The “Great Wealth Transfer” is well underway, with more than $100 trillion expected to be transferred from older generations to their heirs through 2048, according to Cerulli Associates.
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As the baton of wealth is passed down to younger generations, the heirs of wealthy families play a more active role in the influence they seek to create in the world through the use of traditionally homogeneous assets. Family office For more innovative and value-based investments.
the Transfer of great wealth Things are well underway as more than $100 trillion is expected to be transferred from older generations to their heirs through 2048 in the United States, according to a December report. a report By research and consulting firm Cerulli Associates.
“There is significant intergenerational wealth transfer, but the preferences of baby boomers are starkly different from those of millennials,” said Nirbhay Handa, CEO of global migration platform Multipolitan. CNBC Make it.
“Now we have this younger generation that really believes that profit and progress should go hand in hand,” Handa said.
Sea change
Millennials (ages 27 to 42) and Generation
Generation Z and younger generations (ages 27 and younger) are expected to inherit more than $15 trillion.
Notably, the majority of wealth transfers will come from high-net-worth households (HNW) and ultra-high-net-worth households (UNHW), which together make up about 2% of all households, according to the report. These households are expected to contribute more than 50% of remittances, or about $62 trillion.
Compared with baby boomers and older generations, “(younger generations) are less motivated by money, if you generalize it, and much more (motivated by) contributing to society,” said Martin Rolle, INSEAD Distinguished Fellow, Family Business and Family Office. Expert for McKinsey & Company. “They look out the front window (and ask): What awaits us here? What are the big questions of our time?”
Handa said that as Gen
“I think sustainability and the whole ESG narrative is very strong (among younger generations),” the Multipolitan CEO added. “So they may not be interested in investing in fossil fuels or oil and gas, but they are very interested in investing in a company like Utley… or Beyond Meat,” Handa said.
Family offices have become centers of innovation.
Nirbhay Handa
CEO of a multi-politan company
Handa said that this shift in investment attitudes by younger generations came out of necessity.
“People see wars, (they) see the impact of climate change… There is a shortage 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 1960s and 1970s, and you'll find it in American newspapers at the time, but it was a little more abstract. Now, it's real. The storms are coming, the floods are coming,” Roll said. “Hurricanes happen often, it's proof that they see it.”
“Innovation Centers”
Another major shift can be seen in how some do this Family offices It is turned on.
“The whole idea of family offices is less rigid than it used to be,” Handa said. “Family offices have become centers of innovation.” Having grown up in the age of digitalization, younger generations of wealthy families are investing more in technology and startups.
Roll said they are seeking to discover and invest in technologies that can be a “lever of impact.” “For example, investing in climate technology, education technology, food processing, water treatment, natural resources, and renewable energy.”
Additionally, younger generations are becoming more active in how they invest through their family offices.
“30 years ago, family offices were primarily equity stakes of the company that the family owned through the family office, tied to real estate and some broader public equity and (generally, it would be) a passive portfolio.” Roll said.
Today, however, family offices are increasingly popular direct Roll added that investments are in private companies, which are not traditional.
“The parents were what I call homogeneous — they ran one business, but the young people coming in might not be interested in chemicals, which is the main business, so they start to diversify (through) the family office,” Rolle said. .
Why is the big wealth transfer happening now?
Although it is true that wealth is always passing from one hand to another, the importance of the great wealth transfer to our generation can be explained by looking at the third wave of the Industrial Revolution.
“It was the industrialization in the Western world in particular that happened in the 1950s and 1960s, and eventually, with the rise of America after World War II, and Europe — a lot of wealth was created,” Rolle said.
Through the post-war “boom,” Roll said, there were about 40 years of “outstanding economic activity,” leading to the creation of new industries and large companies and, ultimately, the rise of the middle class in the United States and Europe. .
“So, jobs were created… everyone got a car, people got a house… so you got a lot of major transformations that enabled that kind of wealth creation,” Rule told CNBC Make It.
He said it was this older generation that actually built “the world and the wealth after World War II,” and “this wealth, including business stakes, is now passing on to Generation X, but also of course to young people.” Roll.
Bridging the old with the new
All in all, with trillions of dollars in circulation, what does this mean for the world?
“This massive shift in money 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, vitality, and participation,” Handa said. “It’s about democracy, it’s about aspiration, it’s about access.” “Investment preferences are changing and legacy institutions need to adapt to the new world.”
Ultimately, as younger generations inherit the wealth, Rolle said, “I think you'll see the money (doing) good. It will be reinvested in the economy… and in technology, and I think in some of the big challenges that we face.” Our time: climate, gender issues, minorities, villages, the poor, and basic education.
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