Inheritance: Opportunity or Threat - Ledbury Research

Boston College estimate $41 trillion will pass between generations by 2052 – the largest intergenerational transfer of wealth in US history, and it is a similar story in most other developed nations. The fact that this transition is coming has been well documented in the press, and the recipients tend to know about it: Commonwealth Bank believe that only 0.5% of large scale inheritances come as a complete surprise. Though the gifting generation may have to work slightly longer than originally planned (so the timing might be pushed back a little) this should be “manna from heaven for the financial services industry” (Independent, UK).

When we asked our panel of wealthy young Britons the reason for choosing their current banking relationships, the wealthier their parents were, the more There may be a number of reasons for this. There is frequently an element of one-upmanship, and similarly the inheritor wants to prove their own abilities, and not remain in the shadow of their parents. This can be seen in high profile dynasties such as Murdoch and Packer. There may also be an element of guilt-free spending: many recent inheritors splash out on purchases such as properties, cars or travel. Perhaps it is easier on the conscience if done with a new banking relationship?

What ever the reason, banking churn (clients changing relationships) might be starting to build momentum. In fact, 25% of those wealthy young Britons we surveyed are thinking about changing their banking relationship in the next few years, as are 10% of the UK who currently earn over £100,000. Some banks have tried to counter this with classes run for the children of wealthy clients. But so far this has been rolled out slowly and to only a few. Though the money is going to change hands, it is also going to move banks – institutions need to understand how and why this is happening to avoid missing out on their manna.