4 minute read

The Role of Millennials and Gen Z in Shaping the Great Wealth Transfer

Discover how Millennials and Gen Z are reshaping wealth management, impacting advisors, and making strategic estate planning more vital than ever.

Samuel Deane

Samuel Deane, @samueldeane

Founder, Deane Wealth Management

In an era marked by unprecedented wealth accumulation, the tides of financial responsibility are shifting. Millennials and Gen Z, the torchbearers of the future, are emerging as key players in the monumental Great Wealth Transfer. Their unique perspectives, attitudes toward money, and technological prowess are reshaping the landscape of wealth management. 

In this article, we delve deep into the dynamic role these younger generations are playing in influencing how wealth is managed, invested, and allocated. Join us on this exploration as we uncover the symbiotic relationship between the rising generations and the financial advisors who guide them. We'll also unravel the profound benefits of strategic financial planning and estate management in facilitating the smooth and tax-efficient transfer of wealth from one generation to another.

Millennials and Gen Z Take the Reins

The world of wealth is on the verge of a seismic shift. The Baby Boomer generation, which holds a significant portion of wealth, is reaching retirement age, setting the stage for the largest intergenerational wealth transfer in history. This monumental transition is not just about the exchange of assets; it's about how Millennials and Gen Z are shaping the future of wealth management and the financial landscape. As financial advisors, we find ourselves at a unique juncture in history where the values, priorities, and expectations of younger generations are significantly influencing the way wealth is managed, invested, and allocated. 

Believe it or not, younger generations are engaging in new investment strategies. Bank of America recently conducted an online survey consisting of 1,052 high-net-worth (HNW) individuals throughout the U.S. who were over the age of 21 with at least $3 million in investable assets, excluding primary residence. The results were staggering:

  • 75% of investors between the ages of 21 and 42, compared to 32% of investors over age 43, do not think it’s possible to achieve above-average returns solely with traditional stocks and bonds. 

  • Investors over the age of 43 agree that U.S. equities offer the best opportunity for growth in the future and young investors think the greatest growth opportunities lie somewhere in the transformative digital asset space. 

  • Nearly 50% of young investors have cryptocurrency holdings. 

  • Ownership of sustainable investments have doubled since 2018, from 12% to 26% of wealthy people. 

  • Nearly three-quarters (73%) of millennials compared to 21% of older respondents use sustainable investments, which 72% of all survey respondents agree can make a positive impact in the world. 

These statistics may be surprising to some, but it makes sense when you consider the experiences of Millennials and Gen Z. For instance, Millennials came of age during the 2008 financial crisis and subsequent economic downturns. Many faced challenges like high student loan debt, limited job opportunities, and soaring housing costs. Despite facing economic challenges, Millennials tend to display financial resilience and adaptability. We are more likely to switch jobs or pursue entrepreneurship and multiple income streams to improve their financial situations. If you’re a financial advisor working with younger generations in a planning capacity, it’s clear as day that there are some major differences in how we view retirement and financial independence. Unlike previous generations that often equated success with material possessions like homeownership and luxury items, Millennials prioritize experiences. We are more likely to spend money on travel, dining out, and personal growth experiences rather than accumulating possessions. Not only that, but Millennials are the first generation to grow up with easy access to the internet and digital technology. So it makes sense why we embrace fintech solutions, online banking, and digital payment platforms more readily than older generations. For better or for worse, this tech-savviness generally extends to our investment choices, with a higher propensity to explore digital investment platforms.

The Great Wealth Transfer

It's estimated that over the next few decades, around $68 trillion will change hands from Baby Boomers to their heirs, predominantly Millennials and Gen Z. This unprecedented wealth transfer will have far-reaching implications for the global economy and the financial industry. But as we’ve discussed, it's not just about the quantity of wealth; it's about the values and priorities of the recipients. Taking all of this into consideration, how does the Great Wealth Transfer impact financial advisors and the wealth management industry? It’s simple. It means that younger generations will become the primary clients of financial advisors and we will need to adapt our approaches and strategies to cater to this changing demographic if we want to grow our businesses. For instance, in my practice and from my interactions with peers, I am noticing many young people pursue entrepreneurial endeavors and gig work, something not as popular with older generations. This ultimately leads to specialized planning around managing irregular income streams, optimizing self-employment benefits, and planning for the unique financial challenges entrepreneurs face. It also means understanding and being aware that a 25 year old college grad could be running a 7 figure e-commerce business from their bedroom. As advisors, how are we positioning the financial advice we deliver to serve the generation who will need it most? 

But it doesn’t stop at financial advice per say. Millennials and Gen Z value transparency, trust and personalized advice — so advisors who offer clear, straightforward communication, and advice tailored to their unique circumstances will be in high demand. Not to mention, very few of us were given a structured financial education as kids and there’s a huge gap in financial literacy among younger generations. Seeing that Millennials and Gen Z prioritize financial education, we're more likely to seek advice from advisors who offer guidance in simple ways to understand — and many times these are the advisors who are building personal brands and creating finance content on social media, a relatively new phenomenon in the wealth management industry. In a similar fashion, younger generations expect digital solutions and online access to all of their financial information. Embracing technology is a non-negotiable to meet these expectations and provides a seamless client experience. Considering there are more financial advisors over the age of 55 than under the age of 35, implementing the right technology stack could play a big role in how advisory firms differentiate themselves from the pack. With all of this in mind, The Great Wealth Transfer represents both a significant opportunity and a challenge for financial advisors. 

The Benefits of Financial Planning

Financial planning is the art and science of helping our clients manage their financial resources to achieve their life goals. Every good financial advisor would agree that successful wealth transfer requires meticulous planning and execution. Some of the common benefits we might point to are tax minimization, asset control, wealth preservation, legacy planning,  and most importantly client peace of mind. Part of the reason financial planning has become so popular is because it gives us the confidence to know that the transfer of wealth to younger generations will be done in a way that is consistent with everyone's wishes. For example, if most of your clients are retirees and they’re thinking about their legacy, they may want to specify how their assets should be used and who should receive them. At a high level, financial planning can help to ensure that these wishes are respected. In the world of financial planning, the importance of strategic estate planning in wealth transfers cannot be overstated. How are you positioning your advisory firm and service offering to meet the demands of the next generation?

At Trust & Will, we’re here to help keep things simple. You can create a fully customizable, state-specific estate plan from the comfort of your own home in just 20 minutes. Take our free quiz to see where you should get started, or compare our different estate planning and settlement  options today!

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