The Largest Transfer of Wealth in History You Should (Really) Know About

According to Financial markets intelligence firm Cerulli Associates, $84 trillion in assets is set to change hands over the next 20 years!

It's been called the largest transfer of wealth in history¹. The recipients, primarily members of Generation X (those born between 1965 and 1980), millennials (1981-1996) and Gen Z (1997-2012), are expected to inherit $72 trillion of that amount, mainly from baby boomers, with the rest going to charity².

What could this historic transfer of wealth mean for the markets? That depends a lot on important decisions these heirs make as they invest all or part of their good fortune. Will they choose the same mix of stocks, bonds, cash and real estate that their boomer parents gravitated toward? Or strike out in different directions, exploring radically new investment opportunities in search of greater growth? Already, some clues are emerging: 75% of millennial and Gen Z investors surveyed for Bank of America Private Bank’s “2022 Study of Wealthy Americans” believe “it’s not possible to achieve above-average returns solely on traditional stocks and bonds.”³.

Why does this matter?

More than half of this wealth is going into the hands of Today's Gen Z and millenial. Therefore, it is important to pay attention to their behavior. In fact, A 2018 study from Bankrate.com shows that millennials are already less willing to invest their money in the stock market when compared to previous generations. As trillions in assets flow to heirs over the next two decades, their investing preferences could create new opportunities. Some trends are already emerging.

In the survey, the millenial and Gen Z investors opt for non-traditional forms of investment such as Fintech, debt funds, private equity, and so on. And a large percentage of them support climate solutions and social equality causes.

For many of us, moving through the day-to-day motions of our life is enough to leave us exhausted. With hefty student loans to pay off, rising cost of living and interest rates, thinking of ways to grow our personal wealth isn't always at the top of our to-do list (or even on the list at all). But as it turns out, it should be.

Having an educated long-term plan to improve your own net worth, regardless of your family's situation, is key to preparing for the transfer. 

From their choices, it is clear that 

Real estate: A core investment for all

The good new is: One constant across the generations is real estate. In Bank of America’s survey of wealthy individuals, it was the only investing category to be similarly preferred by both older and younger respondents. Therefore, it is clear that real estate is going to continue to be a chief driver of wealth for many years to come.

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References:

¹ The New York Times, “The Greatest Wealth Transfer in History Is Here, With Familiar (Rich) Winners,” May 14, 2023.

²Cerulli Associates, “The Cerulli Report: U.S. High-Net-Worth and Ultra-High-Net-Worth Markets 2021.”`

³2022 Bank of America Private Bank Study of Wealthy Americans

Will the ‘Great Wealth Transfer’ transform the markets?