What You Need to Know
- Younger generations have different views on how wealth should be saved, spent and given away.
- Fulfilling the family element may be simpler for the next generation, especially if they were born into a family with an estate plan in place.
- Generational differences are critical for advisors to understand when it comes to estate planning.
The “Great Wealth Transfer” is coming, with projections anticipating over $84 trillion in assets to be transferred to heirs or given to charities over the course of the next few decades.
Advisors are having conversations with clients and their families right now about their goals as we approach this transfer, but there are key generational differences that will make a long-term impact on the wealth transfer for years to come.
The recipients of this wealth, primarily millennials and Gen Zers, have a much different perspective than their predecessors on what it means to be wealthy, and how wealth should be saved, spent and given away.
What’s Driving This New Perspective?
SEI’s client base is predominantly “G1”: first-generation ultra-high-net-worth individuals who worked for and built their wealth on their own.
This segment often grew up middle class, which tends to make them more cautious when it comes to saving and spending their money. Even as UHNW investors, they have a unique perspective on money, likely influenced by the fact that they at one point or another did not feel fully financially secure.
Their children most likely never grew up wondering if they will be prepared.
This level of comfort that comes along with financial security has created a mindset among many of the next generation where they are less concerned about themselves and their financial success, and feel more comfortable spending or giving money away.
Self, Family and Community
Wealth planning allocation should be broken into three sectors: self, family, community — fulfilling needs of each sector in that order.
But, the definition of “wealthy,” and the guidelines for living a comfortable lifestyle, look a lot different for the next generation.
Advisors and clients are faster to check “self” off the list and instead put more thought and consideration into providing for their families and/or giving back to their communities.
With the next generation, there’s a heightened focus on community and philanthropy. Because they have more confidence that their and their families’ futures will be taken care of, their focus shifts to issues in the greater community that can be addressed.