In my lifetime, I’ve witnessed some seismic shifts in the investment landscape, from the globalization of financial markets to the rise of crypto and the recent explosion of retail investing. Today, we are seeing the beginning of an equally important event, and certainly one of the most profound financial shifts in recent history: the Great Wealth Transfer.
Over the next two decades, an estimated $84 trillion of assets will be passed down from baby boomers to younger generations, marking the largest intergenerational transfer of wealth in recorded history. I believe this movement of money, and the actions of those inheriting it, will reshape the markets, potentially fueling unprecedented growth in retail investing while further rebalancing the influence of retail versus institutional investors.
Younger investors behave differently
The sheer scale of this wealth transfer is immense. With trillions of dollars moving from one generation to the next, the composition and preferences of those holding much of the world’s assets will change dramatically.
Most of these assets are expected to flow into the hands of Generation X, Millennials, and Generation Z – three groups already redefining the norms of investing. Since the Covid retail investing boom, levels of engagement in financial markets among these demographics are growing. Unlike their parents and grandparents, who typically invested conservatively in traditional stocks and bonds, if they invested at all, these generations are much more likely to explore a wide array of asset classes, from stocks to digital assets and alternative investments.
With many countries facing the challenge of an aging population and a retirement funding crisis, today’s emerging investors are more aware of the need to grow their wealth proactively for a financially secure future. This will likely lead to a massive increase in retail investors entering the market as the wealth transfer gathers pace.
As well as being more engaged, this new breed of investors are more confident in their abilities and increasingly empowered by digital tools. Platforms like eToro now allow retail investors to make informed investment decisions with ease, enabling them to take control of their future, rather than relying purely on pensions or rising home values, as previous generations did. The cultural shift away from exclusively trusting financial institutions and advisors has been accelerated by technology, with social media, financial news, and online platforms providing real-time information and education to retail investors everywhere.
Why the timing of the great wealth transfer is so significant
As the Great Wealth Transfer unfolds, it’s not just the vast movement of wealth that’s set to change the investment landscape—it’s the timing of this shift, which coincides with transformational technological advances, particularly in artificial intelligence (AI).
AI-powered tools are now giving retail investors unprecedented access to the same data and market insights that were once the domain of institutional investors. This democratization of information not only makes it easier for individuals to make informed decisions but also empowers them to manage their investments in ways that were unimaginable a decade ago.
However, the transformation goes far deeper than just access to data. AI is revolutionizing how investment advice is delivered, making it more personalised than ever. Traditional investment advice often followed a one-size-fits-all approach, constrained by the capacity of financial advisors to deeply understand each individual investor’s needs. AI changes the game, leveraging vast amounts of data to tailor recommendations in real-time.
The road ahead for retail investing
The Great Wealth Transfer is an opportunity for those fortunate enough to be inheriting money to shape their financial future. It’s also an opportunity for younger generations to build wealth in line with their values and goals, and I believe that this will have a profound impact on shaping the world around us.
As CEO of eToro, I am hugely excited about the role that we and other investment platforms can play in supporting this movement, by providing the tools, resources, and access that will allow people to deploy their transferred wealth into capital markets with ease. The Great Wealth Transfer is already underway and it’s going to usher in a new era of investing.
This communication is for information and education purposes only and should not be taken as investment advice, a personal recommendation, or an offer of, or solicitation to buy or sell, any financial instruments. This material has been prepared without taking into account any particular recipient’s investment objectives or financial situation, and has not been prepared in accordance with the legal and regulatory requirements to promote independent research. Any references to past or future performance of a financial instrument, index or a packaged investment product are not, and should not be taken as, a reliable indicator of future results. eToro makes no representation and assumes no liability as to the accuracy or completeness of the content of this publication.