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Threat or Opportunity? The Pending TRILLION Dollar Wealth Transfer

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11 minute read

By Perry Kinkaide, MSc, PhD, CMC – Kinkaide Enterprises Inc.

Winning a lottery can have tragic results.

Millennials and charities may not realize they are about to win a lottery, arguably the most monumental economic, political, and social event of the 21st century.

It will be the largest, broadest, deepest intergenerational transfer of wealth in history: the transfer of $trillions of wealth accumulated by babyboomers as they retire and expire. I’ve been tracking and alerting others to the associated threats and opportunities, namely: financial planners and high-wealth people, government and early-stage entrepreneurs.

Some millennials are already anticipating and pre-spending their inheritance. Most are not!

Hence, the boom underway of financial planners, new investment services, and government’s interest in how to access private capital. What has not been discussed in any depth is the impact of the wealth transfer on innovation and public services such as health and education.

The impact is expected to be profound and should be stirring a public policy discussion engaging those expecting more or less from governments.

Since the end of WWII, we’ve seen an extraordinary growth of government at all levels. Yet, debt worldwide is in the $trillions. The runup of budgets and services has contributed to an increasing sense of entitlement financed by increasing taxes on the wealthy, growing middle class, and debt financing.

Elected officials with access to “free money” have transitioned government and the public to expect “public” service for “free”. Governments have been getting elected on special interest giveaways, pandering to ever more powerful public-sector unions and professions, and blaming billionaires and corporate job creators if the public coffers are empty. The growth of public debt has been unrestrained. But why worry – the economy has been growing? Debt is under control as a portion of growing GDP and interest rates for serving debt are low. But…

A reckoning for this transfer of wealth is unavoidable

The reckoning will be triggered NOT by a crisis but by the huge transfer of $trillions by retiring and expiring babyboomers. The pending transfer should hardly be a surprise given the extraordinary economic boom and accumulation of wealth by middle-class babyboomers since their post-WWII birth. While the event can hardly be surprising, features of the event are SHOCKING and contributing to the reckoning.

Consider:

1. $Trillions are to be transferred. Recent estimates are that $68T – yes trillion US, will be transferred to millennials as babyboomers retire and expire. This number equates to $8.5T Cdn for Canada. It’s a once-in-a-career opportunity for financial planners. Some have speculated that the familiarity of millennials with technology may be good news for fintech including contemporary bitcoin solutions and cryptocurrencies

2. The transfer and its impact will hit quickly. Aging of the population is not smooth. Birthrates climbed rapidly after WWII creating a spike in their proportion of the population. The spike gives the financial industry little time to prepare for increasing usage of automated, self-help, on-line investing.

3. The transfer of wealth should increase the availability of private capital increasing economic activity: stirring innovation and job creation, exports and community enterprise. Economies most likely to gain will be those with a mature innovation ecosystem supporting survival, growth, and retention of innovation. Note. Fraud may also increase as regulators have difficulty keeping up with creative financing options.

4. Baby boomers were the source of demand for public services that continues to rise. Yet, the capacity to sustain the financing of public services through taxation is expected to drop sharply as taxpaying babyboomers retire and expire. The impact would be mitigated IF the wealth transfer were to stir taxable economic activity.

5. The size and aging of the babyboomer market sustain interest in “public” service delivery where health and education dominate government expenditures. These public services also constitute significant sources of employment.

Current levels of service cannot be sustained when babyboomers retire and expire: a) removing them as employees from the workforce, b) reducing demand for client services, and c) reducing the number of taxpayers for financing public services.

6. Babyboomers have fueled North America’s consumer economy. Markets MUST adapt quickly. Technology is more familiar and acceptable to millennials as the recipient of the wealth transfer. Institutional distrust and data accessibility are enabling the personalization of services and products in virtually every service sector.

7. Accumulation of public debt is crushing. Low-interest rates have continued to fuel the growth of public and private sector debt. ANY increase in interest rates and/or a sustained decline in tax revenues would shock public services.

I’ll pull no punches here and tell it as it is.

The debate must begin in anticipation of the looming tsunami. The good news is that the private sector is investing in technologies to accommodate and benefit from the transition and release of accumulated wealth. The bad news is that the public sector wants to sustain the status quo as it is dominated by beholden professionals with few schooled in transition management. Most claiming management status are really administrators – sustaining the profession.

What is needed to prepare?

1. Millennials need financial planning and their offspring need financial literacy. Without a plan, most will take their inheritance as an opportunity to spend, save or invest, driving a short term consumption boom and consequent hangover.

2. Banks will face increased pressure to accommodate the rise in usage of on-line investing, usage of cryptocurrencies, and other innovations in fintech.

3. Knowledge and technology seek a vacuum. Data is fueling the adoption of machine learning and artificial intelligence throughout the economy, necessary to accommodate a shrinking workforce.

4. Governments must rationalize social service standards and/or facilitate their personalization. Innovations in medicine and healthcare and the associated deinstitutionalization must be priorities.

5. As for education, it too must move beyond government as rapid increases in knowledge make lifelong learning necessary. Deinstitutionalization and innovation become essential for supporting service personalization.

6. Professions need relational skills and lifelong learning to complement their role as aides to consumer designed technologies.

7. Governments with any conscience must prepare for the crisis as an opportunity to give the client consumer status. This means personalizing public services: a) monitoring service satisfaction, b) incentivizing innovation contributing to service personalization, c) training and recruiting managers as change agents while d) maintaining public service insurance for the truly disadvantaged.

8. Collaboration among all stakeholders to increase productivity within industry.

9. Recognition that the humanities MUST guide any technology-driven transition thus calling for arts and science, humanities and technology, to work together.

If you’ve read this far, and are breathless, angry, or in denial…then consider the alternative.

Should governments sense that the public in a democracy can’t accommodate the anticipated shocks of a huge wealth transfer and free-spending, market-driven millennial, then government may step in and mitigate. How?

Mitigation may come by reducing the impact of the “free money” wealth transfer by reducing the buying power of millennials.

Do We Need a Wealth Transfer Tax?

This could be done by introducing a wealth transfer tax arguing that the new tax is dedicated to paying down the public debt accumulated while serving the former babyboomer generation. The downside of such intervention is that such measures will impede a critical improvement in productivity and the competitiveness of the affected economies.

Some governments may even declare innovation as a priority so as to preserve public services. Governments are already recognizing that technologies – such as AI, have the potential to dislocate expensive knowledge workers and address: a) increasing demand for service and it’s personalization, b) increased entrepreneurship and global enterprise, and c) a decline in the supply of social service resources. The policy of increased “innovation” typically fails in public services unless introduced with adequate resolve to confront institutionalized professional resistance and the drive/ culture to maintain the status quo.

Regardless – as no one knows the future, it is about time for Vision & Leadership, Creativity & Convergence.

It’s exciting to know that “free money” in the hands of the babyboomer’s offspring may be the very event to trigger an end to the 20th century’s assembly of “public” service supply and transition increase in the “personal” service market.

_________

Perry Kinkaide, MSc, PhD, CMC is the Founder and Past President of the Alberta Council of Technologies. He is the co-founder of several Alberta technology alliances for advancing cell therapy, cleantech, and fusion technology. He also previously served as the Managing Director of KPMG Consulting in Edmonton, Alta., and Assistant Deputy Minister with the Alberta government.


Produced with the assistance of the Government of Alberta, Alberta Media Fund

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Alberta

Alberta top court downgrades murder convictions in quadruple homicide case

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Calgary – Alberta’s top court has downgraded two convictions in a high-profile case involving the torture and killing of a man and the deaths of three others from first-degree to second-degree murder.

The Alberta Court of Appeal released the decision Friday in the cases of Tewodros Kebede and Yu Chieh Liao over the killing of Hanock Afowerk.

Afowerk’s body was found in a ditch outside Calgary in July 2017. He had been bound, beaten, strangled and shot.

Three other bodies were found in Afowerk’s burnt-out car at a suburban construction site. No murder charges have been laid in those deaths.

Court heard that Afowerk’s death was the culmination of a plot to kidnap him and extort him for money. The jury agreed with the Crown that Afowerk’s killing had been part of the plan from the start.

But the Appeal Court said the trial judge failed to explain that while the kidnapping and beating had clearly been planned, Afowerk’s killing may not have been. It suggested the defendants may have not have been recruited to kill him.

The Crown relied heavily on a text message sent by Kebede before the killing, which read: “U up for the job tonight?”, as evidence of planning. But because the recipient of that message didn’t testify to it, the Appeal Court concluded its meaning was unclear.

The court gave the Crown the choice of retrying the case or substituting second-degree verdicts. It chose the latter.

The court dismissed the defendants’ application for a new trial

“Following the trial judge’s instructions, the jury must have found by their verdict that both appellants actively participated in the murder of Mr. Afrowerk,” the Appeal Court said in its written judgment.

“Both would therefore be properly convicted of second-degree murder. Accordingly, there will be no prejudice to the appellants if we substitute the verdicts to reflect that fact.”

Kebede and Liao must now reappear before the trial judge for sentencing.

The change does not affect Kebede’s and Liao’s convictions involving the deaths of the other three victims.

Liao was found guilty of being an accessory in the murders of Cody Pfeiffer, Glynnis Fox and Tiffany Ear, whose remains were found in Afowerk’s charred car.

Kebede was convicted of being an accessory in Pfeiffer’s murder.

This report by The Canadian Press was first published Dec. 23, 2022.

— By Bob Weber in Edmonton

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Alberta

WestJet announces new flights to Tokyo, Barcelona, and Edinburgh

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Calgary – WestJet plans to offer flights to Japan starting this spring, marking the airline’s first non-stop flights to Asia from Calgary.

The Calgary-based airline said Monday that it will fly to Tokyo’s Narita International Airport from Calgary this spring.

The non-stop flights will operate three times weekly beginning April 30.

The airline also announced new routes from Calgary to Barcelona and Edinburgh and increased frequency to Dublin, London, Paris and Rome, also starting in the spring.

WestJet chief executive Alexis von Hoensbroech says the new flights are part of the airline’s plan to expand capacity from Calgary by more than 25 per cent by next year, beginning with intercontinental routes.

WestJet also says it is preparing for broader expansion within Canada and North America over the coming months.

This report by The Canadian Press was first published Dec. 5, 2022.

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