US Share of household Wealth by Generation

US Share of household Wealth by Generation

Source: https://www.visualcapitalist.com/charting-the-growing-generational-wealth-gap/

As we move towards the end of Baby Boomer dominance in demographics and by extension in economics and politics, we need to look at what a massive inter-generational wealth shift will mean to investment norms and expectations.

The table below shows the actual amounts of wealth that could flow between the four key generations over the next ten years. Studies show that there is approximately $68 trillion that will flow into the coffers of Millennials over this period.

Source: https://www.visualcapitalist.com/charting-the-growing-generational-wealth-gap/

Millennials think and act very differently from their parents and grandparents. For a start, this wealth will flow in roughly equal portions to male and female investors. Women investors particularly, but Millennials in general, are far more progressive in their required outcomes from their investments. A J.P. Morgan study showed that “Women believe that making a positive impact on society is important” and Millennials want to use their investments to help others and consider societal responsibility to be a factor in making investment decisions. This value system also flows through to their politics and therefore it is reasonable to expect that governments will be encouraged to create policy around a more sustainable agenda.

This shift to more sustainable investing has been accelerated by the recent pandemic and it is instructive to note that estimated net flows to ESG investments (Environmental, Social, and Governance) in the U.S. reached $20.9 billion in the first six months alone—that’s nearly equal to the amount of new money invested in all of 2019. Globally the amount of funds in ESG funds has risen to $40 trillion, an increase of $10 trillion in the last few years.

The lesson to take away from this paper is that sustainable investment is trending, resulting in significant shifts in assets as well as changes in government policy, where taxation and subsidies are especially important.  Investors need to be aware of these dynamics.

 

Disclaimer:  Please note that the publication is designed to provide general information only.  It reflects the thoughts and opinions of Logan Wealth Management and should not be construed as financial advice, nor should the information be considered a substitute for personal advice.  Information used in this publication has been gathered from sources believed to be reliable. Logan Wealth Management is not responsible for and assumes no liabilities or responsibility for any loss or damages suffered as a result of the use or misuse of, or reliance on the information or content of this publication. Please consult your financial adviser to determine whether the information is applicable to your personal situation.