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Deloitte’s predicts billions of fees up for grabs for wealth managers

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New research from the Deloitte Center for Financial Services finds that as much as USD240 billion in wealth management fees could be available as household assets are projected to increase to more than USD140 trillion by 2030, an increase of some 60 per cent over the next 15 years.

However, the Center warns that in wealth managers’ search to capture these dollars, they would be remiss to prematurely push aside the focus on their current client base of baby boomers and Generation X in favour 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,” says 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 findings include the fact that baby boomers will continue to be the wealthiest generation in the US through 2030, and remain the largest fee pool for financial services firms. According to the report, the boomers’ share of net household wealth will peak at 50 per cent by 2020 and decline to less than 45 per cent by 2030, quickly tapering off thereafter as mortality rates escalate.
 
The report also found that Generation X will experience the highest increase in share of national wealth through the forecast period, growing from under 14 per cent of total net wealth in 2015 to nearly 31 per cent by 2030; in fact, firms that have not yet woken up to Generation X’s potential may be too late to the party, the firm warns.
 
While millennial wealth will grow the fastest, the demographic will account for less than 20 per cent of national household wealth in 2030. Most millennials are therefore unlikely to become consumers of top-tier wealth services anytime soon, the report says.
 
“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,” says 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.
 

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