Financial advisers must get better prepared for the fast-approaching transfer of intergenerational wealth from Baby Boomers to Gen X, Millennials, and Gen Y, according to wholesale broker AUSIEX.
“In 2027, the first of the Baby Boomers will reach their statistical age of death (81 years for men and 85 years for women),” said a report released by AUSIEX on Wednesday.
“Gen X are now the group preparing for retirement and will hold the large balances in superannuation. Gen Z will soon be fully deployed in the workforce and the predominant demographic groups requiring to be serviced by the wealth industry will be Millennials/Gen Z.”
Additionally, McCrindle Research states that the households of Australians aged over 55 currently own a combined $2.8 trillion. They will pass on the bulk of this wealth over the next 20 years.
But the AUSIEX report suggested Millennial and Gen Z individuals face bleaker income and financial prospects than previous generations.
Those aged between 60 and 64 have an average balance of $323,000 in their accounts. On the other hand, individuals in the 30-34 age group have an average balance of $45,000 in their superannuation accounts.
A recent research study by the Pew Research Center looked at how adults from 19 different countries, including Australia, feel about the financial future of children. It found that, on average, 72 per cent of adults in Australia believe children will be financially worse off than their parents when they grow up.
Rising inflation, as well as the focus on stifling wage growth, could mean that their prospects are even more difficult.
A new generation is also joining the system with significantly lower expectations of building wealth, the report suggested. It also said they seem disengaged with the traditional wealth management approach.
This could lead to a significant cultural change in how younger generations approach and interact with the wealth management industry, as well as how the industry tries to connect with them.
The report suggested advisers prioritise investment in technology to stay relevant to younger generations.
“The older generations are about to leave the system, the younger generations face different challenges than those before them, and the transition to the digital world is continuing apace,” the broker said in a statement accompanying the report’s release.
“The industry [needs] to prepare for change before the Boomer boom is over.”
