Record-breaking wealth is set to pass between generations in the coming decades. This presents families with unprecedented opportunities - and challenges - to protect their wealth for the future. It also requires advisers to step up with deep client engagement and forward-thinking solutions.
Of the $291.5 billion in wealth controlled by the new class of billionaires in 2023, $150.8 billion was inherited, while $140.7 billion was generated by self-made billionaires, according to the UBS Billionaire Ambitions Report 2023. This was the first time this trend was observed since the report's first edition in 2015 (source). In previous years, the balance consistently tipped in favour of self-made wealth. This development reflects a broader trend that wealth managers have been anticipating for years: the passing of wealth from one generation to the next.
A global shift in wealth distribution
This dynamic is not confined to the ultra-wealthy. The Great Wealth Transfer represents the largest intergenerational shift of wealth in history. Globally, $18 trillion is projected to be transferred by 2030 (source), with $124 trillion anticipated in the U.S. alone through 2048 (source). This movement is fuelled by factors such as ageing populations, longer lifespans, and decades of wealth accumulation among baby boomers and earlier generations.
Some win, many lose
For many Millennials and Gen Z inheritors, these windfalls represent a financial reprieve amidst student debt, housing unaffordability, and economic uncertainty. The challenge for advisers and families alike is to ensure that this transfer preserves wealth, aligns with values and secures legacies for future generations. For advisers, the challenge is particularly pressing, as more than 70% of heirs are likely to fire or change financial advisers after inheriting their parents' wealth (source).
Navigating the challenges of the Great Wealth Transfer
1. Shifts in family structures
Modern family dynamics, including blended families and single-parent households, require estate plans that accommodate complex relationships and ensure equitable distribution of assets.
2. Cultural and cross-border complexities
As families and their wealth become more global, managing cross-border assets introduces complications. Differing tax laws, legal systems, and cultural expectations can hinder seamless wealth transfer without careful planning.
3. Regulatory uncertainty
The unequal distribution of inherited wealth is likely to widen social divides. As a result, governments under fiscal pressure are likely to review inheritance tax laws, increasing the need for proactive estate planning to minimize liabilities.
4. Delayed wealth transfers
With increasing life expectancy, many heirs inherit wealth later in life, often in their 50s or 60s. This delay can complicate long-term financial planning and intergenerational engagement.
5. Generational differences in investment preferences
Younger generations are reshaping investment landscapes. Millennials and Gen Z allocate significantly more to alternative assets - from crypto to sneakers - than their predecessors (source). They also prioritise ESG and impact investing, reflecting a desire to align their wealth with social and environmental values.
6. Wealth dissipation risks
The statistics are sobering: 70% of families lose their wealth by the second generation and 90% by the third. Poor financial literacy, imprudent investments, and family disputes are common culprits. Succession planning and financial education are critical to breaking this cycle.
7. Emotional and family dynamics
Succession planning is as much about relationships as it is about finances. Conflicting agendas, disputes, and unclear expectations can cause rifts. Advisers often find themselves in the role of mediator to reconcile differing family interests.
How to prepare for the Great Wealth Transfer
1. Build multi-generational relationships
Advisers need to cultivate strong relationships with entire families, not just the wealth holders. Engaging heirs early and addressing their unique priorities will foster loyalty and ensure a seamless transition.
2. Use transparent communication
Fostering open, honest discussions about wealth, expectations, and legacy is crucial. Families should engage in regular meetings to align their goals and minimise misunderstandings. Advisers can play a key role by facilitating these conversations with sensitivity.
3. Incorporate financial education
Financial literacy is a cornerstone of successful wealth preservation. Families should invest in educational initiatives to prepare heirs for the responsibilities of managing inherited wealth. From clarifying complex financial concepts to mediating family disputes: advisers are indispensable in guiding families through the emotional and logistical aspects of wealth transfer.
4. Tailor investment strategies
Advisers need to adapt to generational shifts by offering tailored investment strategies that balance innovation with stability. ESG and alternative investments can appeal to younger heirs while safeguarding long-term goals.
5. Leverage estate planning tools
Tools such as usufruct and bare ownership arrangements, gifts with reservation of usufruct, private foundations and life insurance are essential to optimise wealth transfer. These tools can mitigate tax liabilities, protect assets and reflect family values.
6. Embrace technology
Digital platforms like Abbove enable families and their advisers to centralise wealth management, monitor financial structures in real time, and simulate scenarios to make informed decisions. These tools enhance transparency and collaboration, ensuring seamless transitions. Modern wealth management demands a blend of personalised advice and cutting-edge technology. Advisers who balance these elements will thrive in an era defined by intergenerational change.
The future of wealth management
The Great Wealth Transfer isn’t just about money—it’s about legacies, relationships, and values. Technology will be a key differentiator for advisers. Platforms like Abbove provide the tools to streamline estate planning, create dynamic simulations, and centralise family wealth data for real-time access.
These features allow advisers to build trust through transparency, improve collaboration across generations, and deliver personalised guidance. Integrating such digital solutions will not only meet the expectations of tech-savvy heirs but also empower families to preserve and grow their legacies seamlessly.
Secure the future with smart solutions
Discover how Abbove can revolutionise your approach to wealth management. Book a demo today to explore how technology can empower your advisory practice and strengthen your clients’ legacies for generations to come.
