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How Firms Can Find Success Managing Multigenerational Wealth

Financial firms must consider their ability to manage multigenerational wealth. Over the next several decades, $85 trillion in Baby Boomers’ wealth will transition to younger generations in what has been deemed “The Great Wealth Transfer,” as Citizen Financial Group reports. But while many financial firms count wealthy Boomers among their loyal clients, they may not have assurances that loyalty will transition to their beneficiaries, even as their assets do.

In fact, over half of wealth managers’ client families leave them upon inheriting their assets, according to InvestmentNews. Often this is because firms fail to consider the unique needs, values, and preferences of younger generations as they inherent new wealth. For example, Baby Boomers have often prioritized financial stability and retirement planning; meanwhile, Gen Xers may focus on building wealth for their own families, and Millennials may value socially responsible investing and technology-enabled services.

Whatever the case, the impetus falls to financial firms to adapt their offerings to meet new demands, bridging the gap and retaining clients across generations. This article provides actionable strategies for financial firms to enhance their services for multigenerational families, emphasizing the importance of fostering open communication, developing personalized financial plans, leveraging advanced technologies, and promoting financial literacy across generations.

Understanding Generational Differences in Wealth

Managing multigenerational wealth presents unique challenges and opportunities for financial firms, requiring a tailored approach to optimize client relationships and outcomes. Different generations have distinct values, priorities, and expectations when it comes to their wealth. Understanding these differences is essential for firms seeking to effectively serve clients across multiple generations.

Baby Boomers

Born between 1946 and 1964, this generation holds a substantial portion of today’s wealth. They value security and stability and prioritize retirement planning and asset preservation. Boomers also prioritize control over their personal wealth and take its management seriously—83% of boomers are at least somewhat confident about managing their finances, Investopedia reports.

Arguably, most existing practices and services among financial firms aren’t designed for multigenerational wealth management. Instead, they tend to cater to the priorities of this generation.

This trend reflects simple economics—Baby Boomers control $78.1 trillion or roughly 50% of all wealth in the U.S., NASDAQ reports, dwarfing that of Gen-X (29.5%) and Millennials (8.5%). However, as this wealth is expected to transition to younger generations in the coming years, firms must adapt their services to meet their changing needs and preferences.

Gen X

Born between 1965 and 1980, Generation X holds significant financial power. As they continue through their peak earning years, these individuals are starting to inherit from previous generations while also building wealth for themselves. They prioritize family relationships and tend to be more risk-averse than Boomers when it comes to investing. Consequently, they may require different investment strategies that focus on preserving and growing wealth without taking excessive risks, especially in terms of reaching their retirement goals.

Millennials (“Gen Y”)

Born between 1981 and 1996, millennials are set to become the primary recipients of The Great Wealth Transfer. This generation’s relationship with wealth is notably distinct from that of their predecessors. Millennials place high value on financial independence and security, having navigated economic challenges such as student loan debt and housing affordability. This financial backdrop has informed their cautious yet technologically adept approach to wealth management.

Millennials exhibit a strong preference for digital financial services and transparency, with a growing interest in robo-advisors and mobile banking platforms. 45% of millennials claim they “have a firm grasp of new financial products or technologies,” NASDAQ reports—exceeding Boomers (14%) and Gen X (35%). Moreover, Millennials are increasingly prioritizing ethical and sustainable investing, seeking to make a positive impact with their financial choices.

Gen Z

Born after 1996, Gen Z adults have only recently entered the workforce; they are yet to establish strong financial footholds. As such, there is limited data on their wealth management behaviors and priorities. However, early indicators suggest that Gen Z possesses a strong inclination toward financial literacy and digital engagement. They are poised to leverage technology in unprecedented ways, shaping future trends in wealth management as they mature. Financial firms must therefore remain agile and attentive, continuously updating strategies to meet the evolving preferences of this emerging generation.

Best Practices for Engaging and Retaining Next-Generation Beneficiaries

There are dozens of factors that will contribute to any clients’ needs besides their age group and family makeup alone. Even so, there are steps financial firms can take to lay the groundwork for a successful multigenerational wealth management strategy.

Foster Open Communication and Education

Effective communication is essential to any financial relationship. For families with multigenerational wealth, it is particularly crucial to facilitate open, honest dialogue between generations. Financial firms should strive to engage with all beneficiaries in ways that are tailored to their respective needs and preferences. For example, while Boomers may prefer traditional forms of communication such as face-to-face meetings or phone calls, younger generations may prefer digital channels like email or video conferencing.

Moreover, educating younger beneficiaries about wealth management early on can help build trust and ensure a smoother transition of wealth. Firms can offer educational resources, such as workshops or seminars, on topics like financial planning, budgeting, and investing to help younger generations feel empowered and involved in managing their inheritance, even before wealth has exchanged hands. With Millennials in particular, the key is beginning from a place of trust—assuming a helpful role rather than that of a salesperson, for example; and providing resources that will help them make informed, independent decisions.

Develop Personalized Financial Plans

Each beneficiary will have different goals and priorities for their wealth, which firms can accommodate through personalized financial plans. They should take the time to understand each client’s unique circumstances and objectives and tailor their services accordingly. This approach allows for more effective communication and builds trust between the firm and its clients.

Values-Based Investing

For example, incorporating sustainable and ethical investment strategies, along with a strong emphasis on transparency, can play a pivotal role in winning over the new generation of investors. 

Millennials and Gen Z investors in particular are driven by values-based investing, seeking to make a positive impact on society and the environment through their financial choices. Recent reports indicate investing based on environmental and social considerations alone has become less of a priority; however, the doors are open—these factors are sure to play an important role among others in all future investment strategies.

“Even as ESG suffers a political backlash and historic outflows, many experts believe it has a secure place in the future of investing—one that is only likely to grow,” Financial Planning reports. “Their main argument is that evaluating a company’s environmental and societal impacts is not just idealism; it’s a form of due diligence.”

Communication & Transparency

In addition to value-based factors, firms should revisit their policies on communication and transparency in their services. This may mean providing more formal, regular updates on financial performance, becoming more upfront about fees and costs, and actively seeking feedback from clients on their satisfaction with the firm’s services. Sharing insights and metrics beyond those associated with financial performance alone, such as broader news and societal impacts related to their investments, can contribute to greater understanding and trust as well.

By prioritizing these factors in personalized financial plans, financial firms can not only meet the growing demand for responsible investing but also build long-lasting trust and loyalty among younger clients. 

Align Technology Investments with Next-Generation Solutions

As discussed earlier, younger generations have a strong preference for digital tools, including in financial services. Financial firms that cater to this need and embrace technology in their wealth management strategies will be more likely to engage and retain the next generation of beneficiaries. 

Even so, firms cannot simply invest in technology for technology’s sake. Instead, they should carefully consider which tools and solutions align with the needs and preferences of their clients, both current and future. Advanced and emerging capabilities to explore include:

  • Robo-advisors: Automated investment platforms that utilize algorithms to manage and optimize investment portfolios with minimal human intervention.
  • Mobile investing apps: Comprehensive applications that allow users to manage all their financial transactions, investments, and accounts from their smartphones.
  • Investment tracking tools: Software solutions that provide real-time tracking of investment portfolio performance and offer insights for better decision-making.
  • AI-driven financial planning tools: Advanced and generative AI systems that provide personalized financial advice, predictive analytics, and budgeting assistance based on user data.

Firms must ensure they have the right technology infrastructure to scale their technology offerings as new capabilities emerge and their Millennial and Gen Z client bases grow. Prioritizing scalable cloud and cybersecurity solutions, among others, can help ensure firms remain competitive in the rapidly evolving landscape of wealth management.

Remain Agile and Evolve with Changing Needs

Above all, financial firms must be adaptable and responsive to changing needs and preferences within different generations. Again, there is no one-size-fits-all approach to multigenerational wealth management, and what works for one family may not work for another. Financial firms must continually reassess their strategies and evolve alongside their clients to meet their ever-changing financial needs. This includes staying up-to-date with new technologies, trends, and emerging priorities among their clients and their broader generational cohorts.

By integrating these practices, financial firms can build lasting relationships, ensure the seamless transfer of wealth, and support families in achieving their long-term financial goals while preserving their legacy.

Adapt to New Generational Needs with Option One Technologies

Option One Technologies specializes in scalable cloud and cybersecurity solutions for financial firms, helping them adapt to a new generation of investors. Contact us today to learn more about our services and how we can support your firm’s success.