The Great Wealth Transfer: should advisors be worried?

The Great Wealth Transfer: should advisors be worried?

The so-called ‘Great Wealth Transfer’ is looming. Over the next thirty years, baby boomers are set to transfer a total of £5.5 trillion to the younger generation, according to research by the Kings Court Trust and Centre for Economics and Business Research. 

However, the heirs of this wealth transfer won’t necessarily be sticking with their parents’ advisors. In fact, research by Cerulli has shown that just one in five ‘affluent’ investors use the same advisor as their parents.  

Difference in risk appetite

The younger generation also invest differently to their parents. 

As of late 2022, 21% of affluent millennials held some cryptocurrency. This compares with 22% of Gen Xers and just 3.6% of baby boomers. Meanwhile, more than half of Gen Z reported owning this asset class.  

Younger investors were also far more likely to invest in peer-to-peer lending platforms or crowdfunding. With just under 10% of millennials willing to invest in these ways, compared to just 1% of baby boomers. 

Michelmores, who ran the study into this generation gap, noted that though these numbers weren’t necessarily high, they showed that younger generations were more willing to take a risk with their investments. 

But risk appetite wasn’t the only thing that set the younger generation apart.

Concern for ethical investing

According to the study, 22% of millennials see ESG as a primary consideration when making an investment decision. This compares with just 6% of baby boomers. Strikingly, over 40% of the older generation reported that “social and environmental impact has never been a consideration” in their investment decisions. 

A separate report from the Charities Aid Foundation found that demand for help with their charitable giving was much greater among millionaires aged between 18 and 34. 57% of this age group wanted help with their charitable giving, compared to 49% of those aged 35 to 54 and just 34% among those aged 55 and older.  

With such stark differences, it’s no wonder that one in three financial advisers cited client longevity or an aging client base as their biggest concern.

Aaron Gibbs, personal finance commentator at Charles Stanley, said firms will need to adapt their proposition or risk getting “left behind” by the younger generation. 

Deloitte warned, however, that trying to be “everything to everyone” is unlikely to yield good results. Instead, the professional services firm suggests “fine-tuning” product, distribution, and pricing strategies to fully meet customer needs.