Australia is one of many countries that are navigating the intergenerational wealth transfer – a topic we recently introduced in the first chapter of this series. Across the globe, an unprecedented shift in wealth is taking place, as Baby Boomers move into retirement and pass on their assets to younger generations. From North America to Europe and Asia, the global scale of this wealth transfer is staggering, with significant economic and social implications.  

At the same time as this major wealth transfer is unfolding, various other global trends are impacting the financial industry and the economy at large. Rising living costs, economic slowdowns and housing unaffordability – particularly in major cities – are common threads across developed nations, creating new dynamics in how wealth is transferred and managed.  

At a generational level, younger cohorts may be prioritising different things to their parents and grandparents, while also seeking out advice via a range of new channels and formats. The challenge for the industry, both locally and abroad, will be to promote cohesion and communication across the generations. 

The following are just a few of the major global themes developing as part of the wealth shift. 

1. Longer lifespans to test retirement savings 

The ageing population, particularly in developed nations, including Australia and other Organization for Economic Co-operation and Development (OECD) countries, is a global demographic trend that presents a series of new challenges for policymakers, and indeed for the financial services industry.  

Across the world, trillions of dollars are expected to change hands intergenerationally in the upcoming decades. As older people retire, the necessity for structured and innovative estate planning grows particularly critical. The transfer of wealth is not simply a family and financial planning issue; it has broader economic implications, including how wealth disparities could change depending on the effectiveness of how wealth is distributed across the various segments of the population. 

A reduced working population and increased retired population is likely to lower productivity and reduce consumer spending. Healthcare funding challenges are likely to heavily feature in our futures. Those countries with retirement savings systems in place, including Australia, are going to see the first real test of the private pension (for us, superannuation) to support longer retirements, in what could be an increasingly volatile market.  

2. Rising property wealth across major cities and wealth inequality 

According to CoreLogic data, the median Sydney house price is now $1.2 million. From Vancouver to London to Sydney and beyond, property prices have rapidly and sharply increased over recent years, reshaping local economies and having far-reaching social impacts. The causes for the sharp increase are varied and include a low-interest rate environment, supply constraints and ubanisation – among other factors. As a result, property is set to be a major feature of the intergenerational wealth transfer, requiring detailed advice and planning.  

Advisers are increasingly assisting younger generations with accessing the property market – whether by gifting strategies, inheritance planning or family trusts. 

Though high property prices may be a common feature across markets, the tax implications will be felt differently according to the jurisdiction. An inheritance tax is not a feature of Australia’s current tax system, unlike in other countries. However, though Australians who inherit property may not be subject to an inheritance or estate tax, capital gains taxes and other financial implications need to be factored into their planning and should be carefully managed with the assistance of a licensed professional. 

3. Shifting investment preferences and behaviours

The last 2021 ABS Census showed that the Millennials had already caught up to Baby Boomers as the largest generational group in Australia. Facing higher property prices and an inflationary environment, younger cohorts are having to work particularly hard to build and grow their investment portfolios. One positive factor is the growth of online investing platforms. 

The ability to invest directly is a relatively recent development, and one that continues to grow. Low brokerage share trading platforms like Selfwealth offer a simple online and mobile platform for investors to access at any stage of their journey. While offering a simple self-directed option to independent investors, Selfwealth also offers an adviser platform built for managing client portfolios with a streamlined single view.

Technology and product development innovations are always adapting to meet the needs of investors, and this will only continue. My belief is that the financial advice sector is particularly well placed to navigate the changing terrain and keep their clients informed and prepared.  

The information has been prepared without considering the objectives, financial situation or needs of any individual. For this reason, any individual should, before acting on this information, consider the appropriateness of the information, having regards to the individual's objectives, financial situation or needs, and, if necessary, seek appropriate professional advice.