Talkin' 'Bout My Generation

One of the biggest opportunities in wealth management today is cracking the nut that is intergenerational wealth transfer. It has been on the strategy radar for some time and is nothing new however is more pertinent than ever as the world adapts to a new era of investing.?

For the past few years, the hot projects amongst private banks and wealth managers has centered around strategies for Millennials. As trillions over the coming years will pass to that generation, never has the spotlight shined so bright. However you wish to define Millennials age range as a generation, in most instances, that generation is now, on average, within their mid 30’s. And at that age, the demographic is entering the economic sweet spot between the ages of 35 to 55.?

On average this age group has the most number of life and career events such as marriage, children, home ownership, promotions and career progression. This is also the point of peak consumption as average earnings are also at their highest point. We have already passed the point, in 2019, in the United States, when the Millennials generation passed the boomers as the largest of generations.?

This is a generation that for wealth management businesses today represent the largest demographic, many of which are already well established financially, yet undeniably key to the future success of any firm.?

Furthermore, this generation is more diversified than what has been and still is the dominant demographic of HNWI’s. GlobalData published a report in 2019 which highlighted that 89% of all global HNWI’s are men and of that 39% are over the age of 60.?A McKinsey study additionally emphasized the growing influence of women where typically the first transfer of wealth is from husband to wife before an intergenerational transfer takes place and today in the US, high net worth investors under the age of 40 are twice as likely to be female than those over the age of 40.

There is in effect a quadrupple whammy here in terms of the prize:

1. Inheritance of investible and housing wealth from the boomer generation

2. A generation at peak consumption within their own life cycle

3. The largest generation by population

4. Changing face of HNWI’s - from historically older men dominating

Schroders undertook some research recently into UK finance advice market suggesting that 65% of inheritors do not intend to remain with their parent’s advisor. Inheritors do not necessarily want to retain the same investments either and there is plenty of empirical evidence in research and surveys to show the changing trends in investor wants and needs. Tradition investing has made way for sustainable, impact and alternative strategies (e.g. private assets) to name a few.?

Source: World Wealth Report 2020, Cap Gemini Research Institute

In 2020, 48% of responses in the World Wealth Report by Cap Gemini were from those under the age of 40 and 44% of respondees were female. This provided some telling insights, particularly when it comes to investor interests. One of the most prominent shifts of late is the interest in sustainable investing and the good news according to the report is that wealth management firms are already well placed. HNWs surveyed planned to allocate 46% of their portfolio to SI by the end of this year while 80% of wealth managers already offer sustainable investing options.?

Over the next two decades, Forbes have reported that a staggering $30 trillion will transfer from the Baby Boomer generation. This is a huge opportunity for the wealth and investment industry. The key is to acknowledge, recognize and adapt to the change.