Capturing Intergenerational Wealth Transfer with Technology: Engaging Young Investors in Canada

As we witness one of the largest intergenerational wealth transfers in history, the Canadian financial landscape is poised for significant change. With an estimated $1 trillion expected to move from Canadian baby boomers to their Gen X and millennial heirs by 2026, according to ISS Market Intelligence, financial advisors must rethink their engagement strategies to effectively capture and manage this shift. In the U.S., the figures are even more staggering, with US$84 trillion forecasted to change hands over the next 20 years, as reported by Cerulli Associates.

The Opportunity with Young Investors

The demographic set to inherit these assets is not only anticipated to be the wealthiest generation yet but also the most tech-savvy. Over one-third of these heirs expect to receive at least C$500,000, and more than half plan to invest their inherited wealth. According to research from Family Enterprise Canada and the Ultra High Net Worth Institute, approximately 70% to 90% of heirs will change financial advisors after inheriting wealth from their parents.

This statistic reflects a common challenge for financial advisors who work with families across generations. Heirs often prefer advisors who better align with their own goals, values, and communication styles, leading them to seek new relationships rather than continuing with their parents' advisors.

This new wave of investors will necessitate a shift in how the financial industry approaches investor engagement, as traditional methods may no longer suffice.

Digital Engagement: A Must for the New Generation

Digital channels are the preferred medium for most investors under the age of 35, with a whopping 95% indicating they would use social media to select and interact with a financial advisor if the option were available. In stark contrast, only 13% of those over 65 would choose to engage via social channels. This stark preference gap underscores the need for advisors to establish a strong presence on platforms like LinkedIn, Instagram, X (formerly Twitter), and TikTok, collaborating with influencers and creating content that resonates with and educates young investors.

Technology Expectations of Young Investors

Today’s younger generations, particularly Gen Z, have high expectations for technology. They demand apps that are not only mobile-friendly but also capable of delivering financial planning, portfolio reporting, and educational content tailored to their life stages in real-time. The impatience for subpar technological experiences is evident, with 24% of this demographic expecting swift and efficient tech solutions. Robo-advisors and other digital platforms are increasingly adopting B2B strategies to meet these needs, offering streamlined, visually engaging, and enjoyable online experiences.

Addressing Financial Stress and Conservatism

Despite their future wealth, many young Canadians are currently stressed about their finances. A survey by Deloitte highlights that top stressors for Gen Z and millennial investors include day-to-day financial management and long-term financial planning, making them more conservative and debt-conscious than previous generations. This conservatism is an essential factor for advisors to consider, as it shapes how these investors view risk and investment opportunities.

Customizing Financial Advice for Financial Wellness

To truly engage this upcoming generation, advisors need to provide customized financial and estate planning services that focus on overall financial wellness, not just wealth accumulation. This approach aligns with the purpose-driven ethos of younger investors, who are keen on making financial decisions that reflect their values and long-term life goals.

Bridging the Strategy-Implementation Gap

Despite the recognition of this massive transfer and the potential it holds, there remains a notable gap in effective strategy implementation. According to Cerulli Associates, fewer than one in five young investors are likely to continue using their parent’s financial advisor, mainly because these advisors fail to engage them on their preferred terms. A robust, technology-focused strategy is essential to bridge this gap, improving retention rates among young investors and ensuring that wealth management firms are well-positioned to manage this significant capital inflow.

Conclusion

For Canadian wealth management firms, the impending intergenerational wealth transfer presents an unparalleled opportunity to reshape their business models and client engagement strategies. By embracing technology and tailoring their services to meet the unique needs and expectations of younger investors, these firms can secure a significant portion of this wealth transfer, setting the stage for long-term growth and success in a rapidly evolving financial landscape.