• Jasmina Hazuria
  • Published: 26 September 2023


It's a time of unprecedented opportunity, a wave of abundance is on the horizon, set to reshape the financial security of Gen X and Millennials. Or so we've been told. As the great wealth transfer draws near, a monumental change will occur, empowering the next generation.  Gen Z, just starting their careers, are left as an afterthought in this time, as they patiently await their cue, ready to redefine the financial industry.

With this great transfer of wealth coming, Institutions and Financial Advisors prioritize the needs and preferences of Gen X and Millennials as they develop new products and strategies.  The environment, pricing and technology are at the forefront of every conversation; however, we may be missing out if our focus does not include Gen Z, the creative cohort born into the digital era.

How great is the wealth transfer?

The Great Wealth Transfer has received substantial attention in the past few years.  The idea that the baby boomer generation will leave trillions of dollars in assets to their Millennial and Gen X heirs.  But, how much wealth will be transferred?  And if transferred, where will that money be used?  There is much evidence to support the idea that any wealth transferred over may be depleted into other forms of investments.

The first question is whether there is much wealth to transfer over.  Although Boomers put aside a significant portion of their income into retirement savings, they started at a late age, around 35.  They also experienced significant fluctuations in AUM through the dot.com crash in 2000, the great recession in 2008 and most recently, the pandemic and the impacts of inflation.  Life expectancy is also a factor as many did not account for the extended years in their financial planning.  According to Canadian statistics, “53% of Canadians are not sure if they are saving enough, while 60% worry they will outlive their retirement savings”1.

Some argue the Great Wealth Transfer may not have the expected impact because economic inequality and disparities in wealth distribution mean that the foreseen effects of the wealth transfer are skewed towards a small percentage of the masses. According to the New York Times “the top 10% of households will be giving and receiving a majority of the wealth”2. Those in lower income brackets, will not be left with a sizable inheritance. As a result, for the vast majority, achieving financial independence will continue to depend on personal financial planning, education, and wealth-building through personal efforts.

Even if there is wealth passed down, the second question is whether the money will remain invested.  Millennials are in a financial crisis, and many are opting to live at home due to the inability to afford housing.  Millennials are also the first generation to prioritize their lifestyle, cutting down on work and career while focusing on self-care activities.  Funds coming to them will likely be depleted for achieving financial freedom and living a better life.

So, as Boomers, Gen X and Millennials use the wealth they’ve acquired for ‘living’, and the prospects of sizeable inheritances are diminished or limited to the wealthy few, firms need to find ways to service clients with smaller wallet sizes and advisors need to shift away from focusing their attention on clients with high AUM and towards keeping those clients they consider to be non-profitable.  Not doing so now, runs the risk that the younger generations who start to build and accumulate more wealth will not look to advise in the future as competitive self-servicing solutions start to arise with the introduction of AI.

Who are Gen Z

Institutions and businesses need to draw their immediate attention to serving the future leaders and consumers, Gen Z. As we discussed in The Resurrection of the Advisor, this generation places emphasis on the “self-made” concepts that are influencing them today in social media. Furthermore, they are choosing careers that allow them to spend less time working and more time making income passively through technology and other investments.

Gen Z is agonized by hearing the pain of rising house prices from their parents, and the financial hardships caused by low employment and inflation.  With the depletion of assets by the older generations; from standard of living, paying off a mortgage, and the fear of not having enough to retire instilled in their minds, Gen Z is more poised to think about retirement early. According to the CFA Institute, “Canada has the highest percentage of Gen Z investors versus non-investors among the nations covered by this study. Nearly three-quarters (74 percent) of Canadian Gen Zs ages 18 to 25 say they own at least one investment, compared to 56 percent in the U.S., 49 percent in the U.K., and 57 percent in China.” Investopedia says Gen Z “proves to be more financially sophisticated than any previous generation was at their age”4

Servicing Gen Z offers many benefits for institutions and businesses as they represent a sizable consumer market with significant purchasing power. They are a digitally native generation, accustomed to technology and online platforms.  Despite not inheriting wealth, Gen Z has entered the world of investing earlier than any generation before.  They face the same hardships as Millennials and as a result, understand the need to save for a safe and secure future.

This article was originally published in Wealth Professional.