Over the next several years, a massive amount of money is set to change hands, peaking in 2030, according to some estimates. Millennials and GenXers are in line to receive the lion’s share.
Engaging these next-gen inheritors in conversations about how family fortunes were made, plans for how the money will be handed down and how funds should be managed in the future is critical to the preservation of that wealth. Yet, in many families, those conversations simply aren’t happening.
Money is admittedly difficult for many people to talk about. In some generations and some societies, talking about money is still considered taboo, prompting many a matriarch and patriarch to forgo even a high-level discussion with their children.
Complicating these wealth transfer discussions is a widespread apathy among next-gen wealth holders, Millennials in particular, around the construct of wealth. In fact, many studies show that a large percentage of people under the age of 40 don’t value wealth the way their parents and grandparents did. Instead, they are more apt to prioritize experiences and other intangibles.
So how can advisors get families talking about inter-generational wealth transfer? Two words: Responsible Investing.
Out Of The Fringes
With an estimated $17 trillion invested in assets in North America alone, according to the Forum for Sustainable and Responsible Investment, responsible investing has moved out of the shadows into the mainstream. In fact, at the start of 2020, 1 in every 3 dollars were managed in responsibly invested assets.
We’ve seen this uptick in interest among our own clients. In a recent RBC Wealth Management client survey, 61% of our clients said they are interested in increasing the share of ESG investments in their current portfolio. And the vast majority—86%—want more information about it.
Responsible Investing is of particular interest with younger investors and to women. An article in ETF.com pointed out that 90% of affluent millennials said they are interested in gaining returns on their investments while also promoting positive social and environmental outcomes. And a 2021 report from Cerulli Associates found that 84% of U.S. asset managers anticipate high demand for ESG strategies from Millennials, a cohort that currently only represents 5% of financial assets, but that is set to inherit USD 22 trillion in the next 25 years.
Whether parents, grandparents and advisors are ready and willing to talk about ESG or not—the next generation of inheritors are poised to force the issue.