By 2030, Millennials and Gen Z are anticipated to inherit over $68 trillion from their parents, making them the wealthiest generation in American history. This transfer of wealth is known as the “Great Wealth Transfer.”
Historically we have seen intergenerational wealth transferred among royal families or the super-elite. However, with the growth of the middle class over the past few decades, this transfer is happening with a much different demographic. There has always been a method to the wealth transfer madness: the super-elite and royal families have their money, people and documents managed by a “Family Office.” A family office is a team of accountants, lawyers, investment analysts and administrative staff all working together to ensure your financial goals are met, not only while you are alive but also after you pass away. Sounds expensive, right? Yes, running a family office will cost you a million dollars annually.
Currently, there are 22M people in North America with a net worth between $1m and $25m. Running a family office for this demographic is unattainable. It’s not just the cost of running a family office that’s the problem. It’s also the archaic methodology that relies too heavily on human capital. While many baby boomers are still getting used to the digital age, Millennials and Gen Z have never known a world without the internet. With mobile devices and connectivity at their fingertips, they’re the fastest to adapt to digital adoption. Millennials and Gen Z need digital access to family office management to manage their wealth effectively.
The Great Transfer of Wealth will happen in a digital world, and those who adopt a digital platform to manage it will see the most success. Millennials and Gen Zs’ investment interests and technological preferences can create substantial opportunities for FinTechs to capture this space. However, these digital platforms will need to go beyond asset management in order to win market share. In addition to access to centralized information on asset allocation, sector exposure, and liquidity between managers, platforms will need a holistic approach to wealth management, which includes managing people, documents and money. Along the way, platforms also need to provide education and guidance on how family offices use prenups, wills, trusts and life insurance in different life scenarios.
This Great Wealth Transfer is also a great knowledge transfer from a traditional, human capital-heavy space towards a digital, more inclusive space where everyone building wealth can share best practices and learn from one another.
Disclaimer: This blog is for informative purposes only and should not replace the professional advice of tax, legal, financial, or investment advisors. The opinions expressed here are merely observations of industry trends and should not be taken as stock or sector recommendations.
