The great wealth transfer: How gen Z is transforming wealth management

A historic shift is upon us. Baby boomers are set to transfer substantial assets to subsequent generations, with gen X, millennials, and notably gen Z poised to inherit significant wealth. According to Wealth-X, this transfer is projected to reach an unprecedented $18.3 trillion globally by 2030, with Europe alone accounting for $3.6 trillion. For wealth managers, this presents both significant opportunities and considerable challenges.

One of the critical risks associated with this generational wealth transfer is the erosion of inherited assets. Frequently, younger inheritors have limited interactions with their parents’ financial advisors and may lack the financial acumen necessary to manage their newfound wealth effectively. If wealth management firms fail to adapt to the expectations and values of gen Z, they risk losing assets as this new generation looks elsewhere for financial guidance.

The transformation driven by gen Z extends beyond mere inheritance – they are fundamentally redefining investment priorities. Sustainability considerations are often a key part of their financial outlook. However, this commitment to sustainability does not come at the expense of performance; gen Z investors seek financial returns alongside purpose-driven investments. Wealth managers must therefore craft investment strategies that balance ESG (environmental, social, and governance) objectives with robust financial performance to effectively engage and retain this emerging investor base.

Equally crucial for capturing gen Z's attention is digital engagement. Having grown up in an era dominated by intuitive mobile applications and instant digital services, gen Z expects wealth management to deliver the same seamless digital experiences. A study conducted by CFA Institute and the FINRA Investor Education Foundation highlights this stark digital preference, showing that most gen Z investors and millennials actively use mobile apps to manage investments, compared to a significantly smaller proportion of gen X investors. To remain relevant, wealth managers must enhance their digital offerings, incorporating user-friendly applications, real-time portfolio updates, timely market insights, and personalised, interactive educational content.

Adapting to gen Z’s expectations requires wealth managers to evolve into purpose-driven advisors, aligning deeply with their clients' values while utilising technology to enhance engagement. Embedding sustainable investing into portfolio strategies, ensuring transparency in decision-making processes and fees, and delivering comprehensive financial education are all critical elements in building lasting relationships with younger investors. Advisors who proactively engage younger clients through these means will build trust early, significantly increasing the likelihood of retaining assets through generational transitions.

However, merely offering sustainable investment options and robust digital platforms is insufficient. Wealth managers must actively involve younger clients in financial discussions and decisions. Given that many young inheritors lack direct experience in managing substantial assets, there is an urgent need for education and mentorship. Offering targeted workshops, personalised investment coaching, and easily accessible educational resources can bridge this knowledge gap, empowering gen Z investors to manage their inherited wealth responsibly.

Indeed, the role of mentorship in wealth management is pivotal. Advisors who adopt a mentorship role rather than simply managing portfolios establish deeper, trust-based relationships spanning multiple generations. This trust is particularly critical given the significant sums of money involved in the ongoing wealth transfer.

Customisation is paramount. Gen Z and millennial investors expect highly personalised wealth management experiences. They value advisors who take the time to understand their individual goals, preferences, and ethical considerations, and tailor investment recommendations accordingly. Leveraging insights from behavioural finance and harnessing the analytical power of AI to provide tailored advice can set wealth managers apart in an increasingly competitive market.

Additionally, wealth management firms must remain flexible in their communication and advisory approaches. Traditional models, such as quarterly meetings and static printed reports, are unlikely to resonate with gen Z. Instead, adopting interactive, real-time digital reporting tools, AI-driven market insights, and digital-first advisory platforms will better meet younger investors' expectations.

This great wealth transfer signifies more than just a substantial movement of assets – it heralds a fundamental shift in investor attitudes and expectations. Gen Z investors demand advisors who are not only digitally savvy but also ethically aligned and capable of integrating investment strategies with personal and societal values. Wealth management firms failing to adapt to these new standards risk becoming obsolete, losing relevance among the next generation of investors.

The question for wealth management is no longer whether change is necessary, but rather how swiftly and effectively this transformation can occur. The urgency is clear, and wealth managers who act decisively – investing in sustainability expertise, digital transformation, and personalised client services – will secure their position as leaders in this evolving landscape. The opportunity is vast, but success hinges on embracing change wholeheartedly and proactively.

Rhodri Preece is Senior Head of Research at the CFA Institute.

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