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69% of Australian Retirees expect to leave a very significant inheritance to their children; HSBC Survey
Topic Started: 21 Sep 2014, 11:17 PM (11,725 Views)
peter fraser
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The boomers in the USA are obviously concerned about whether their children have the skills and ethical standards required to handle the large sums of money that they will be leaving to them. They are concerned that there is a big difference between the attitudes of those who work to make a fortune to those who inherit that fortune.

Extract from a study by Acenture - http://www.accenture.com/SiteCollectionDocuments/PDF/Accenture-CM-AWAMS-Wealth-Transfer-Final-June2012-Web-Version.pdf

While the “Great Transfer” will see over
$12 trillion shift the “Greater” wealth
transfer is much larger, estimated at
over $30 trillion in financial and nonfinancial
assets in North America (See
Figure 1). At its peak between 2031 and
2045, 10 percent of total wealth in the
United States will be changing hands
every five years. The accelerating pace
of this transfer, combined with the
generational differences in the demands
and expectations of wealth management
service providers, makes this massive
transfer of wealth between generations
a defining issue for the wealth
management industry.

Besides the scale of the transfer, what
makes this transfer strategically difficult
to manage is that firms cannot rely solely
on their advisors to manage this transfer
of assets between generations. With the
average age of advisors at just over 49 in
the US and 54 in Canada, many current
advisors are nearing retirement and might
be less motivated to build foundational
relationships with their clients’ children.


Another extract from that study

They may distribute their wealth
differently

Depending on the needs of their children
and grandchildren, Boomers may make
gifts of assets while they are alive to
enjoy and influence how they are used.
In addition, they may plan on leaving
lump-sum bequests to institutions and
charities that are important to them.
The advice they seek to maximize
their independence and individuality
while minimizing tax exposure will
be increasingly sophisticated. The
strategies Boomers use for gifting or
distributing wealth will be influenced
by tax and estate transfer laws. The
various methods Boomers may choose
to distribute wealth create the need for
firms to step up their estate planning
offerings within all business models.



and another extract concerned that wealth advice providers won't have the resources to handle the avalanche.


Getting Ready for
the Big Shift

In the face of this large-scale shift,
there is evidence that most wealth
management firms are unprepared. Many
firms struggle to effectively manage
the estate execution process on a oneoff
basis today. In fact, only 6 percent
of households use estate planning
services with their primary advisor and
the primary cause of attrition is a client
passing away and assets leaving as estates
are executed8. Wealth management firms
face a two-part challenge: retaining the
loyalty and the assets of the Boomers,
while also developing a value proposition
that is relevant to the next generation
of inheritors.

Some interesting graphs in the report.
Edited by peter fraser, 26 Sep 2014, 08:54 AM.
Any expressed market opinion is my own and is not to be taken as financial advice
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Lef-tee
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miw
25 Sep 2014, 10:20 PM
And where does that money go when it is spent?

To the younger generation who produce the products and services. And to the government in tax.

That house doesn't vaporize. It gets transferred to the younger generation, either before or after death.

Your agenda is basically to redistribute consumption of current production from those who have earned it to those who have not yet earned it. Pretty bloody convenient given that you have already arranged your affairs to evade your version of the redistribution if it comes.
No the house doesn't vaporize miw - the cost of owning it just continues to inflate away.

Maybe there's a communication breakdown here caused by fundamentally different ways of looking at things - to some, the house is an asset. And surging asset values are great for me if I already own them.

To others, the house represents the basic human need for shelter and ever - inflating costs are not in the interests of those yet to come along.

So from that point of view it seems obvious that whatever else we might be leaving our children, one big thing we are leaving them is inflated living costs. We are almost out of room to allow them to shoulder ever- larger debt burdens by making the price of borrowing money cheaper. This reality appears so plain that I can't imagine why there should even be any argument about it. This is what I mean by we get the party and they get the hangover.
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herbie
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Lef-tee
26 Sep 2014, 09:05 AM
... ever - inflating costs are not in the interests of those yet to come along ...
Nor are they in the interests of the older members of families who'd very much like to see the younger members of their families get into housing.

But dreaming up schemes and justifications for them, aimed at taking the houses of the older members of those families off those families, potentially adds to those families problems rather than diminishes them.
A Professional Demographer to an amateur demographer: "negative natural increase will never outweigh the positive net migration"
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Lef-tee
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herbie
26 Sep 2014, 09:38 AM
Nor are they in the interests of the older members of families who'd very much like to see the younger members of their families get into housing.

But dreaming up schemes and justifications for them, aimed at taking the houses of the older members of those families off those families, potentially adds to those families problems rather than diminishes them.
You're obviously referring to someone else having said that because I haven't.
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herbie
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Lef-tee
26 Sep 2014, 09:45 AM
You're obviously referring to someone else having said that because I haven't.
Fair comment.
A Professional Demographer to an amateur demographer: "negative natural increase will never outweigh the positive net migration"
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peter fraser
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herbie
26 Sep 2014, 09:59 AM
Fair comment.
I think that we need to look at what has caused Paul to be so worried.

I initially treated Paul's views as a bit of a joke and I had read some of the articles that he references and also treated them as a poke at the boomers with little relevance.

When I look on the web what I find are fairly serious articles and studies on the enormous wealth that the US Boomers have which is going to be passed on in one form or another plus a lot of charitable donations from the mega wealthy. But when I read the UK press it's just poisonous anti boomer stuff and I think that many of our journos have picked up on that attitude rather than the US attitude.

I actually thought that a lot of Boomers in the US lost their wealth in the market crash and had to go back to work, and I know that a lot of retirees in the auto unions lost their benefits when GM and Chrysler went through bankruptcy, but maybe enough of them made it through OK.

Frankly I think that the boomers in Australia did better than those in both the USA and the UK and the ones that I see are either doing OK but not fantastic or they are very strong.

I suspect that Paul has taken some of the journals views as gospel and with a bit of the budget fear thrown in he has panicked. Of course on top of that he hates boomers, but that's another story. Anecdotally what he is saying is crap, but there are no genuine studies done here in Australia apart from this HSBC one. Not many that seem to have done an in depth analysis.

Until we get some more decent studies we are just going to put up with this crap because there are plenty of boomer haters like Paul out there just looking for something to get indignant about.

Edited by peter fraser, 26 Sep 2014, 10:21 AM.
Any expressed market opinion is my own and is not to be taken as financial advice
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ThePauk
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peter fraser
26 Sep 2014, 10:19 AM
I think that we need to look at what has caused Paul to be so worried.

I initially treated Paul's views as a bit of a joke and I had read some of the articles that he references and also treated them as a poke at the boomers with little relevance.

Peter
Point is that the attitudes are changing and I have provided plenty of links to articles and studies that show that.
You are making assumption about the HSBC study in so far as assuming it is a study about the boomers in particular, where it clearly is not and at a sample size of only 1000 serious questions must be raised about is conclusions. I do not disagree that the Lucky generation wanted to leave a financial legacy as part of their DNA. I am simply stating that attitude has changed in the boomers.

The real issue is however that regardless of what a boomer 'intends' to do, they have as a cohort underestimated their own longevity and the amount left for inheritances will be far less than expected.

More boomers are heading into retirement in debt than any previous generation and their is vast inequity within the boomer cohort.
Couple that with the changed attitude of Gen Y, who are not expecting any inheritance and in fact would rather see their boomer parents spend their wealth and enjoy their retirement to the fullest. In this regard, the attitudes match and there is no need for any real concern, especially as Gen Y would have paid Super throughout their entire working life and will be far better prepared than the boomers for retirement costs.


"This trend has been observed in several countries. It especially raises the question of what older people are doing with their comparative wealth, and whether what could be left is being left, or is being spent. There is a distinct possibility that older people are spending money on themselves that they might otherwise have left to their children (e.g., Finch & Mason, 2000, for England; Kelly & Harding, 2006, for Australia). Another possibility is that older people, by dint of living longer, may be spending the money on medical and care expenses for the extra years. We probably need to distinguish between their discretionary and non-discretionary spending, but in either case it adds up to having less to pass on."
http://www.aifs.gov.au/institute/pubs/fm2011/fm88/fm88a.html

Please read this govt study again.. I find it as well balanced piece and it debunks you 'no studies done' approach to this issue.

Perspectives on intergenerational bequests: Inheritance arrangements and family resources

http://www.aifs.gov.au/institute/pubs/fm2011/fm88/fm88a.html

You must also note that the US has far more multi-generational wealth than a young AU has and that it is hard to compare the various nations, as they have very different timelines for wealth accumulation.

As for boomer bashing, it is clear to me that many boomers remain in denial about the difficulties the young face and they financial challenges that mostly the boomers have created for them. The boomers are simply not leaving the place in better shape than when they found it IMO.

It has been interesting to follow some boomers comments/apologies for their mistakes, however they are rare.
http://www.foxnews.com/opinion/2013/05/09/open-letter-from-baby-boomer-to-millennials-apology-and-some-advice/
Edited by ThePauk, 26 Sep 2014, 10:57 AM.
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herbie
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peter fraser
26 Sep 2014, 10:19 AM
Until we get some more decent studies we are just going to put up with this crap because there are plenty of boomer haters like Paul out there just looking for something to get indignant about.

There's some potential for some political risk I suppose. But at the end of the day, I've just decided to run with the assumption (if necessary) that there'll always be plenty of accountants and lawyers around who are smarter at figuring out ways to protect people's loot than the Socialists are at figuring out ways to take it off them.

Oz Socialists would really need some sort of 'kangaroo curtain' in place to really make the joint the sort of place they'd like it to be. And I surely can't see that happening anytime soon.
A Professional Demographer to an amateur demographer: "negative natural increase will never outweigh the positive net migration"
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ThePauk
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herbie
26 Sep 2014, 11:39 AM
There's some potential for some political risk I suppose. But at the end of the day, I've just decided to run with the assumption (if necessary) that there'll always be plenty of accountants and lawyers around who are smarter at figuring out ways to protect people's loot than the Socialists are at figuring out ways to take it off them.

Oz Socialists would really need some sort of 'kangaroo curtain' in place to really make the joint the sort of place they'd like it to be. And I surely can't see that happening anytime soon.
Herbs
Yes, I suspect you are correct about accountants and lawyers however, changes to the asset test for a pension will be very hard to hide or gift away.

I also agree that pure socialism will not rise in OZ anytime soon.
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peter fraser
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ThePauk
26 Sep 2014, 10:39 AM
Peter
Point is that the attitudes are changing and I have provided plenty of links to articles and studies that show that.
You are making assumption about the HSBC study in so far as assuming it is a study about the boomers in particular, where it clearly is not and at a sample size of only 1000 serious questions must be raised about is conclusions. I do not disagree that the Lucky generation wanted to leave a financial legacy as part of their DNA. I am simply stating that attitude has changed in the boomers.

The real issue is however that regardless of what a boomer 'intends' to do, they have as a cohort underestimated their own longevity and the amount left for inheritances will be far less than expected.

More boomers are heading into retirement in debt than any previous generation and their is vast inequity within the boomer cohort.
Couple that with the changed attitude of Gen Y, who are not expecting any inheritance and in fact would rather see their boomer parents spend their wealth and enjoy their retirement to the fullest. In this regard, the attitudes match and there is no need for any real concern, especially as Gen Y would have paid Super throughout their entire working life and will be far better prepared than the boomers for retirement costs.


"This trend has been observed in several countries. It especially raises the question of what older people are doing with their comparative wealth, and whether what could be left is being left, or is being spent. There is a distinct possibility that older people are spending money on themselves that they might otherwise have left to their children (e.g., Finch & Mason, 2000, for England; Kelly & Harding, 2006, for Australia). Another possibility is that older people, by dint of living longer, may be spending the money on medical and care expenses for the extra years. We probably need to distinguish between their discretionary and non-discretionary spending, but in either case it adds up to having less to pass on."
http://www.aifs.gov.au/institute/pubs/fm2011/fm88/fm88a.html

Please read this govt study again.. I find it as well balanced piece and it debunks you 'no studies done' approach to this issue.

Perspectives on intergenerational bequests: Inheritance arrangements and family resources

http://www.aifs.gov.au/institute/pubs/fm2011/fm88/fm88a.html

You must also note that the US has far more multi-generational wealth than a young AU has and that it is hard to compare the various nations, as they have very different timelines for wealth accumulation.

As for boomer bashing, it is clear to me that many boomers remain in denial about the difficulties the young face and they financial challenges that mostly the boomers have created for them. The boomers are simply not leaving the place in better shape than when they found it IMO.

It has been interesting to follow some boomers comments/apologies for their mistakes, however they are rare.
http://www.foxnews.com/opinion/2013/05/09/open-letter-from-baby-boomer-to-millennials-apology-and-some-advice/
Paul, you are full of shit

Go away
Any expressed market opinion is my own and is not to be taken as financial advice
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