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The Great Wealth Transfer: How Millennials Will Transform The Wealth Management Industry

by Suvo Sarkar Special to Gulf News


The Great Wealth Transfer has commenced. In the next 25 years, an estimated USD 100 trillion of wealth will change hands from the older generation to the younger generation. The bulk of this inheritance will go to millennials, people aged between 25 and 40 today.


Millennials comprise 25% of the global population, make up the majority of today’s workforce and will reach its demographic peak in 2025 on a global scale. With their combined annual income crossing USD 8 trillion in the United States alone, they will have a dominant influence on consumption, investment and wealth management.

The rise of the “millionials”

The concept of wealth management has been around since the 1930s. And yet, no one generation has changed this industry's dynamics as much as the millennials.

Worldwide net private wealth is estimated to be close to USD 500 trillion, and an increasing proportion of this wealth will be owned by adults under 40 in the coming years. Adults who are tech-savvy, inquisitive, risk-seeking, socially aware, and generally considered more independent and tolerant.

Millennials grew up in the digital era, making technology an integral part of their lives and a strong influence in their decision-making. Compared to their parents, they have better financial literacy and are more sensitive towards issues pertaining to the environment, climate change, gender parity, and inclusivity. Keeping these characteristics in view, wealth managers will have to overhaul their operating models to support new product offerings, modes of engagement and marketing channels to serve this younger generation better. Unlike previous generations, millennials readily embrace new and innovative ways of managing finances. They actively seek information and resources to educate themselves and do not just rely on external advice. Having witnessed a plunge in property prices during the subprime mortgage crisis of 2008, they mindfully choose to keep their financial liabilities low. This gives them the bandwidth and flexibility to take higher risks and invest in various traditional and non-traditional investment avenues.

Demanding clients, different themes

A recent research shows that millennials are one of the most complex, important and demanding groups of clients for wealth managers to understand and serve. The good news for wealth managers is that millennials are more open than their parents to sharing their transactional data, social media profiles and even GPS locations with providers in exchange for greater personalization. Despite their comfort with digital channels, millennials also value the ability to discuss matters with an advisor, whether virtually or in person.


New themes are emerging. The sharing economy, the climate emergency, and inequalities are on the compasses of the younger generation. While yield remains a cardinal point, asset allocation also depends on the values promoted by companies. Hence the rise of green finance products and sustainable investments based on extra-financial criteria like ESG (Environmental, Social and Governance factors).

One size does not fit all

So what is expected of wealth managers? First, millennials expect digitization at every touch point and demand personalized experiences. They do not prefer the one-size-fits-all approach for their wealth management services, and would want advice in a “Netflix-style” data-driven and hyper-personalized model.

Second, millennials are more open to taking risks than older generations and are willing to invest in spec returns. A recent survey revealed that 46 percent of millennial millionaires owned crypto-currencies.

Third, millennials prefer to be independent and self-reliant. Wealth managers have to harness technology to educate and guide their clients to make well-informed investment decisions rather than merely prescribing investment plans.

And finally, millennials take an active interest in ESG issues and proactively incorporate these philosophies into their investment decisions. It is estimated that 61 percent of ulative assets, such as cryptos, digital and alternative assets, for highermillennial investors currently participate in impact investing, and this share is likely to grow significantly in the coming years.

As the Great Wealth Transfer takes effect, and about USD 1 trillion of wealth changes hands in the Middle East by 2030, wealth managers both regionally and globally have to prepare themselves to cater to a new and different cohort of wealthy individuals.

Suvo Sarkar is the founder and CEO of 3D Advisory, a boutique consulting firm that focuses on digitisation, data and design. Till recently he was the senior executive vice president of a leading regional bank in the UAE.


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