The great intergenerational wealth transfer and how to get it right

It seems straightforward enough. The Boomer generation—who roughly make up 25 percent of our population but own more than 50 percent of private wealth— are set to pass on their accumulated wealth before they kick the bucket. 

Australia is on the verge of the largest generational wealth transfer in history. 

So how much money are we talking about here? Almost $4 trillion. 

OK Boomer, so what could this mean?

The looming wealth transfer will present opportunities and challenges, for those on the wealthy receiving end and the broader financial industry. 

It involves a somewhat uncomfortable conversation around a still-taboo topic: the impact of inheriting significant wealth, and what to do about wills and estate plans when a person dies.

“The intergenerational transfer of wealth has been described as unprecedented – about 3.5-4 trillion dollars over the coming years,” says Ted Richards, Head of Distribution and behavioral economics expert from Six Park

“This presents challenges for both the beneficiaries of inheritances and the industry alike. How should Australians who receive an inheritance put it to best use? 

How can the industry help, particularly as it undergoes transformation post the Banking Royal Commission; and given that advisers typically service an older client base?”

How to prepare

Family conversations are crucial to preparation. 

“More than half of Australians haven’t had conversations about their legacy nor even have a will in place,” says Richards. 

“They should also get a better understanding of the different ways they can use that money, particularly as opportunities to invest grow. 

In the past, you may have thought to buy property, or perhaps invest through fixed-term deposits. Technology is making many more avenues for investment available to every Australian. But awareness of these opportunities is still low.” 

What should be just as crucial is the integration of technology for businesses serving a new type of client: the youth. 

“Start integrating digital solutions that complement your current offering,” says Richards. “This will help engage the younger generations, including the children and grandchildren of your current clients.”

The challenges 

Preparations may suffer setbacks due to outdated, traditional advice models and the ‘advice gap’ that’s locked 80% of Australians out of the financial advice market, according to Richards. 

“The challenge for many advisers is having the right capability to engage younger clients and appeal to a segment with different investment values—and in all likelihood, a ‘digital-first’ mindset,” he says. 

“The traditional advice model will be perfect for some of the beneficiaries of the transfer of wealth, but for others—and possibly the majority—the traditional model won’t be the right starting point. A simpler, more affordable and accessible solution will be.” 

Since the Banking Royal Commission, more than 6,000 financial advisers have already left the industry from an initial total of over 25,000 advisers, and this trend is expected to continue.

“Financial advice is increasingly something only the wealthy can afford,” Richards says. “Millennials may be considered ill-prepared because they’re not attractive clients for advisers, so they aren’t receiving any help. 

“However, millennial investors actually have pretty strong opinions on how they want to manage their wealth and at some stage they will need help so businesses need to consider how they can help and engage them.” 


Don’t delay digital

“Don’t wait,” Richards says, “because there are now low-touch solutions to help you engage with younger generations–and indeed, anyone who may not be an economical client today, but is the full service client of the future.” 

“These digital solutions are much more accessible and can complement your current face-to-face offering, allowing you to engage with clients at the right time in their investment journey.

“Some advisers view this as a risk. But if they get it right, it can provide them an opportunity to help a client early in their wealth management journey, and serve them over a longer period of time.”

Richards suggests consumers educate themselves. 

“Consumers should make an effort to understand that they have a great many more options to use their money wisely than previous generations. Spending a little time to understand what those options are will be more than worth their while.” 

If you’re feeling lost at where to start – it’s as simple as starting a conversation. 

If the looming wealth transfer has you thinking, be sure to check out our previous article on Australia’s intergenerational wealth gap.