The significant impact that the large aging baby boomer population will have on Investment Advisers and, by extension, financial lines insurers underwriting is underway.  Ripple effects of retirement, decumulation and wealth distribution directly impacts adviser income and may result in conflicts and refocus toward more aggressive, riskier investment strategy.  Being able to navigate this investor profile shift and insure advisers requires understanding of the tremendous influence the Boomer generation has on the economy and equity markets.   

According to 2020 records from the U.S. Census Bureau, Boomers, born in the two decades following the end of World War II (between 1946 and 1964), numbered 73 million people[i]; 21.6% of the population.[ii]  While that is the second largest generation behind their millennial children, as of Q4 2021, Boomers controlled almost half (50.3%) of all US household wealth.[iii] Their higher level of education than previous generations allowed Boomers to better capitalize on economic changes like productivity growth, technological innovation, and globalization.[iv] 

With their accumulated wealth, Boomers have looked to Investment Advisers for capital growth and preservation strategies. However, with mass exodus of this generation from the workforce, real US GDP growth will likely be slowed to a more modest pace than in recent decades.  In 2008 McKinsey predicted that the 3.2% GDP increase on average annually since 1965 would end up closer to 2.4%  over the next 30 years.[v]  That prediction, even with the affects of Covid, inflation and the Ukraine war, was not too far off.[vi]  In the third quarter of 2020, about 28.6 million Boomers reported that they were out of the labor force due to retirement.[vii]  While COVID may have speed up retirements, age is keeping the older demographic from returning to the workforce.[viii]

Without employer compensation or benefits, Boomers may no longer be adding or even maintaining wealth as they begin to use investment portfolio income to supplement Social Security and Medicare.  Also known as decumulation; the process of converting savings for retirement into a consistent and sufficient stream of income will be one of withdrawal, not deposit.[ix] Importantly, Boomers wealth is more dependent on corporate equities and mutual fund shares; comprising 30.3% share of Baby Boomers wealth.[x]  As the aging population increases cashing out of retirement structures, there will be immediate repercussions to Investment Advisers.

In particular, the retirement fund distribution age thresholds set by the IRS are being met in increasing numbers by Boomer participants. Since IRAs must have their balances distributed to the account owner or owners beneficiaries, the required minimum distributions (RMDs) for traditional IRAs will accelerate in the next 5 10 years.  Especially because the IRS imposes a 50% penalty on any missed RMDs.  As of Jan. 1, 2023 RMDs from a traditional IRA must start by April 1 of the year after the fund participant turns 73.[xi] Many other types of retirement accounts, including 401(k) plans, follow a similar set of rules.

Given that Investment Advisers income is generated from the investment vehicles they create for clients, the increase in age-forced RMDs from IRAs and similar retirement plans will create financial pressure for advisers and may give rise to conflicts with client investment strategy. Because investment advisers include asset managers, investment counselors, investment managers, portfolio managers, and wealth managers,[xii] with fiduciary duties imposed under federal and state statute, risk of regulatory exposure increases when adviser and client wealth goals are not aligned.

The impact on fee based planners, those that charge clients based on a percentage of their assets,[xiii] as well as commission-based planners, who are compensated for each transaction, may vary, but both are impacted by decumulation. There is inherent risk in advisors collecting fees or commissions on portfolios that lose money when the goal is to help the client manage and increase their net worth.[xiv]  Given the anticipation that Boomers will be more focused on account stability to have assets available for withdrawal, the appeal of a volatile, fee and commission based investment strategy will likely diminish. 

In addition, the making of legacy payments out of assets to children and grandchildren is also on the rise.  While wealth does not dissipate, it is allocated, Investment Advisers need to take care in the fiduciary duty owed to clients to provide sound investment advice even in light of decreasing AUM.  Furthermore, given SEC and state regulatory oversight, any significant impact to portfolio value should be evaluated for proper reporting as well as transparency in the adviser investment strategy.  Often heirs scrutinize certain charged fees and investment decisions after the fact that impact their anticipated inheritance.

Therefore, more depth underwriting questions surrounding Investment Adviser future planning strategy with decumulation is also appropriate. Given that the millennial children of Boomers only have 7.9% of wealth in corporate equities and mutual fund shares[xv], questions surrounding client growth should also be considered. Particularly, what is the investment appetite of that generation poised to inherit the largest wealth transfer in history?  Investment Advisers and their insurers need to be aware that it does not appear to include the same asset management strategy as their parents.

[i] By 2030, All Baby Boomers Will Be Age 65 or Older (

[ii] U.S. population share by generation 2021 | Statista

[iii] US Household Wealth Update: Baby Boomers Still Control Half; Gen X Share Rising – Marketing Charts

[iv] 3 Reasons Baby Boomers Are the Richest Generation in History (

[v] Talkin’ ’bout my generation: The economic impact of aging US baby boomers | McKinsey

[vi] U.S. GDP Q4 of 20222 was +2.7% see Gross Domestic Product | U.S. Bureau of Economic Analysis (BEA)

[vii] This is 3.2 million more than the 25.4 million who were retired in the same quarter of 2019 see More Baby Boomers have retired since COVID-19 began than before | Pew Research Center

[viii] Employment rate by age U.S. 2022 | Statista

[ix] Why Retirement Decumulation Is The New Accumulation (

[x] US Household Wealth Update: Baby Boomers Still Control Half; Gen X Share Rising – Marketing Charts

[xi] Roth IRA Required Minimum Distributions (RMDs) (

[xii] Also including individuals or companies paid for providing security advice and regulated by SEC, if managing $110 million or more in client assets (state security regulators have jurisdiction if less than $100 million assets under management) see Investment Advisers |

[xiii] Ethical Issues for Financial Advisors (

[xiv] Id.

[xv] See Footnote v.


Meet the Author

Sarah Abrams, Head of Professional Liability Claims, Bowhead Specialty

Sarah Abrams is the Head of Professional Liability Claims at Bowhead Specialty. She oversees the Directors and Officers, Management Liability, and Errors and Omissions claims handling for Public and Private Company insureds. Sarah previously practiced law at insurance coverage and defense firms in Chicago after graduating from Chicago Kent College of Law with a J.D. and Duke University undergraduate. Prior to joining Bowhead Specialty Sarah was the Director of Management Liability at Markel and has worked within the insurance industry as counsel and in claims management for over fifteen years.  
Sarah has spoken on numerous industry panels focused on claims trends in management liability, coverage, and diversity and inclusivity impact on resolution strategy. She has been published in numerous industry periodicals and internet publications, including providing content as a guest blogger on the D&O Diary. 
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