets accordingly. But those tools lack the experience and holistic planning that a fiduciary advisor can bring to a client’s finances. The same goes for do-it-yourself advisors who try to plot their own course, in the beginning a savvy investor can handle themselves, but when their financial picture becomes more complex they need a professional, Vickery said.

“For some people that works, but they don’t have the experience that we do,” he said. “They can know enough to be dangerous, basically. For example, if they rollover an IRA more than once a year then that would subject all of their IRAs to taxation and a lot of people wouldn’t know that and then they get into trouble.”

An experienced advisor also knows the ins and outs of risk management and can help clients prioritize their financial goals. Vickery said he often works with clients to assess their tax burdens, protect assets, and look at their financial picture beyond just the inputs investors would feed into an automated tool.

“Money’s a commodity, so there’s expensive money and there’s cheap money, which is better to use first and which is better to leave until further down the road?” he said. “From an experience point of view we can have strategies to reduce taxes, protect their nest egg, and give them a comfort level that they’re not going to get with a machine.”

After all, computer programmers have a saying: “garbage in, garbage out.” With an experienced advisor, clients can feel confident that they are not simply cluttering up their financial future with garbage inputs. That experience also can help clients feel secure that their money will be looked after well during a market correction, when many do-it-yourself investors might not know how to react, Vickery said.

“A machine ultimately does what you tell it to do. The clients are really taking their financial future into their own hands, and for some people that’s okay, but for the majority it’s not,” Vickery said. “Even some of the savvy investors say, ‘Look, it’s my retirement, I don’t want to look at this every day, that’s your job.’ You need an experienced pilot, not somebody who took some quickie lessons.”

For more information on Vickery Financial LLC, visit:

Securities offered through Sigma Financial Corporation, Member FINRA/SIPC. Vickery Financial LLC is independent of Sigma Financial Corporation.


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