Is the world ready for the greatest wealth transfer in history?

By Ken Costa, seasoned investor and author of The 100 Trillion Dollar Wealth Transfer: How the Handover from Boomers to Gen Z Will Revolutionize Capitalism 

Change is inevitable. As generations age, the status quo will undoubtedly shift, in all aspects of society, and that includes finance and wealth.

In the next ten years, we are primed to witness a major shift in the demographic that controls of the world’s finances and associated institutions. What we must ask is of is not a matter of ‘if’, but ‘how’. 

How can we ensure it is carried out smoothly and successfully? How can we make this beneficial for all generations? These are the pertinent questions for this one-in-a-generation shift that I explore and address in my new book, The 100 Trillion Dollar Wealth Transfer: How the Handover from Boomers to Gen Z Will Revolutionize Capitalism.

A cross-generational shift: from Boomers to Zennials

This enormous transfer of assets will take place between the so-called ‘baby boomer’ generation to today’s millennial and Gen Z cohort. It is estimated that over $100 trillion will pass from the hands of boomers in what will be the biggest wealth transfer ever.

Not only will we see a monetary shift, but the change will also involve our economy and society more broadly. With money comes power, and ‘Zennials’ (Millennials and Gen Z) will have the opportunity to use these newly acquired assets to champion their own causes. With the younger generations’ emphasis on environmental protection and a greater awareness of ethical and social responsibility, they are steering the markets towards a future that will allow these values to be carried out.

However, the divisions between older and younger generations have never been starker. Zennials have proven that they have the power to restabilise the institutions that have not served them well and fail to consider their needs. If our existing political and financial institutions are to survive, they must also consider the demands of younger generations into account.

The three ‘CO’s: collaboration, compassion, community

Management of the wealth transfer must be driven by what I call ‘CO’: collaboration, compassion and community. It is with these qualities that a more inclusive, purposeful and socially energised capitalism can be built.

A survey in the United States have revealed that in the next ten years, 15% of adults, mostly part of the millennial and Gen Z cohorts, expect to receive a significant inheritance. However, there is a clear lack of confidence in how to manage their new financial status. Only 25% of millennials and 18% of Gen Z surveyed said they felt “very comfortable” handling their funds.

It appears that the younger generation is keen to seek advice and guidance too, with 64% stating they trust the advice of established wealth management organisations (source: Broadbridge). There will be fierce competition within the industry for this Millennial and Gen Z customer base. Wealth management organisations need to be attuned to the needs of the younger generation and guide them as they continue to form their views about financial management. 

As a Boomer myself, I feel a responsibility to work with Millennials and Gen Z to ensure their insight and own, valuable experience is not lost throughout the process. We can fill the gaps in each other’s knowledge.

Technology will take precedence

One of these areas that is certainly new to the Boomer generation is technology. Millennials and Gen Z are absolutely ‘digital natives’, leading the way in the adoption of new technologies, from social media to remote working to cryptocurrency.

Millennials and Gen Z grew up in a thoroughly digitised society and this will continue to be the environment the wealth transfer takes place in as well as influence the new types of ‘less traditional’ assets they choose to invest in. In all aspects, from markets to infrastructure, technologically driven strategies and solutions are expected to be the norm.

Millennials and Gen Z are motivated by social issues

Above all, it is the passions and concerns close to the hearts of Millennials and Gen Z that will be – and already are – driving the markets.

Climate change, equality and diversity, home ownership and the rental market, protest movements and the re-evaluation of history are all issues that are influencing their clear-set goals. Research has shown that this cohort prioritises “self-betterment and self-fulfilment” by means of personal growth and mental health in contrast to previous generations who measured this by financial growth (source: Onramp Invest).

Undoubtedly, this is one of the many examples of generational differences advisors must actively identify and bridge over. But rather than fearing these contrasts as a source of conflict, we must look at them with an attitude of growth and openness, that it can always be resolved. The immense risk is that the divisions continue and we lose sight of value creation and incentive based market economy; it is an urgent task for the boomer generation to defend these vigorously if socially energised capitalism remains a robust market driven activity. 

By listening to each other, finding common ground and building a workable plan for the future, we can build a socially energised capitalism, one that will thrive and work for the benefit of all generations.