Navigating the coming great wealth transfer: RIAs need to be prepared
- November 1, 2023: Vol. 10, Number 10

Navigating the coming great wealth transfer: RIAs need to be prepared

by Brent Mason

Over the next 20 years, an estimated $70 trillion will be passed down to the next generation. In preparation for the coming wave of wealth transfer, it is imperative that RIAs offer the widest breadth of services to their clients. Wealth transfer is a complex process involving financial, legal, emotional and interpersonal aspects. A staggering 88 percent of heirs do not retain their parents’ financial advisers, meaning RIAs need to play a vital role in educating and preparing both clients and their heirs for successful wealth transfers.

A comprehensive and personalized approach is essential to offer the next generation exceptional value, guaranteeing a successful transition and the preservation of your clients’ legacies. Early and transparent communication is critical to understanding a family’s values, addressing emotional factors and recognizing the expectations of younger recipients. This insight forms the basis for creating a thorough multigenerational financial plan. Additionally, staying updated on technology trends, AI platforms, and app-based tracking will be pivotal in securing the next generation as clients.

Generally, financial planning encompasses investments, estates, taxes and philanthropy. However, as the next generation becomes savvier and expectations change, members of that cohort will increasingly value tailored guidance and collaboration with investment professionals who promote a long-term wealth perspective.

For example, most RIAs are active in fixed income and equity, including publicly traded REITs, but private real estate investment, if not already in one’s offering, needs to be developed. Real estate is one of the best assets for protecting, growing and passing along wealth. The asset’s long investment horizon helps preserve value from one generation to the next, but given the complexities of private real estate investing, working with an experienced partner is a must.

A real estate sponsor is responsible for finding, acquiring and managing a property on behalf of a partnership. Based on what suits a client’s needs, investing with a real estate sponsor can be in the form of a fund (multi-asset) or as a syndication (singular-asset deal by deal). There are numerous subsegments of the real estate market sectors ranging from office and retail to multifamily and industrial, and both macro- and micro-economic factors impact performance, as do regional differences. The sponsor navigates these challenges to find the best deals for a particular risk/return profile and then offers limited partners the opportunity to invest.

Partnering with established and vetted sponsors will assist RIAs to confidently access investments for their clients that take advantage of the beneficial characteristics of real estate, including longer investment timeframes, which allow wealth to grow in tandem with multi-year trends and demographics, while still producing income and tax benefits during the holding period.

Common terms that RIAs should be familiar with are core, core-plus, value-add and opportunistic. These terms designate different levels of risk and commensurate return. For example, Odyssey Properties Group, provides predominantly value-add opportunities in the multifamily sector. Value-add projects are so called because the sponsor has identified ways to deliver an increase in real value through either physical or operational (or both) improvements of the property. Sponsors, such as Odyssey, are highly selective in their search for the right investment.

When RIAs offer investment opportunities beyond a portfolio of bonds and equities, they are delivering the tailored diversification needed to mitigate risks while still growing wealth through the long-term. Private real estate provides a best-of-both-worlds opportunity where long-term growth and wealth preservation is coupled with income generation and tax benefits.


Brent Mason is president of Mason & Associates, an RIA.

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