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Navigating the challenges of the great generational wealth transfer

Advisors, are you ready for the Great Wealth Transfer? Are you prioritizing the next generation of investors? Partnering with Fidelity Clearing Canada ULC (FCC) can help ease the transition that is already underway. At FCC, we understand the challenges and complexities of the generational wealth transfer. Through our uniFide® digital business platform, we provide innovative solutions and personalized experiences tailored to the unique needs and preferences of both older and younger generations.

What is the Great Wealth Transfer? The concept has been widely written about over the last few years, and as more baby boomers head into retirement, the urgency of tackling the challenges and complexities around this transition will increase. This follows recent research1 about how much money is expected to be passed on over the coming three decades from the baby boomer generation to their Gen X and millennial offspring: in round numbers, a staggering $68 trillion!

The single largest wealth transfer in history is shaking up the financial services industry as players seek to retain their existing clients while simultaneously establishing a position with soon-to-be beneficiaries.

The generational wealth transfer meets opposed investment preferences

One of the first major issues is the mismatch2 between the investment preferences and goals of older and younger generations. For those who are passing down capital, i.e., baby boomers, the primary goal has typically been wealth preservation and retirement planning while taking on as little risk as possible.

Meanwhile, the aspirations of their heirs tend to revolve around careers, family, and personal development. They have a higher risk tolerance and are more likely to embrace investments in digital assets, real estate, and private equity in pursuit of better returns. Younger wealth holders are also far more inclined to pursue environmental and social objectives.

Given these dynamics, the ability of incumbent wealth managers and financial institutions to compete will depend on how prepared they are to address these inevitable changes. They should already be taking steps to ensure against soon-to-be heirs promptly changing advisors once they receive their inheritances.

A matter of trust

The beneficiaries of the Great Wealth Transfer won’t necessarily trust their windfalls with their parents’ financial advisors. There are clear signs that incumbent financial institutions are already struggling for relevance with younger audiences who are showing a proclivity toward tech-focused brands. According to an EY survey3:

  • Some 37% of consumers say a FinTech firm is their most-trusted financial services brand, compared with 33% who say a bank is their most-trusted brand and 12% who trust a wealth management firm the most.
  • Around half of Gen Z and millennial investors name a FinTech firm as their most trusted financial brand.

How can wealth advisors prepare?

To build resilience and prepare for the imminent generational wealth transfer, wealth management firms should evolve their business models to retain share of wallet and establish advisory relationships with the next generation of clients. Let’s consider some of the keys to successful adaptation:

  • Embrace smart technology: Firms need to remember they’re dealing with tech-savvy digital natives who take access to collaborative, easy-to-use technology (such as video conferencing and chat functions) as a given. Four in ten4 customers under age 45 say they expect to use video conferencing, and one-quarter expect to use smartwatches and smart speakers to interact with their financial advisors. Younger clients are heavily influenced by social media, so wealth management firms also need to be active and effective on social channels.
  • Diversify portfolios: If you don’t have a service and advice proposition geared for the next generation, there’s no better time to start developing a new suite of offerings. These propositions might include mortgage advice and school fee planning. Bear in mind that your charging structures might also need to be revised to a more appealing fixed fees approach.
  • Automate intelligence-gathering and onboarding: Forward-looking firms are putting in place digital capabilities and easy-to-use toolsets that allow them to capture insights regarding their younger clients’ preferences while onboarding new investors swiftly, securely, and accurately.
  • Embed personalization: Younger investors care more about personalization than older groups, with 81%5 of Gen Zers saying this feature could deepen their relationships, compared with just 47% of investors over 65. Personalization involves delivering truly customized experiences across channels, products, and lines of business.
  • Build out and highlight your sustainable investment proposition: Younger generations are interested in making investments that will have a positive global impact6 regarding issues like sustainability and climate change. Highlight investment portfolios that prioritize responsible, sustainable, and ethical themes when engaging with this audience.

Let’s mind your business, together.

The imminent generational wealth transfer will shape the financial services industry for decades to come. This transition is underway and is already creating opportunities for investment firms willing to rethink their strategic approaches, diversify their portfolios, and deliver personalized, digital customer experiences.

With family wealth starting to pass from generation to generation, are firms and advisors ready? As the baby boomers move into retirement, liquidate their assets, and plan their legacies, new opportunities and challenges open up for wealth managers. Partnering with Fidelity Clearing Canada ULC (FCC) can help navigate these challenges and ease the transition. FCC’s uniFide® digital business platform provides innovative solutions and personalized experiences tailored to the unique needs and preferences of both older and younger generations, while automating business and data flows for optimal effectiveness. Helping you turn effort to efficiency, and grind into growth.

Learn more.