The Generation Game: the investment industry’s $10 trillion opportunity 

If you work in the investment industry, then brace yourself for major change: in the next 10 years alone, an estimated $10 trillion globally is expected to change hands between generations, from the baby boomers to their children. 

As with any major shift, it will create challenges and opportunities – and in the investment industry there’ll be winners and losers.  

“The ultimate question for asset managers and intermediaries will be how to keep hold of this wealth”, says Paul Poletti-Gadd, Solutions Director at FundsLibrary. Research has shown that financial advisers lose a substantial share of assets under management following a client’s passing. But, Paul says, “rather than a trend towards greater disintermediation, this transfer of wealth should actually be used as an opportunity for advisers to play a greater role”.  

To thrive, the industry needs to ensure it appeals to the next generation who stand to inherit this shifting pool of wealth. Thankfully, asset and wealth managers are painfully aware of the challenge, and it’s starting to be reflected in their strategies. But how do you capture and maintain this transferred wealth? How do you engage with the new owner of the capital?  

Different demands 

Part of the challenge, of course, is the new, different demands and expectations of the younger generation. Technology is a large part of this. From calling a nearly instant car on Uber to ordering from a bewildering array of dinner options on Deliveroo, they’re a generation who are used to getting what they want and when they want it. They’re accustomed to carrying out all of their transactions and communications with a tap on their smartphone, facilitated by slick technology. So why would they bother to book an appointment with an IFA? 

Also, younger investors are more conscious of environmental and sustainability issues and want to make sure that mindset is reflected in their investment choices. So, asset managers will inevitably continue to evolve their products and services to reflect this. However, Paul questions: “If sustainability becomes as big a requirement for investors as returns, then how do asset managers quantitatively and systematically measure and communicate that? How do they integrate this information onto fund factsheets? Big hurdles remain.” 

Another challenge is education. The beneficiaries of the newly transferred wealth may not appreciate the value of saving and planning for their retirement if its 30 or 40 years away. Arguably the asset management industry has a role to play in educating its new client base, alongside government, schools and other parties.  

Greater digital capabilities will help the investment industry engage with this next generation of clients, as well as ensuring business models are sustainable in an increasingly competitive environment.  

But it seems there is a long way to go for many firms. Asset and wealth managers are often accused of being slow to adopt new tech, from blockchain to the use of big data. While many firms have been investing in improving their digital capabilities, it is still common to rely on multiple legacy systems, often spread across different technology platforms. 

What about robo advisers and fintech? 

Of course, this growing digital demand hasn’t gone unnoticed. There are whole new sections of the financial services industry – robo advisers and other fintech firms – that were born to cater to the younger generation’s digital expectations. Some of them are doing a very good job of it too.  

But they don’t provide the answer to one crucial question: in order to make informed decisions with their inheritance, where does the newly minted investor go for tailored, personalised information? Paul says: “Robo advisers can’t give the sort of specific tax or life advice that a flesh-and-blood financial adviser can provide”. 

And more broadly, fintechs don’t have the skillset to actually oust the larger, more established asset managers. Instead, they should be viewed as complementary; the skills, knowledge and technology offered by these firms can help bridge the gap between the expectations of clients, young and old, and wealth management firms’ offerings. So, global asset and wealth managers are now partnering with fintech firms to help them with data analytics, to better identify risk, and to automate asset allocation and the management of wealth.  

While fintechs won’t provide the answers themselves, tech remains a crucial part of the solution for engaging with the next generation. 

New ways of communicating 

Despite concerns to the contrary, the upcoming transfer of wealth actually provides a great opportunity for savvy traditional asset managers.  

To thrive, they’ll need to apply their core skill set – the astute investment of money for clients – but take new routes to market. 

A huge part of that will be branding and communication. Paul says: “We’ve already seen some of the more traditional asset and wealth managers drastically change their look and feel to appeal to a younger client base”. Some have strategically shifted their tone of voice; the wording they use on their website for example. For others, coats of arms have been replaced with more minimalist logos. But the actual core operation of these businesses remains unchanged. 

The challenge for small asset managers 

While larger, deep-pocketed asset managers can afford to re-brand and evolve their product range to better cater for the next generation of investors, that may not be the case for the smaller end of the market.  

The result could be more consolidation, or a carving out of the middle of the market, as these firms fail, while larger investment houses and smaller, niche operators thrive.  

The effects of the intergenerational transfer of wealth are likely to give shape to a new, stronger investment industry.  

Paul says: “At FundsLibrary, we will stay close to this topic and help guide our clients through the major changes it entails. We are always happy to help with any query or clarification whenever necessary, whether it be regulatory, data or other”. 

FundsLibrary can be contacted on +44 117 313 1670 or  via email

Views, opinions or claims expressed on this website are those of the authors, and not necessarily the views of FundsLibrary. The content and information contained on the site should not be taken as advice. We accept no responsibility for loss incurred by any person on taking or refraining from action as a result of material contained herein.

All figures correct as at 31.12.2019.