In the next 40 years, more than $10 trillion will be passed into the hands of the baby boomers, many of whom are already wealthy from decades of bull markets and matching 401(k) plans.
The idea of this inheritance "bubble" has been around for more than a decade, and talk about it reached a crescendo after a 1993 Cornell University study. But after years of talk, the financial-services industry is still a little unsure what to do about it.
Thirty or forty years ago, banks would have received most of this money without trying. But now, in the midst of what is arguably the biggest windfall in world history, banks are in a battle to capture this wealth.
"I think the focus on the transfer of wealth is still a relatively new phenomenon," said Don McMullen, vice chairman at First Union. "As far as an organization of our size, it's still the new phenomenon. Banks early on did not see the end game -- the transfer of money."
But financial experts said the fact that some banks are struggling to find a strategy doesn't mean it's all going to ETrade or Charles Schwab. There are early indications that more and more people are diverting inheritance money into a foundation or charity.
It may not end up all in one place. But no one, it appears, is sure who will end up managing the bulk of these huge sums in the future.
"God knows," said Robert Litan at the Brookings Institution. He, like spokesmen for banks and other companies, said his firm will study the issue.
Baby boomers are the group of children born in boom times after World War II who are now in their mid-30s to early 50s. The issue of their inheritance is starting to come under scrutiny because the transfer of wealth to boomers, which began in earnest in 1990, is now into the peak transfer years, which will continue to about 2035.
While the Cornell study estimated the 50-year transfer to be $10.4 trillion, a recent Boston College study that included a wider range of people put the figure at $41 trillion to $136 trillion for a time period beginning almost a decade later.
Early anecdotal information indicates that boomers have no plans to keep that money in the same old CDs or IRAs as their parents.
"My take is that 25 percent of it is already spent before the parent passes on -- mentally, that money is already gone on the new house, the new car, whatever," said Carl Brooks, a financial planner with Carroll Financial Associates in Charlotte.
"The wealth that's been accumulated by people over 70 has become huge," said Robert Pharr, president of Providence Capital Management Inc. in Charlotte. The baby boomers inheriting that wealth "are more aggressive and more willing to look beyond and look at things differently than their parents did."
Tom Fruge, Bank of America's private bank market executive for the Charlotte area, said the older generation is a little more focused on "asset preservation," or low-risk investing. That would include such things as CDs, IRAs and real estate.
The fierce competition for banks' deposit money has meant that banks have had to buy mutual funds and brokerage firms and insurance companies to try to keep up.
"A lot of the money will go to taxes," McMullen explained. But as for the rest, "I think it's going to be the organization that can help the customer across the full spectrum."
An example of a bank reaching out: First Union's 2-year-old Family Trust, which includes a special service that will take care of elderly parents. The bank arranges for an outside company to check on parents once a day or as often as the offspring says, or drive them to the doctor, or prepare the home for them to return from the hospital.
To capture money headed for foundations, First Union has a department that will set up such a charitable trust, said Edwin Glass, managing director of First Union's Personal Trust area.
John Ramsey, executive vice president at CCB Financial Corp., said he believes efforts like these prove "all banks are working on it, even if they won't admit to it."
CCB is working hard to get this inheritance money, Ramsey added, and has been for a decade or more.
Bankers have long known they had a problem, even before they thought of the wealth transfer. In 1978, banks and thrifts held 57 percent of financial assets, compared with 2 percent in mutual funds and 19 percent in pension funds. By 1998, banks and thrifts held only 27 percent of assets; mutual funds had 15 percent and pension funds, such as 401(k)s, had 30 percent, according to the Financial Market Center, a group that analyzes money flows.
"Most people have kept it in banks," said Jane D'Arista, who helps write the Center's Flow of Funds report. "And it is certainly not there now."
The answer, banks think, is to be everything to everyone.
So if not banks, who will manage these trillions of dollars?
Pharr of Providence Capital said he believes mutual funds already have been winning this inheritance money away from banks.
"Mutual funds are growing because more and more people are coming in the door," Pharr said. "Their performance has, on average, been better (than banks' products.)"
Dian Vujovich, a mutual fund expert and author of "Straight Talk About Mutual Funds," agreed that mutual funds are doing a better job than banks in targeting the wealth transfer.
"I think mutual funds have it hands down over banks," Vujovich said. "One of the beauties of mutual funds is they do react quickly. And so many banking institutions are just too big. There are too many people who have to have a say in how we invest. They're just slow."
An industry source said the other problem banks have is that they cannot match the huge salaries and commissions in bank trust departments that money managers normally get.
"Banks have had, for a long time, a problem attracting the kind of talent it takes to manage money effectively, and to reproduce the kind of returns (of mutual funds)," the expert said. "They haven't had the culture."
For example, the source said, can you pay a trust department portfolio manager more than twice what his boss is making?
"You'll have a revolt from within," he said. "If you pay a half a million or more to that portfolio director, morale (in the bank) takes a nose dive."
Although most mutual fund companies may be attracting more customers, most are not consciously marketing to the baby boomers about to inherit more money.