The Great Wealth Transfer

The ‘Great Wealth Transfer’ refers to the transfer of trillions of dollars in assets from Baby Boomers to younger generations. Through to 2045, it’s estimated that $84 trillion in assets will be redistributed globally [1]. This transition will create the wealthiest generation in history and, notably, many of these assets will be managed by women for the first time in history.

In New Zealand, this transfer of wealth is anticipated to involve approximately $1.2 trillion dollars - exceeding the total value of all companies listed on the NZX, dwarfing current KiwiSaver funds, and surpassing 80% of the value of all residential property and the land it sits on [2]. This shift will not only impact investment behaviours but also reshape the economic landscape of New Zealand.

The implications of this transfer are important.  Firstly, for the first time in generations - due to changes in succession planning norms and gender equity - wealth is more likely to be evenly distributed between male and female siblings. Secondly, because women live longer than men, more of them will become responsible for distributing assets. And lastly, the Gen X and millennials who are lucky enough to be benefactors of this wealth, will have different ideas regarding what they do with this money.

Alvarium co-founder Andrew Williams was recently asked to speak on the ‘Great Wealth Transfer at a Financial Services Conference (FSC) which explored the following ideas that we believe are also important for our clients to understand: -

• Differing investment priorities for women.
• Financial literacy to empower women.
• Succession planning that accounts for changing investment strategies.

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‍Differing investment priorities for women‍

Although there are no one-size fits all when it comes to women and their investment strategies, here at Alvarium we have noticed a trend that implies that women’s investment priorities are likely to be shifting towards values-driven investing, philanthropy and inter-generational investing.

“Women account for 67%of our clients invested in the Pathfinder KiwiSaver Plan, that focuses on investing in line with values and ethics” says Andrew.

And whist KiwiSaver balances across the board are generally lower for women than men, our market research shows us Pathfinder customer balances are over 10% higher than the average KiwiSaver balance across all age groups.

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‍Financial literacy and empowerment for women

Women are underserved when it comes to investing, financial literacy and employment in the industry. Financial Services Council reports from 2021 and 2023 say that over 80% of Kiwi women rate their level of financial wellbeing as moderate, low or very low; over 70% feel that financial wellbeing influences their overall well-being; and 69% don’t feel financially prepared for retirement.

So, what can be done to help as this transfer of wealth begins and more women find it necessary to take the helm regarding financial decisions for the futures of their families? Areas where improvements could be made include:

1.     Empowering women to make good decisions: Dealing with the finances is a job that traditionally landed on the males’ shoulders. It’s important now, and will be more important in the future, that the women in partnerships understand the intricacies of their families’ financial decisions and feel confident about what they are investing in. Financial planning and advice will play a key role in helping women and their families make decisions.

2.      Attracting more women into the financial industry: Speakers at the recent Financial Services Conference were unified by their frustration with the amount of female CV’s that come across the desk during recruitment phases. Adding to this Deloitte's analysis suggests that only 20% of leaders in C-level positions, within the finance industry, are women. Andrew sums up why this matters nicely:

“Alvarium are advocates for gender balance and the balance of thought. It’s a reality that women bring great balance to the work we do” says Andrew. “We’re lucky that out of the last five employees Alvarium hired, three of them are women and 33% of our managerial positions are held by women. We go looking even though there is difficulty on the supply side as most CV’s are from males.”

‍3.      Advocates for early financial education: Andrew highlights the value of early education on financial literacy.

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“I believe that to get more women into the industry, it will be through education at a younger level, not just financial literacy but investment literacy. Kids are sponges - start at the school boards and move down.” This approach could help build literacy as well as a more diverse talent pool and support long-term industry growth.
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‍Succession planning

‍“The transfer through to the next generation is huge”, says Andrew. “Overseas companies that we have close connections with are effectively organising and advocating a coming together that will see that transfer of wealth within the next ten years. Alvarium has been following their lead by encouraging our investors to consider their succession plans."

We believe that when it comes to succession planning, it’s important to understand that younger generations are likely to have different ideas for the future compared to their parents and consequently their investment approaches will also differ.

Gen X and Millennials are expected to prioritise ethical considerations, particularly in areas like climate change. Benefactors of wealth are likely to be risk takers if they know they have inheritances as a safety net - they may be more inclined to take risks, start businesses, or invest in emerging markets and technologies.

Differing investment strategies are likely to leverage online platforms, crowd sourcing and social media. It’s also likely we’ll see changes in spending and charitable giving due to generational shifts in values. It’s important that succession planning brings these differences together and does not drive families apart.

At Alvarium, we understand the nuances of this transition and are committed to helping families navigate it smoothly. By providing an adverse range of investment strategies—including private assets, real estate and impact investing - we can tailor approaches to meet each family’s unique needs and values. This flexibility ensures that families can align their investments with their vision for the future, ultimately strengthening relationships and building a lasting legacy. We’re proud to support families in directing their wealth in ways that resonate with their principles and goals. Andrew pointed out that Alvarium often puts philanthropy at the centre of high-net-worth family discussions.

“The practice of giving money away is a very good education system to encourage financial literacy and how you can invest for impact. And let’s face it, giving money to an impactful charity is more rewarding than buying a fast car.”

Our advisers play a key role in ensuring all parties we work with have the knowledge and power to make informed decisions. If you would like to discuss the implications it may have for you, or your family please get in touch with one of our advisers.

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