(image from pexels.com)
Nonprofit executives anticipating that intergenerational transfer of wealth have a better chance of getting the cash after it has passed to the next generation.
Only 1% of older Americans versus 3% of younger Americans have factored in philanthropy as a primary purpose for their wealth according to new data from The Harris Poll in the study “America’s Great Wealth Transfer.” The majority of older Americans plan to leave inheritance to their children (81%). When this transfer occurs, the new generation will have views on wealth and financial priorities that differ from those of their parents.
Older Americans primarily see their wealth as a path to security (42%), and as a means to live their desired lifestyle/for enjoyment (35%). Younger Americans likewise share these sentiments (32%, 23% respectively). Significantly more often than older Americans, they see wealth as a method of building a legacy (22% younger, 12% older) and to achieve personal fulfillment (18%, 8% respectively).
The Harris Poll defined older Americans as ages 55 to 80 and older and younger Americans as 18 to 54. The polling was done for financial firms for insights on how to deal with wealthy clients.
Financial returns stand as both generations’ top priority for their investments (54% older, 62% younger). However, older Americans place more importance on diversification (43%, 24% respectively) and minimizing risk (42%, 28%).
Younger Americans place greater emphasis on the social consequences of investing, such as impact investing (28% younger, 3% older), and Environmental, Social, Governance (ESG) (13%, 2% respectively). While related, these two investment strategies slightly differ in their overarching goals. ESG provides a framework to evaluate companies, manage risk, and identify long-term value – such as avoiding companies with unethical labor practices that could face reputational damage. Impact investing looks to produce tangible positive outcomes alongside securing financial gains, such as investing in affordable housing projects with the aim of improving the community.
Even with valid concerns, 64% of older Americans are confident in their family member’s ability to responsibly manage their inheritance. And most are ready to turn over the reins completely. Only one-quarter (25%) of older Americans think they should have a say in how their beneficiaries manage their inheritance. Younger generations are even more confident (83%) in their ability to manage their inheritance.
The Harris data shows that beyond gratitude, most young Americans share positive feelings about inheriting familial assets — expressing hope (54%), joy (43%), and relief (28%). However, a significant number also feel the weight of pressure (20%), anxiety (18%), and guilt (15%) over their impending inheritance. Interestingly, very few older Americans expect that their heirs will experience these negative emotions — guilt (2%), stress (1%), pressure (1%) – reflecting a lack of communication on the emotional side of transferring wealth.
More than half (58%) of younger Americans agreed that given the economic environment, it’s harder for their generation to accumulate wealth than it was for their parents’ generation. The Great Wealth Transfer will go a long way in helping younger generations feel as though they are closing the financial gap with their older relatives, according to researchers for the Harris Poll.
