According to Cerulli Associates, the “Great Wealth Transfer” is well underway, with more than $100 trillion expected to be transferred from older generations to their heirs by 2048.
Goodbaby Pictures | Electronic+ | Getty Images
As the baton of wealth is passed on to younger generations, heirs to wealthy families are taking a more active role, using their traditional singular power to create influence in the world. family office Make more innovative, value-based investments.
this great wealth transfer According to a December report, more than $100 trillion in U.S. inheritance is expected to be passed down from older generations to their heirs by 2048. Report Developed by research and consulting firm Cerulli Associates.
Nirbhay Handa, chief executive of global immigration platform Multipolitan, said: “There is a large intergenerational transfer of wealth, but the preferences of baby boomers are very different from those of…millennials.” CNBC Success.
“The younger generation now really believes that profit and progress should go hand in hand,” Handa said.
Earth-shaking changes
Millennials (aged 27 to 42) and Generation X (aged 43 to 58) will be the biggest beneficiaries of wealth transfers, expected to inherit about $85 trillion between 2024 and 2048, the report said.
Generation Z and younger generations (27 and under) are expected to inherit more than $15 trillion.
Notably, the report said that most of the wealth transfer will come from high net worth (HNW) and ultra high net worth (UNHW) households, which together account for about 2% of all households. These households are expected to contribute more than 50% of transfer payments, approximately $62 trillion.
Martin Roll, Distinguished Fellow in Family Business and Family Offices at INSEAD, said that compared to baby boomers and older generations, “If I generalize,[younger generations]are less motivated by money. Less, but more contribution to society (motivation)” McKinsey & Company expert. “They look out the front window (and ask): ‘What’s going to happen ahead? What are the big issues of our time?'”
Handa says Gen X and Millennials care about social impact – with topics like climate change, diversity, health and wellness and hedging against geopolitical conflicts top of mind.
“I think sustainability and the whole ESG narrative[among the younger generations]are very powerful,” the Multipolitan CEO added. “So they may not be interested in investing in fossil fuels or oil and gas, but they are interested in investing in things like Companies like Oatly … or Beyond Meat are very interested,” Handa said.
Family offices have become centers of innovation.
Nirbhai Handa
CEO of multiple cities
Handa said that the change in the investment attitude of the younger generation is inevitable.
“People are seeing war,[they]see the effects of climate change… There is a lack of drinking water in many parts of the world,” he explained. “As a result, this generation has become more determined to focus on things that align with their personal values.”
“The challenges are real… Yes, we talked about climate in the ’60s and ’70s, and you’d find them in American newspapers at the time, but it was just a little more abstract. Now, it’s real “Storms are coming, flooding is happening, hurricanes are more frequent…it shows (and) they see it,” Rohr said.
“Innovation Center”
Another major shift can be seen in some family office Running.
“The whole concept of family offices is not as rigid as it used to be…Family offices have become centers of innovation,” Handa said. Younger generations from wealthy families who have grown up in the digital age are investing more in technology and new startups.
Rohr said they seek to identify and invest in technologies that can serve as “levers of impact.” “For example, investing in climate technology, education technology, food processing, water treatment, natural resources, renewable energy.”
In addition, the younger generation is more active in investing through family offices.
“Thirty years ago, a family office was primarily an equity stake in a company that the family owned through the family office and would be tied to real estate, some broader public equities and (overall, it would be a) passive investment portfolio,” Rolle said. explain.
Today, however, family offices are increasingly direct Rolle added that investing in private companies is not traditional.
“My parents used to be what I call a monolith — they ran one business, but the younger people who came in might not be interested in chemicals, which was the main business, so they started diversifying (through) family offices,” Rowe I said.
Why is there a great wealth transfer happening now?
While wealth does change hands all the time, the significance of our generation’s great wealth transfer can be explained by looking back to the Third Industrial Revolution.
“In fact, especially in the Western world, the industrialization that happened in the 1950s and 1960s, and ultimately with the rise of the United States and Europe after World War II, created a lot of wealth,” Rohr said.
The postwar “boom” saw about 40 years of “excellent economic activity,” Roll said, which led to the creation of new industries, big business, and ultimately the rise of the middle class in the United States and Europe.
“So, jobs were created…everybody got cars, people got houses…so there were a lot of big shifts that led to this wealth creation,” Rohr told CNBC Make It.
It was this older generation that really built “the post-World War II world and wealth” and “wealth, including business equity, is now being passed on to Generation X and certainly to younger people,” he said .
Building bridges between old and new
Overall, with trillions of dollars changing hands, what does this mean for the world?
“The huge shift in funding means that the way things were done in the past is not necessarily the way things will be done in the future,” Handa said.
“This era is about vitality, dynamism and participation. It’s about democratization, it’s about aspiration, it’s about accessibility,” Handa said. “Investment preferences are changing and traditional institutions need to adapt to the new world.”
Ultimately, as younger generations inherit wealth, Rohr said, “I think you’re going to see this money (doing) good things. It’s going to be reinvested in the economy … technology, and I think in some of the big challenges we have of times: climate, gender, minorities, villages, the poor and basics (education).
Want to make some extra money outside of your day job? Sign up for CNBC’s online course How to make passive income online Learn about common passive income streams, tips for getting started, and real-life success stories.
add, Subscribe to the CNBC Make It Newsletter Get tips and tricks for success in work, money, and life.
