The generational transfer of wealth — the passing down of assets from one generation to the next — is a significant and growing trend, given that the global population is aging and baby boomers are retiring and passing on their wealth. By some estimates, over the next few decades, trillions of dollars will be transferred from one generation to the next. In fact, a 2022 report by Cerulli Associates suggests that the U.S. alone will see an estimated $84 trillion in wealth transfer by 2045 [1]
Demand will increase for financial planning services
As the amount of wealth being passed down grows, the demand for wealth management and financial planning services will continue to rise. Financial advisors and institutions specialising in estate planning, tax strategies, investment management, and legacy planning will see an influx of clients seeking guidance on managing and preserving wealth across generations.
Financial institutions and wealth managers can capitalise on this trend by offering tailored services that cater specifically to the needs of multi-generational families, including:
- Holistic wealth management;
- Multi-generational estate planning;
- Legacy consulting to help families pass on not only their wealth but also their values and philanthropic goals.
Aligning financial goals with philanthropic endeavours
Generational wealth transfers often create opportunities for families to leave a lasting impact through philanthropy. Many wealthy families use their wealth to support causes they care about, and younger generations may be more inclined to continue these philanthropic efforts. Therefore, the transfer of wealth can provide a significant opportunity to advance charitable initiatives and create a legacy of giving.
Wealth managers can help families align their financial goals with philanthropic endeavours by setting up family foundations or other charitable vehicles. Engaging the next generation in discussions about philanthropy can create a sense of purpose and responsibility around wealth and guide families in building a legacy that reflects their values.
Changes to investment strategies
With wealth being transferred, there is often a shift in how assets are invested. Younger generations may view risk, sustainability, and impact investing differently. This presents an opportunity to redirect capital into emerging markets, green technologies, sustainable investments, or impact-driven ventures.
Advisors can tap into this demand for socially responsible investing (SRI) or environmental, social, and governance (ESG) investing by helping heirs align their investment portfolios with their values. Additionally, this shift in investment preferences can lead to the creation of new financial products that cater to these evolving needs.
In many cases, heirs inherit highly concentrated assets, such as stocks in a family business or real estate holdings. The generational transfer provides an opportunity for heirs to diversify their portfolios and manage risk more effectively by selling or redistributing these concentrated assets.
Wealth managers can guide heirs through the process of asset diversification, helping them reallocate their wealth into more liquid and diversified portfolios. This can involve creating a more balanced investment approach that includes equities, fixed income, real estate, and alternative assets, and helps mitigate the risks associated with holding too much wealth in one area.
Enhancing family wealth for the next generation
The generational transfer of wealth presents both significant challenges and exciting opportunities. Families can successfully navigate the complexities of passing down wealth by addressing key issues such as communication, tax planning, financial education, and asset liquidity. At the same time, this wealth transfer creates a wide range of opportunities for wealth managers, financial institutions, and families themselves — from growing their wealth through smart investment decisions to making a lasting impact through philanthropy. With careful planning and strategic advice, the next generation can preserve family wealth and enhance it for future generations.
To learn more about the great generational wealth transfer, get our latest guide that summarises the unique opportunities for wealth managers and key strategies for retaining beneficiaries.
To learn how SS&C Advent can support your firm’s unique needs, check out our investment managements solutions, or request a demo today.
[1] “Cerulli: Press Release: Cerulli Anticipates $84 Trillion in Wealth...,” Cerulli Associates, accessed January 10, 2025, https://www.cerulli.com/press-releases/cerulli-anticipates-84-trillion-in-wealth-transfers-through-2045.
