Boomers to Zoomers:
Engaging the next generation of wealth
As trillions shift to younger generations, advisers must evolve to provide Millennials and Gen Z with tailored advice, tech-savvy tools and values-based financial planning
As the “Great Wealth Transfer” gets underway, inheritance patterns are shifting.
Baby Boomers and older generations expect to pass an estimated $100tn to younger generations in coming decades. New research conducted by FT Longitude* shows that high-net-worth (HNW) and ultra-high-net-worth (UHNW) families are accelerating the transfer of wealth to their heirs. Almost half (47%) of wealth holders worldwide have inherited directly from their grandparents, a majority (55%) having received between $1mn and $25mn.
“Millennials and Generation Z are receiving larger inheritances at a younger age,” says Jared Franz, Economist at Capital Group, the investment management firm that conducted the research. "It's a substantial amount of money, and the younger generations could benefit from financial advice and support."
Making their marks
One concern is that, owing to a lack of financial knowledge and experience, younger generations may be unprepared to manage their newly acquired wealth. But conventional financial knowledge may not be as applicable to them as it was to their predecessors. Younger people will inevitably have their own attitudes and priorities, and will likely want to put their wealth to use in quite different ways than their parents and grandparents.
Financial advisers must adapt to the perspectives of younger wealth holders, working with HNW and UHNW families to ensure all concerned parties are happy with future investment plans. At HSBC, for example, Head of Wealth and Premier Solutions Lavanya Chari emphasises the importance of involving the whole family in the conversation about how wealth, including a family business, will be managed.
“We make an effort to build relationships across different generations, so that we can help families cross the divide,” says Chari. She adds that financial literacy and education remain critical to preparing younger generations for wealth management responsibilities. “Holding those discussions early is important, so that younger generations are ready when the succession takes place.”
Entrepreneurial tendencies
According to Claudia Caffuzzi, Vice Chairman of J.P. Morgan Private Bank and Head of International Private Bank and Latin American Wealth Advisory, there is a growing emphasis on diverse interests and skills among family members. One particular goal of many Millennial and Gen Z inheritors is to build their own enterprises. “There’s a burgeoning entrepreneurialism,” says Caffuzzi. “They don’t just want to manage their family’s money or take on the family business. They want to start their own ventures.”
There’s a burgeoning entrepreneurialism. They don’t just want to manage their family’s money or take on the family business. They want to start their own ventures
Claudia Caffuzzi
Vice Chairman of J.P. Morgan Private Bank and Head of International Private Bank and Latin American Wealth Advisory
Younger generations' entrepreneurial tendencies could not only create more venture opportunities but also boost support for growth businesses. Many younger people are more interested than previous generations in investing in the riskier segment of start-ups and scale-ups. Nevertheless, younger inheritors can benefit from guidance in developing disciplined investment strategies. “Helping them to set parameters can protect them from over-enthusiasm when the opportunities come,” says Caffuzzi.
The other common area of focus for Millennials and Gen Z inheritors is sustainability and impact. “They don't just view their wealth as a tool for their own financial security,” explains Chari. “They want to have a positive impact on the world. They often take ideas such as social responsibility, ethical practices and responsible investing far more seriously than previous generations.”
Tech-savvy investors
Finding new ways to connect with a younger constituency will be crucial to financial advisers, says Franz. “There is so much financial advice already available on social media,” he warns. “It may take longer before these younger inheritors seek out support.” This is confirmed by the study, which finds that Millennials are more likely to turn to social media and “finfluencers” (a source of investment advice for 27%) than to financial advisers (18%) when they inherit.
There is so much financial advice already available on social media. It may take longer before these younger inheritors seek out support
Jared Franz
Economist at Capital Group
Advisers will, therefore, need to adapt to the preferences of tech-savvy Millennial and Gen Z inheritors, who expect personalised, frictionless services, including app-based interfaces and AI integration.
Young inheritors will require a new kind of financial advice, one that helps them align their investment decisions with their personal values and life goals. They seek advice that will enable them to make positive, rewarding choices. “We’re seeing increasing interest from partner firms seeking support for programmes focused on the next generation of investors,” notes Guy Henriques, President, Europe and Asia Client Group at Capital Group. “In response, we're delivering tailored thought leadership, content and educational resources that align with their specific goals and audience needs.”
Almost two-thirds of Gen X and Millennial inheritors in the research say they have regrets about how they’ve used their inheritance money
Almost two-thirds of Gen X and Millennial inheritors in the research say they have regrets about how they’ve used their inheritance money, with nearly two in five wishing they had invested more. “Just having someone with experience and knowledge guide you a little bit can make a huge difference,” says Franz.
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