Business
The Great Wealth Transfer – Billions To Change Hands By 2026
Here comes the boom.
What is ‘The Great Wealth Transfer’?
This term has been coined by several major wealth managers across North America; referring to the tremendous amount of wealth that will be transferred to younger generations over the next decade. Wealth amassed by baby boomers will eventually be passed down to their families or beneficiaries, typically with the aid of a trusted wealth manager or financial advisor.
Similar in a way to climate change, when we visit some of the data that has been reported in both Canada and the US, this issue seems to be far more pressing than most people are aware. Depending on the publication, the exact amount of wealth that will be transferred is questionable. Cited in Forbes, a report done by the Coldwell Banker Global Luxury® program and WealthEngine claim that $68 Trillion will change hands in the US by 2030.
We spoke with Gwen Becker and Devin St. Louis, two VP’s, Portfolio Managers and Wealth Advisors for RBC Wealth Management, offering their expert insight into the industry and the vast amount of wealth that is changing hands in Canada.
According to RBC Wealth Management, their numbers in terms of the wealth transfer report $150 billion is set to change hands by 2026. The industry as a whole is at the forefront of this generational shift, whereas a trusted advisor can onboard younger family members to ensure the highest level of support through the process. Gwen offers her perspective:
“Certainly just around the corner; something that we are definitely paying attention to. My practice has always been very relationship-driven. It has been my privilege to advise many of my clients for decades. I have been intentional to welcome and include multiple generations of the same family. I advise grandparents who are now in their 90s, to which the majority of their children are my clients and even beginning to onboard grandchildren.”
This is an example of what is referred to as multi-generational estate planning. Being in the midst of the ‘great transfer of wealth’, this type of planning is crucial for advisors to implement early so they can continue to support the same family in the future. According to the Canadian Financial Capability Survey conducted in 2019, 51% of Canadians over the age of 65 will refer to a financial advisor to seek literacy and support. Contrary to that, Canadians aged 18-34 show that 51% are more likely to use online resources to aid in their financial literacy.
Devin offers his perspective on how the importance of family legacy plays a role when an advisor poses this question: What is your wealth for?
“If you sat down with a couple 10 years ago, they may say, when I pass away, whatever wealth is left can be distributed evenly amongst our children. That has changed quite a lot now because elder family members are now more concerned about how their wealth is passed on to the next generation. Onboarding grandchildren can ensure that a family legacy that receives their wealth, uses it to benefit their family and their community.”
An important question to consider. Clearly there is a shift in attitude towards having a family legacy live on through younger generations of a family. Evident that having the support of a financial advisor or wealth manager not only ensures the most efficient use of your money and assets but also ensures financial stability for your family in their future.
If we revisit the above study in how a younger demographic is more likely to utilize online resources, interesting how a more digitally inclined audience will be receptive to advisors. Boiling down to how millennials and younger age groups will perceive wealth management if those in that space fail to offer their services through online communication.
Devin agrees that RBC is uniquely positioned for this digital shift:
“interesting that everybody had to transform their processes online through this COVID-19 pandemic. Every company has been forced to step up their technology means, RBC has definitely risen to that occasion. RBC has adapted quickly, improving a great technology base that already existed. I don’t perceive it at this point to be a challenge. I believe we have the right focus. I think it’ll be a good transition for us.”
Gwen continues:
“I do agree that RBC is very well positioned. The younger generations below millennials that would eventually take over some of this wealth carries some challenges. How does that age demographic think, and what are their expectations of wealth management or financial advisors? It is difficult to understand what that generation will expect out of digital advisors. Estate planning matters, and it will always be tied to you knowing the family, it’s a relationship business”
Consider that RBC Wealth Management oversees $1.05 trillion globally under their administration, has over 4,800 professionals to serve their clients and was the recipient of the highest-ranking bank-owned investment brokerage by the 2020 Investment Executive Brokerage Report Card, safe to say their decades of professionalism, expertise and ‘get it done’ attitude speaks for itself.
So, what does this mean for younger members of families who may not understand the field of wealth management?
Starting the conversation early
Whether you are the elder family member who has their financial ‘quarterback’ preparing their estate to change hands or are younger family members who may be the beneficiary of wealth in the near future, starting the conversation amongst family members early is important for the process to be successful. Considering that some possessions have more than just monetary value, but an emotional tie to the family legacy can be a difficult asset to distribute evenly. Of course, it can be a tough conversation to have, it may involve discussing the passing away of a loved one or even setting a plan to cover future expenses. Gwen mentions:
“I encourage my clients to have open conversations with their children while they are alive so that their intentions are clear. Depending on the dynamics of the family, things such as an annual family meeting with a beneficiary can be effective once it’s put in place. If they are not comfortable leading that conversation, bring a trusted adviser to the table to be impartial and logical.”
There is no way to know what ramifications will come of this ‘great transfer of wealth’. It may be that we see the resurgence of a strong bull market in the near future, we may see new tech innovation that we cannot yet grasp or new business investments that continue to disrupt traditional processes. Only time will tell.
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I Testified Before a Senate Committee About the CBC
I recently testified before the Senate Committee for Transport and Communications. You can view that session here. Even though the official topic was CBC’s local programming in Ontario, everyone quickly shifted the discussion to CBC’s big-picture problems and how their existential struggles were urgent and immediate. The idea that deep and fundamental changes within the corporation were unavoidable seemed to enjoy complete agreement.
I’ll use this post as background to some of the points I raised during the hearing.
You might recall how my recent post on CBC funding described a corporation shedding audience share like dandruff while spending hundreds of millions of dollars producing drama and comedy programming few Canadians consume. There are so few viewers left that I suspect they’re now identified by first name rather than as a percentage of the population.
Since then I’ve learned a lot more about CBC performance and about the broadcast industry in general.
For instance, it’ll surprise exactly no one to learn that fewer Canadians get their audio from traditional radio broadcasters. But how steep is the decline? According to the CRTC’s Annual Highlights of the Broadcasting Sector 2022-2023, since 2015, “hours spent listening to traditional broadcasting has decreased at a CAGR of 4.8 percent”. CAGR, by the way, stands for compound annual growth rate.
Dropping 4.8 percent each year means audience numbers aren’t just “falling”; they’re not even “falling off the edge of a cliff”; they’re already close enough to the bottom of the cliff to smell the trees. Looking for context? Between English and French-language radio, the CBC spends around $240 million each year.
Those listeners aren’t just disappearing without a trace. the CRTC also tells us that Canadians are increasingly migrating to Digital Media Broadcasting Units (DMBUs) – with numbers growing by more than nine percent annually since 2015.
The CBC’s problem here is that they’re not a serious player in the DMBU world, so they’re simply losing digital listeners. For example, of the top 200 Spotify podcasts ranked by popularity in Canada, only four are from the CBC.
Another interesting data point I ran into related to that billion dollar plus annual parliamentary allocation CBC enjoys. It turns out that that’s not the whole story. You may recall how the government added another $42 million in their most recent budget.
But wait! That’s not all! Between CBC and SRC, the Canada Media Fund (CMF) ponied up another $97 million for fiscal 2023-2024 to cover specific programming production budgets.
Technically, Canada Media Fund grants target individual projects planned by independent production companies. But those projects are usually associated with the “envelope” of one of the big broadcasters – of which CBC is by far the largest. 2023-2024 CMF funding totaled $786 million, and CBC’s take was nearly double that of their nearest competitor (Bell).
But there’s more! Back in 2016, the federal budget included an extra $150 million each year as a “new investment in Canadian arts and culture”. It’s entirely possible that no one turned off the tap and that extra government cheque is still showing up each year in the CBC’s mailbox. There was also a $93 million item for infrastructure and technological upgrades back in the 2017-2018 fiscal year. Who knows whether that one wasn’t also carried over.
So CBC’s share of government funding keeps growing while its share of Canadian media consumers shrinks. How do you suppose that’ll end?
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From the Canadian Taxpayers Federation
The Canadian Taxpayers Federation is calling on the federal government to rein in the bureaucracy following today’s Parliamentary Budget Officer report showing the bureaucracy costs taxpayers $69.5 billion.
“The cost of the federal bureaucracy increased by 73 per cent since 2016, but it’s a good bet most Canadians aren’t seeing anywhere close to 73 per cent better services from the government,” said Franco Terrazzano, CTF Federal Director. “Taxpayers are getting soaked because the size and cost of the federal bureaucracy is out of control.”
Today’s PBO report estimates the federal bureaucracy cost taxpayers $69.5 billion in 2023-24. In 2016-17, the cost of the bureaucracy was $40.2 billion. That’s an increase of 72.9 per cent.
The most recent data shows the cost continues to rise quickly.
“Spending on personnel in the first five months of 2024-25 is up 8.0 per cent over the same period last year,” according to the PBO.
“I have noticed a marked increase in the number of public servants since 2016 and a proportional increase in spending,” said Parliamentary Budget Officer Yves Giroux. “But we haven’t seen similar improvements when it comes to service.”
The Trudeau government added 108,793 bureaucrats since 2016 – a 42 per cent increase. Canada’s population grew by 14 per cent during the same period. Had the bureaucracy only increased with population growth, there would be 72,491 fewer federal employees today.
The government awarded more than one million pay raises to bureaucrats in the last four years, according to access-to-information records obtained by the CTF. The government also rubberstamped $406 million in bonuses last year.
“The government added tens of thousands of extra bureaucrats, rubberstamped hundreds of millions in bonuses and awarded more than one million pay raises and all taxpayers seem to get out of it is higher taxes and more debt,” Terrazzano said. “For the government to balance the budget and provide tax relief, it will need to cut the size and cost of Ottawa’s bloated bureaucracy.”
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