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According to a new study, Generation X may be the biggest beneficiary of the $84 trillion Great Wealth Transfer over the next 10 years.
While millennials and members of Generation Z expect the biggest inheritances in the coming years as baby boomers pass on their fortunes, members of Generation X will likely reap the biggest windfalls in the short term. According to Wealth-X, the average age of people in North America who will inherit fortunes from their parents worth $5 million or more is 46.1 years old.
According to the study, the average age of children expected to receive the most substantial inheritances (from parents worth $30 million or more) is 47.6 years old. (The study defines members of Generation X as between the ages of 44 and 59 today, and millennials between the ages of 28 and 43.)
The findings shed light on the vast wealth potential of Generation X, which has largely been overlooked in the debate over young heirs. Wealth management firms and private banks have largely focused on potential clients in their 20s and 30s while waiting for families to pass on trillions. More than half of millennials expect an inheritance of at least $350,000, according to Alliant Credit Union.
The Wealth-X report suggests that wealth management firms, luxury companies, and real estate companies targeting the next generation of wealthy clients should also start considering Generation X.
“There is often a lot of talk in the media about millennial and Gen Z heirs, but in fact, Gen X will be the first to inherit from their wealthy parents,” according to the report.
The report states that, for now, millennials and Generation Z “are more likely to receive sums as grandchildren, which will often be less substantial.”
Inheritances will be extremely concentrated at the top. Over the next 10 years, 1.2 million people worth $5 million or more will pass on a total of more than $31 trillion in wealth, according to the report. Of that amount, nearly two-thirds (64%) will come from the ultra-wealthy, defined as those worth $30 million or more. In other words, almost $20 trillion will be inherited by 155,000 people in that upper echelon of wealth.
The super-rich, or those worth $100 million or more, will account for nearly half of the total $31 trillion to be inherited. Billionaires will inherit around $5 trillion, according to the report.
Heirs will have different values and priorities than previous generations, which wealth managers, luxury companies, and philanthropic organizations will need to adapt to. According to the report, the next generation of investors is more influenced by technology, more focused on the environment and social justice, and more global.
“New technologies, the clean energy transition and 'impact investing' will be the focus of many heirs' ambitions, which may not necessarily align with a family's existing business structures or the inherited plans of those transferring their fortunes.” “says the report.
