Giving Compass' Take:
- Christopher Delporte examines the importance of preparing for the wealth transfer to Gen Z, millennials, and Gen X from baby boomers.
- How can donors help prepare for the transfer of wealth between generations in the years to come?
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Gilded Age industrialist and philanthropist John D. Rockefeller said: “The only question with wealth is, what do you do with it?” It’s a question that has stood the test of time, but the answer certainly has evolved in the process of preparing for the wealth transfer.
Eighty-four trillion dollars through 2045 is the oft-cited hefty sum of wealth transfer currently underway from baby boomers in the U.S. to younger generations. While Gen X, millennials and Gen Z may be on the receiving end of this historic wealth transfer wave, one thing is certain: These generations view and manage their financial matters much differently than the previous ones did, underscoring the importance of preparing for the wealth transfer.
The Importance of Preparing for the Wealth Transfer
Wealth management experts cite a mix of reasons for this. Generations on the receiving end of wealth from parents, grandparents and other benefactors — women inheritors and investors, in particular — approach investments much differently. For some, it could be due to their level of financial literacy or differing financial priorities, the desire to align investments with social goals and beliefs, or a lack of connection with or confidence in “traditional” or “old school” financial advisers. As this wealth shift takes place, banks and financial advisers have an opportunity to rethink how they approach, attract and work with these varied groups and their unique money needs.
According to a recent survey by Edward Jones with Next360 Partners and Morning Consult, nearly half of all Americans plan to leave an inheritance, and two-thirds of those planning to allocate funds plan to leave instructions on inheritance. But there is limited communication around what this direction means for the receiver, the survey authors noted, demonstrating the necessity of preparing for the wealth transfer.
The study also reported that intergenerational wealth and preparing for the wealth transfer is more than just the transfer of money for women, including an expression of core values such as security, freedom and well-being for themselves and their families. According to the study, 87 percent of women define the purpose of wealth as a way to obtain financial security and the freedom to live the life they want, and 85 percent view it as a means to a better quality of life.
Read the full article about preparing for the wealth transfer by Christopher Delporte at ABA Banking Journal.