June 17, 2024

Wealthsimple CEO Mike Katchen

The upcoming decades promise to witness an unprecedented transfer of wealth between generations, heralding what experts dub as the “most significant intergenerational wealth transfer in history.”

As Baby Boomers prepare to pass down their inheritances to younger family members, a considerable portion of the population accustomed to middle-class living will find themselves endowed with substantial investment potential.

Projections from consulting firm Cerulli Associates suggest a staggering $84 trillion will transition hands by 2045, while The New York Times offers a more conservative estimate of $15 trillion for this wealth transfer.

The question arises: how will these inheriting generations navigate and manage their newfound wealth? Forecasts differ, but there’s a common thread—they’re likely to adopt markedly different approaches compared to their predecessors.

According to a survey, a striking 80% to 98% of heirs won’t retain their parents’ financial advisors, signaling a significant departure from tradition.

And they seem to have valid reasons for this inclination. A survey conducted in 2021 revealed that only 38% of wealth managers feel equipped to comprehend and cater to the unique financial needs of millennials.

Younger generations exhibit a readiness to seek alternative opinions, even turning to automated solutions. An Accenture study found that 67% of millennials express interest in computer-generated wealth management recommendations.

Recent surveys underscore a growing dissatisfaction among Millennials and younger demographics with conventional wealth management tools and resources. Notably, Millennials are twice as likely as Baby Boomers to embrace robo-advising, a sector anticipated to reach $1.2 trillion by 2024.

Companies like Wealthsimple have emerged to cater specifically to this demographic. Despite its peak search volume coinciding with the onset of the pandemic, interest in Wealthsimple has continued to surge over the past five years.

Wealthsimple’s appeal lies in its robo-advising services, which automatically rebalance portfolios and reinvest dividends. Additionally, the platform offers access to human advisors, providing a blend of automated and personalized assistance—a feature particularly attractive to Millennials who can start investing with as little as $1.

In anticipation of this impending wealth transfer, wealth management advisors are gearing up to engage with these new, younger clients. Strategies include prioritizing financial literacy, addressing tax implications, fostering deeper relationships, and tailoring services to meet individual needs.

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