The wealth management business in the United States is about to get even bigger.
By 2030, U.S. household assets are projected to jump 60% to more than $140 trillion from $87 trillion today, according to a new report from the Deloitte Center for Financial Services.
Of the $140 trillion, nearly $64 trillion will be in investable financial assets, which means that between $150 billion and $240 billion in wealth management fees could be up for grabs, the report says.
For banks and financial services firms looking for a piece of the action, baby boomers are still their best bet, despite pressure to pursue the much-talked-about millennial market.
According to the report, baby boomers will continue to be the wealthiest generation in the U.S. for the next 15 years and remain the largest fee pool for financial services firms. By 2030, boomers will account for almost 45% of the nation's household wealth, while Generation X and millennials will represent only about 30% and 20%, respectively.
Nevertheless, Generation X and millennials should not be dismissed as they will make up half of the national wealth in 2030, says Gauthier Vincent, a principal with Deloitte Consulting and the leader of Deloitte's wealth management practice.
The report, which forecasts how wealth will evolve for baby boomers, Generation X, millennials as well as the silent generation, outlines four types of generational service offerings that are likely to emerge within the next 15 years:
- Consolidated services for affluent clients: The authors of the report see financial services firms developing consolidated tax, retirement and estate planning offerings for wealthy baby boomers and Gen Xers, as well as high-net-worth millennials. The offerings would be geared to helping clients accumulate wealth and meet midlife and retirement goals.
- Stewardship offerings for clients with decreasing assets: These wealth advisory offerings would aim to help baby boomers and silent generation retirees calibrate spending levels and other financial needs. These services would likely be integrated with simplified estate planning services for less affluent customers.
- "Training wheels" for newcomers to wealth services: Starter services with varying pricing structures, usually built around robo advisor platforms, will become valuable to millennials entering the workforce, less affluent millennials and young Gen X households, the authors contend. In addition, they remind financial institutions that they should have a plan for when the "training wheels" need to come off.
- Debt management services for indebted households: To help Generation X and millennial households burdened by debt, the authors predict that wealth managers will offer services built around advice to change saving and spending behaviors, with a focus on cutting debt.
The report is particularly bullish on bank wealth management businesses, predicting that household assets are likely to grow faster than liabilities over the next two decades. This gives banks a strong reason to make wealth management services core to their product offering, the report says.
"Over the long term, client synergies from a strong wealth franchise could offer better growth opportunities to banks than a pure lending business," says Jim Eckenrode, executive director of the Deloitte Center for Financial Services.
For an interactive—and very nifty—graphic that shows the wealth and debt levels of the four generations studied in the report over the next 15 years, click here.