Proper Wealth Management More Important Than Ever Before

As millennials and Generation Z prepare to inherit their parents' and grandparents' wealth, the need for proper wealth management has become increasingly important. These two generations are facing unique financial challenges, including high levels of student debt, stagnant wages, and a changing job market. In addition, they may not have the same level of financial education or experience as their predecessors. As a result, it is crucial for new generations to understand the importance of wealth management and learn how to manage their finances effectively going forward.

One of the main reasons why proper wealth management is important for younger generations as they inherit is that they may not be prepared to handle the financial responsibilities that come with it. Inheriting wealth can be a significant financial windfall, but it can also be overwhelming, especially if they are not used to managing large sums of money. Additionally, they may not have the same level of financial education or experience as their parents or grandparents, which can make it challenging to manage their inheritance effectively.

Although one can consider that these two generations are still young and are not ready to manage wealth, it is crucial for older generations to start involving their children in the decision-making process in wealth management, everything from financial decisions, meetings with financial advisers, investment strategies, and helping them build the skills they need to manage their wealth responsibly and make informed decisions about their financial future. 

One of the main reasons why proper wealth and asset management is so important for younger generations is that they will inherit a larger amount of wealth than previous generations. In past articles, I have talked about how, in the next 10 years in the US alone, over US$30 trillion will change hands from older generations to millennials and Generation Z, creating a great moment for the industry overall, and how this could be an opportunity for wealthtech.

Focusing on high-net-worth and ultra-high-net-worth individuals alone, a report by Wealth-X, a global wealth intelligence and data firm, states that there are approximately 1.2 million individuals in North America (Canada, US, and Mexico) who have a net worth of at least US$5 million or more. This number is expected to grow by 25% over the next five years, adding to approximately US$7.5 trillion, with much of that wealth being passed down to younger generations. As a result, it is more important than ever for younger generations to learn how to manage their wealth effectively, and become acquainted with everything that comes with it.

Another reason why proper wealth management is essential for millennials and generation Z as they inherit is that they may face tax implications or legal complexities that they are not familiar with. For example, they may need to navigate estate planning or trusts, which can be complicated without professional guidance. Additionally, they may face tax implications, such as inheritance taxes or capital gains taxes, that can significantly impact their inheritance.

When it comes to wealth management, there are two main options available nowadays: traditional wealth management and wealthtech (robo-adviser). While younger generations, being more tech-savvy, can be easily more attracted to the latter, wealthtech is not a viable option as one starts growing their wealth. For high-net-worth and ultra- high-net-worth individuals, the complexity of their wealth makes it crucial to be managed by not only a financial adviser but an institution that can offer expert guidance based on a client’s specific needs and goals. This level of expertise can be invaluable when it comes to managing large sums of money and achieving long-term financial goals.

And yes, while wealthtech platforms can provide valuable tools and resources, they are limited, and the low-cost structure can end up  giving average, limited advice and returns, as they may not offer the same level of personalized attention and guidance as a real human adviser. 

The importance of proper wealth management for younger generations cannot be overstated. As millennials and Generation X prepare to inherit their parents’ and grandparents’ wealth, they must be equipped with the necessary knowledge and skills to manage their inheritance effectively. This includes understanding financial responsibility, tax implications, and the legal complexities that may arise.

Older generations must take an active role in involving their children in financial decisions and helping them build the skills they need to manage their wealth responsibly. With over US30 trillion expected to change hands from older generations to millennials and Generation Z over the next 10 years, and US$7.5 trillion being managed by these generations, with individual net worths of at least US$ 5 millions by 2026, the need for proper wealth management is more significant than ever before.

While there are different options available, such as traditional wealth management and wealthtech, it is crucial as one starts growing ones’ wealth to have an experienced financial adviser who can offer expert guidance based on their specific needs and goals. 

By involving younger generations in wealth management decisions and providing them with the necessary tools and resources, they can effectively manage their inheritance and achieve long-term financial success.