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The largest transfer of wealth in modern history is underway, and the heirs who will inherit the family’s multibillion-dollar fortune are preparing to spend the money in a very different way than the generations that built it.
Over the next two decades, an estimated $83.5 trillion is expected to pass from baby boomers and business adults to their children and grandchildren, according to UBS.
“The world is entering a period of intergenerational wealth transfer,” UBS told CNBC. Billionaire households alone are expected to transfer an estimated $6.9 trillion by 2040.
In many wealthy families, the first generation built wealth in concentrated areas they knew well: family businesses, real estate, or blue-chip local stocks, wealth experts told CNBC. Their children are more likely to study internationally, travel more easily and be open to a variety of investments.
“The first generation were ‘builders,'” says Elizabeth Hart, CEO and founder of Legacy Wealth Advisors. “Their wealth is often tied up in one asset class that they understand deeply, usually a family-run business or local blue-chip stocks.”
In contrast, younger heirs tend to “view wealth through a global lens,” Hart said, adding that they are more open to diversified investments across asset classes and markets.
That change could redirect some of the inherited wealth away from traditional family financial outlets, particularly real estate. Hart said Asian families, in particular, have historically invested “almost exclusively in a multi-generational property,” but second- and third-generation heirs are increasingly looking to diversify into other assets and properties.
A survey by Natixis Investments found that millennials are more likely than older investors to seek exposure to private equity, with 53% expressing interest. They are also more likely to discuss cryptocurrencies with advisors, with 62% doing so, while 44% plan to expand or start crypto investments within the next year.
The younger generation also seems to be more comfortable with risk. Natixis found that 78% of millennials in the Asia-Pacific region are looking for opportunities to beat the market, compared to 38% of baby boomers who are willing to take risks to get ahead.
Money as a means to an end
Tobias Prestel, founder of Prestel & Partner, said that young rich people see money as an end and as a means to achieve goals.
“For many adults, money is a thing, and money is good for many, for many young people, money is just a tool,” said Prestel. “They look more at how the tool is used than enjoying the treasure chest.”
Changing attitudes are also influencing spending habits. Instead of creating collections of traditional status symbols, some young heirs prioritize experiences, travel and international lifestyles. Prestel said the less wealthy are less likely to accumulate cars and more likely to own real estate around the world, including travel and exposure to real estate.
Interest in sustainability and impact investing is also growing. UBS found that nearly half of next-generation investors are already invested in or willing to learn more about impact and sustainable investing.
Transferring also reshapes the way families manage wealth. The bank found that family members of the next generation increasingly see inheritance as a transfer of responsibility rather than an eventual financial collapse.
“My brother and I don’t think of the inheritance as something we will get, but as our responsibility to do a good job like my father did,” one respondent told UBS.
However, change is not without risks.
While the amount of wealth changing hands won’t disrupt broad transfers, advisers say the biggest risks to wealth preservation often come from families themselves.
“Crack isn’t a lack of money; it’s a lack of communication,” says Legacy Wealth Advisors’ Hart.
Many first-generation wealth creators are still reluctant to relinquish control, especially in Asia, where wealth is often closely associated with the family patriarch or matriarch. Meanwhile, heirs are pursuing greater transparency, hierarchy and formal management structures for family assets.
“Even if there is a succession plan, what destroys a lot of wealth is family conflict,” added Hart.
As wealth moves beyond its first generation, advisers say a successful transfer depends more on preparing heirs for management, not just planning the assets themselves.
