A historic and unprecedented phenomenon has recently emerged that is troubling global banks and wealth management companies. It is known as the “Great Wealth Transfer,” and refers to the transition of tens of trillions from the “baby boomer” generation to the millennial generation and Generation Z.
It seems that what worries financial institutions is not the transfer of money per se, but rather the identity of who will inherit it, because the new generation does not share the philosophy of investing in traditional stocks and bonds with its predecessors, but rather prefers bolder bets that include cryptocurrencies, emerging technology companies, and alternative assets.
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These changes come in light of the expansion of the spread of digital platforms and low-cost investment services, as an increasing number of wealthy clients prefer to manage part of their money through emerging companies and modern technologies rather than relying completely on traditional advisors.
It is expected that wealth worth more than $60 trillion in the United States alone will transfer into the hands of millennials and Generation Z by 2048, according to what the British Financial Times reported, citing Cerulli Associates.
The “great wealth transfer” is not limited to Western economies. In South Africa, it is expected that about $85 billion will be transferred to heirs over the next decade, with more than 40% of the wealthy people over the age of sixty, based on what the American Bloomberg website reported on data from the “Henley & Partners” report.
Structural reasons
Experts explain this transformation by the difference in the economic experience of the new generations that arose after the global financial crisis, and witnessed the rise of American stocks and the spread of cryptocurrencies.
- Alternative investmentsYoung investors are looking to exploit the AI boom by investing early in private companies, as well as expanding their investments in private equity and real estate. According to what the report quoted from a study conducted by Bank of America on wealthy Americans, 90% of investors between the ages of 21 and 45 tend to invest in alternative assets such as private equity and real estate, while this percentage does not exceed 15% among the baby boomer generation.
- IndependenceYoung people tend to use digital platforms and applications such as “Revolt” or “Wealthfront” to obtain cheaper and faster services, rather than relying entirely on a traditional financial advisor.
Features of challenges
This transformation threatens – according to the Financial Times – Wealth management firms and traditional banks rely on long-term relationships with older adults, because the new generation has radically different investment preferences and transaction habits.
The newspaper revealed that the children of a wealthy client asked the wealth management company to dispense with their private advisor who had dealt with the family for years, demanding an advisor “more in line with their generation.”
Data cited in the report by the French company Capgemini indicate that banks and traditional wealth managers lost about $1.5 trillion in assets under their management between 2022 and 2025, after wealthy investors turned to new competitors that provide more flexible services based on technology.
In turn, Bloomberg warned that the transfer of wealth opens wide discussions within family companies and boards of directors about the identity of who will succeed the founders, the amount of powers they will retain, and whether companies whose success is linked to the personalities of their founders will be able to continue after their departure.
The Bloomberg report concluded that the success of the inheritance process is measured by the ability of the heirs and professional departments to preserve the companies founded by first-generation entrepreneurs.
Response of banks and companies
The “big shift” prompted major financial companies to expand their services in an attempt to provide investment opportunities sought by young clients, according to the Financial Times.
Morgan Stanley acquired the EquityZen platform for trading private company stocks, while Charles Schwab purchased the Forge Global platform.
At the same time – the newspaper continues – banks are spending billions of dollars on developing technology, artificial intelligence, and improving digital applications, while adding financial education services and exclusive events for children of wealthy families, hoping to build early relationships with the new generation.
But these efforts do not guarantee customer retention, as a global survey conducted by Capgemini shows that the percentage of wealthy people who rely on one financial institution will decrease to 19% by 2025, compared to an increase in the number of those who distribute their money between four and six institutions.
Industry officials tell the Financial Times that the new generation is not only looking for different financial products, but also wants advisors who think in the same way and understand their digital culture.
As huge wealth transfers continue over the coming decades, it appears that competition between banks will not be limited to money management, but rather will revolve around the ability to convince young heirs that traditional institutions are still capable of keeping pace with a world that is changing at an unprecedented pace.
