The great wealth transfer: a new generation of stakeholders?

Over the two decades, more than $84 trillion in assets will be left behind by baby boomers and members of the Silent Generation as they shuffle off their mortal coils.

As these folks enter their eighties and nineties, America’s economy is on the cusp of an intergenerational shift financial advisors and journalists termed the “Great Wealth Transfer.” Financial market specialists Cerulli & Associates believe this slow windfall is transforming how the financial service industry operates.

The boomers — born between 1946 and 1960 — and their Silent Generation parents built the modern world as we know it, redrawing the post-World War II financial map. They benefited from the most purple fiscal patch in human history.

The combination of explosive population growth and an industrial production base unmatched anywhere in the world also meant the United States economy made America’s middle class richer than in any other nation on Earth. This changing of the guard spells good news for Generation X and millennials; this money is coming their way.

Generational Shift

There are divides within most larger generational categories, and boomers are no exception — baby boomers and the later, more affluent “Generation Jones” exemplify this idea. Early Gen-X and later millennials are also dissimilar to their peers; older members of Gen-X, some of whom remember the Vietnam War, saw a different world to those born at the turn of the next decade. They endured the financial doldrums of the ’70s while their younger contemporaries enjoyed a Reaganite economic renaissance.

Late Gen-X members share similar values to older millennials, but may disagree with their more tech-adjacent younger peers. However, both groups will become a powerful financial stakeholder in the near future. And each coming generation is likely to differ wholesale from the one before them. Moreover, another key pattern has emerged since they joined us in the early ’80s. American millennials are more ethnically varied than any generation before them. Naturally, Gen Z and Gen Alpha will be even more diverse as the United States population continues expanding.

Implications for the Asset Management Sector

What does it mean for the American economy? Forbes wrote last year that the financial services transformation is already underway. More coming changes will redraw the financial map as generations have known it. Technology is integral to this paradigm shift: banks are overhauling their digital infrastructure, while the financial technology (fintech) services industry is gaining the upper hand on younger investors. The fintech market is in robust shape. Digital assets will be the largest mover in 2024, with assets under management (AUM) growing more than any other fintech sector in 2025.

Divergent Ideals

Until recently, Boomers, younger Gen X, and millennials have had differing investment preferences driven by varied life experiences and technological advancements. Boomers are traditionally more risk-averse and still rely mostly on friends and family for investment advice if they have no professional help.

Meanwhile, Generation X has to contend with the pressures of growing children and aging parents, giving them a “Sandwich Generation” moniker. Conversely, millennials have hitherto been ethical investors, more partial to stocks or interests that support their worldview. Younger investors will also give at least $11.9 trillion to charity, which only strengthens millennials’ reputation as the most socially active demographic.

However, the ideals behind responsible investing come in some part from an environmental, social, or governance (ESG) standpoint. S&P Global offers an ESG Score finder on its website. The tool awards a score that measures companies’ ethical performance. Investor Business Daily published its top 100 ESG-scoring companies in 2023 — Microsoft sat atop the list with 72.76. Currently, electric vehicle manufacturer Tesla has a 40-point score.

Still, there is a fiscal elephant in the room that may give many younger asset owners cause for concern: inflation.

The Inflation Question

While the late ’70s heralded record inflation, spiking at an average of 13.5% in 1980, the subsequent years were kind to those holding assets, especially between 2010 and 2020. Then came an inflation surge, forcing large parts of the American public into tenuous financial situations. While inflation has since fallen somewhat, global conflicts, climate-related uncertainty, and geopolitical instability may leave an unpredictable outlook for the time being.

Cryptocurrency Woes

Rodrigo Dominguez Sotomayor is a financial analyst at White & Case. He says the global fintech industry still lists from the stormy seas of Silicon Valley Bank’s 2023 collapse. The fallout triggered American payment provision firm Plastiq’s to file for bankruptcy, while global fintech holdings suffered a lower 2023 investment. Moreover, the much-publicized fall of market-leading crypto investment firm FTX and the subsequent arrest of former CEO Sam Bankman-Fried only added more uncertainty.

Consequently, millennials and their younger siblings in Gen Z now see investing in a new light. They abandoned ethical investment tactics for those more like their predecessors. In 2022, Sharon Epperson wrote in a CNBC feature about how millennials may see low-risk bonds as more attractive than crypto and socially responsible stocks. A marker for crypto’s performance in 2022 was Bitcoin. The most popular cryptocurrency fell in value from roughly $61,000 in October 2021 to $20,000 by the same time the following year.

Not So Different After All

Liberty Street Economics posted a recent analysis of disparities in wealth between generations. Those aged between 18 and 39 years saw their net worth grow by more than 80% between 2019 and 2023. Although this period was bad for small businesses, the wealth generated was based on a shift toward mutual funds and equities.

Maybe the generations aren’t so different after all.

— — —

This article was produced by Media Decision and syndicated by Wealth of Geeks.


Today's breaking news and more in your inbox

I'm interested in (please check all that apply)
Are you a paying subscriber to the newspaper? *

Starting at $2.99/week.

Subscribe Today