The “Great Wealth Transfer” is underway, and inheritance patterns are changing, with significant implications for the distribution of wealth and financial markets. A study by Capital Group, a firm specialized in active investments with approximately $2.8 trillion in assets under management, indicates that high-net-worth (HNW) families around the world are accelerating the transfer of wealth to their heirs.
The study surveyed 600 high-net-worth individuals from Europe, Asia-Pacific, and the U.S. to understand their approach to inheritance and their own succession planning.
“It is estimated that in the coming decades, baby boomers in the United States, Europe, and developed countries in Asia will transfer trillions of dollars to younger generations. Millennials and Generation Z are receiving larger inheritances at a younger age and could benefit from a financial advisor’s market knowledge and long-term investment perspective. At Capital Group, we have built lasting partnerships with wealth managers based on the belief that expert financial advice and strong long-term investment performance drive better outcomes for asset holders and their beneficiaries,” says Guy Henriques, President of Distribution at Capital Group in Europe and Asia.
Attracting the Next Generation of High-Net-Worth Individuals
According to the study, nearly half of all respondents (47%) inherited directly from their grandparents, and the majority (55%) received between $1 million and $25 million. Millennials are more likely to turn to social media and “finfluencers” for investment advice when inheriting (27%) than to financial advisors (18%). Furthermore, 65% of Generation X and Millennial heirs who participated in the study say they regret how they used their inheritance money, and nearly two in five wish they had invested more.
In the case of Spaniards, they are more likely to invest their inheritance: 37% compared to the 33% global average.
Maximizing the Potential of Inheritance
According to a recent study, three quarters of respondents say they have difficulty communicating their inheritance plans, and the majority turn to lawyers (61%) or accountants (49%) to manage them, while only 20% turn to financial advisors.
Additionally, 79% do not specify how the inherited capital should be used, which contributes to much of that money remaining idle or underutilized: only 22% is invested in funds and just 11% is allocated to pension plans.
This lack of strategy is reflected in the dissatisfaction of asset holders: 60% are unhappy with how they used their inheritance, and one third regret not having invested enough. In Spain, 54% of high-net-worth individuals wish they had directed more of their inheritance toward investment.
“Our study reveals that most of these asset holders wish they had used their inheritance differently and invested more. At Capital Group, our mission is to improve people’s lives through successful investing. We believe that if they consider investing part of their newly acquired capital, individuals with substantial wealth could build long-term prosperity. As a company with 94 years of experience, we have partnered with clients to invest across multiple generations, and as markets rise and fall, it is important to remember the value of staying invested for the long term,” concludes Guy Henriques, President of Distribution at Capital Group in Europe and Asia.
