Trillions Are Riding on 'Silver Tsunami'

Trillions Are Riding on 'Silver Tsunami'
William L. Kerst Jr., CEO and founder of Community First Trust of Hot Springs (Steve Lewis)

As it once remade the nation’s demographics, buying habits and popular culture, America’s most influential generation stands ready to transform retirement and generational wealth.

Some 70 million aging baby boomers are primed to bequeath the largest aggregation of assets and business interests ever accumulated, a phenomenon dubbed the “silver tsunami.” And Little Rock trust attorney Stan Miller says it’s even bigger than the name suggests.

“Over the next 25 years $60 trillion to $80 trillion is going to pass from the people who earned it into the hands of people who did not earn it, for the most part,” said Miller, a partner in ILP + McChain Miller Nissman. “What even sociologists haven’t got their head around is that this is a first in the history of mankind. There’s never been a transition of wealth at this scale, because in the old days a few rich people would pass down their wealth, but there’s never been such a general accumulation of wealth by so many.

A graph showing the boomer population

“When I’m feeling optimistic, that seems pretty cool, because wealth can be transformational in terms of education, travel and doing good,” Miller continued. “But on my scarier days, I think of a bunch of kids who may not be prepared to receive these sums.”

Miller has seen some damage firsthand, fortunes frittered on friends and bad investments, or consumed by addictions, and everybody knows of lottery winners blowing through millions in a few years. To avoid pitfalls, clients must know their goals, and advisers must know their clients, wealth planning professionals said.

“I ask clients about themselves, and I will not look at a financial statement until I get the whole story,” Miller said. “I want to know about the spouse, the parents, the kids, what kind of car you drive, where you go to church. Until I get to know who they are, I completely refuse to talk about money or assets.”

William L. Kerst Jr. of Hot Springs and Henry Ford of Tennessee agreed, adding that more tools than ever are available to serve clients’ goals, as long as the clients have deeply considered what they want to achieve.

More Positions, Revenue

Baby boomers are expected to transfer $1.5 trillion to $3 trillion in assets and business value every five years from now through 2050, according to DD&F Consulting Group of Little Rock.

To serve the influx of clients, firms like Miller’s and Kerst’s Community First Trust of Hot Springs are adding employees, beefing up software and surfing a rising tide of revenue.

It’s a business opportunity for advisers, but also an apt time to remind wealthy people that death and taxes are indeed inevitable.

“The younger group of baby boomers, those born up to 1964, is starting to put plans into place to transfer their wealth to their kids,” said Kerst, who also leads the trust department of Farmers Bank & Trust of Magnolia, which merged with Community First early last year. Community First remains the only stand-alone trust company in the state.

“Some kids can manage money, and you’ll see some families leave it outright to them, but others cannot,” Kerst said. “A lot more wealth is being put into trusts, which is resulting in more wealth management and trust positions. (Kerst has 17 employees and counting, he said.)

“We’re also watching over more money for more people, including those who leave wealth to be distributed when the child reaches a certain age.”

Miller, following Kerst’s theme, said bequests often “leave some controls over the money for life, so that heirs are protected from bad influences. Wealth really has a dark side, and it can enable disruptive and addictive behavior. Keeping that in mind really drives my approach to estate planning.”

Born roughly from 1946 to 1964, the boomers left an outsize imprint on music, fashion, retail trends and even America’s shift from farms and cities to auto-reliant suburbs.

They also became the country’s wealthiest generation, and about 10,000 of its estimated 73 million surviving members are turning 65 every day. Many are working well past 65, but they reflect a rapidly aging workforce; employers are expected to face a significant loss of skills and knowledge in coming years.

“Instead of just wills, people want a living trust conversation, a conversation much more centered around outcomes,” Simmons said.

“People can set terms in trusts that will require a beneficiary to go and convince the trustee that they really need the money and won’t be wasting it. The concept of an outright distribution is rare now.”

Miller, a former Army officer who decided early to “go deep” rather than wide, has devoted his entire practice to estate planning for more than 30 years.

He’s also a founder and principal of WealthCounsel LLC, a document-drafting software provider, and author of “Your American Legacy,” which details his estate-planning approach.

WealthCounsel has thrived serving the growing tranche of retirees. “It has just exploded, and after offering technology solutions needed in the marketplace, we found our business growing every single year. There’s this aging population, this aggregation of wealth, and a growing recognition that handing off a couple of million dollars to the kids might actually be hurtful.”

Kerst said First Community Trust has added employees and has seen revenue grow even through the pandemic.

Success in Succession

Business succession clients are also lining up. Success in business doesn’t necessarily translate into succession skills, the advisers said. “These people knew just what they wanted to do with their businesses, but at the end they just kind of wander forward,” Miller said. “You actually need a planned succession, and you can’t do it overnight.”

Ford, who founded LifeSteps Financial in Claremont, California, and now practices out of Tennessee, specializes in privately held business successions.

Henry Ford

“On the business owner side, we are seeing major transitions to the next generation of individual businesses,” said Ford, offering a national perspective. “Basically the baby boomer generation and Gen X, which I am, own 86% of all non-publicly traded businesses now, so we’re talking about a massive transfer of business ownership.”

In Arkansas, a great many of those businesses being passed down are farms.

“Farmers, like other business folks, want to see their enterprises continue, but they may have four kids and only one of them wants to farm,” Miller said. “The others have gone off to become doctors, nurses or whatever. So we can offer ways to pass the farm down to the child who wants it while still treating the other kids fairly. There’s no cookie-cutter approach.”

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