4 Crucial Takeaways as Finance Faces the Great Wealth Transfer
The great wealth transfer will shake the foundations of the finance industry. Are traditional players ready to meet the expectations of the next generation of investors?
By Elizabeth Landau
May 10, 2024
The $84 trillion "great wealth transfer" from Baby Boomers to Millennials and Gen Z will shake the foundations of the finance industry. GreenPortfolio recently held a webinar and invited other experts in climate finance to join us to discuss a key question: are traditional players ready to meet the shifting values and expectations of the next generation of investors and consumers?
Here are four key takeaways on how the finance industry must evolve to meet our expectations as investors who care about both the planet and profit:
1. Prioritize Values and Impact, Not Just Returns
Data shows younger inheritors overwhelmingly prioritize sustainable and ethical investing over pure profit motives. Our CEO, Bonnie Gurry, mentioned a study from Stanford that found significant differences between generations. From year to year, Boomers consistently express moderate concern about environmental issues but are unwilling to sacrifice financial returns.
On the other hand, Gen Z and Millennial investors are willing to give up a portion of their returns to align with their values. Nearly a quarter of younger respondents in the study were willing to lose more than 10% of their wealth if it meant putting their money into investments that benefit the environment.
There’s also a growing belief among investors that it is possible to balance financial gains with a focus on sustainability. So while there is an willingness to concede returns for impact, there’s a growing awareness that this isn’t necessary with the right research, strategy and support from professionals.
This represents a seismic generational shift that will upend business as usual. To capture future assets, financial institutions must develop robust capabilities that credibly track impact metrics.
2. Embrace Personalization and Customization
Millennials and Gen Z don't just want cookie-cutter products – they expect hyper-personalized financial services mapped to their unique values, interests, and goals. As Dr. Kedar Karkare of Karma Wallet predicted, "We're going to see what Spotify did to music happen to retail spending and investing,” leading to highly customized portfolios.
From direct indexing to AI-driven splicing of financial data, technologies enabling this level of personalization will become key competitive advantages. Firms must evolve past one-size-fits-all offerings.
3. Rebuild Trust Through Transparency
Younger investors are highly skeptical of corporate greenwashing around sustainable practices. As Dr. Karkare put it: "The level of trust in corporate claims is decreasing year over year, even though consumers want sustainable ethical practices.”
Expanding on this sentiment, Adam Oskwarek of Zopeful observed that we’ve reached an inflection point where regulatory, consumer, and internal employee pressures are forcing companies to be more transparent and take bolder climate action. "The companies that do will be the ones that benefit from the wealth transfer as the next generation wants to put their money, time, effort and spending towards things they value."
At GreenPortfolio, we consistently hear from our community that transparency and greenwashing concerns remain a major barrier to sustainable investing adoption – which is why we're actively tackling this problem head-on.
As Bonnie points out, "you can't manage what you can't measure" – and emerging technologies will be instrumental in navigating this challenge.
To rebuild credibility, the finance industry must embrace radical transparency. From supply chain data to audited impact metrics, giving customers full visibility into sustainable business practices will be table stakes.
4. Utilize Sustainable Innovation
With incredible wealth waiting to shift to values-aligned investing, there are massive opportunities for innovative sustainable products and services.
Our panel of experts pointed to soaring demand for solutions like:
- Quality carbon offsets/removal
- Green finance vehicles
- Blockchain-enabled impact tracking
- Customizable direct indexing
Emerging technologies are unlocking new frontiers – enabling unprecedented personalization, radical transparency, and novel avenues for driving positive impact. By staying ahead of evolving customer needs, financial innovators can capture huge segments of the great wealth transfer.
Embracing a sustainable and values-driven future
The writing is on the wall - profound changes in investing preferences are already underway. While uncertainty remains, legacy players ignoring these generational shifts in values and technology risk destabilization. Those embracing the sustainable and values-driven future can position themselves to lead the finance industry for decades to come.
Your future, your terms!
That includes finding banking and investment partners that listen to your climate priorities. Get paired with a financial advisor who shares your values!
Watch the full panel discussion here:
About our panelists:
Bonnie Gurry is CEO and Co-Founder of GreenPortfolio, the climate fintech engine empowering millennials to make climate-friendly investment choices.
Dr. Kedar Karkare started Karma Wallet to help consumers understand which companies are good for the world.
Adam Oskwarek is the Founder of Zopeful Climate, a climate tech company that makes science-backed climate action accessible for companies and individuals.
Moderated by:
David Garrison is the Founder of Climate & Capital Connect, a professional networking platform for climate, sustainability and impact, and co-founder of Climate & Capital Media, the first non-profit media organization solely focused on the business of climate change.
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