What does the great wealth transfer mean for economic growth?

During the next couple of decades, demographic trends will move over $80 trillion of wealth into the hands of new owners.

This worldwide wealth transfer is the equivalent of three years of global fixed capital investment spending.

The great wealth transfer is concentrated in the US, UK, Europe and Japan. In regions like Asia, the rapid industrialization that broadens and accelerates wealth creation is a more recent phenomenon. That has meant that in such economies, affluence has generally been accumulated by later generations, and so demographics naturally delay the wealth transition.

Whoever takes control of this money will therefore exert meaningful influence over the direction of funding for business investment in the global economy, directly affecting the relative cost of capital for different projects. The shifts in relative capital costs will, in turn, impact the structure of economic growth.

The great wealth transfer does not mean that money remains in private hands. Governments around the world are experiencing rising debt levels; OECD government debt stands at over 110% of GDP. The social pains that inevitably accompany the upheaval of the Fourth Industrial Revolution suggest governments will remain under pressure to spend on welfare safety nets. Against this background, governments are unlikely to contemplate so large a transfer of wealth with idle indifference. At least some will be mobilized in support of government finance.

Whether private wealth is mobilized through financial repression or more direct taxation, public sector use of this wealth will redirect and thus reduce the resources that are available for private investment. Because it is personal wealth that is likely to be targeted, some types of private investment may be more impacted than others. In 2025, family offices put over a fifth of their portfolios into private equity; a notably higher allocation than institutional investors like pension funds. Thus, any attempt at mobilizing the wealth transfer of family offices to help fund government debt implies a relative increase in the private equity cost of capital compared to other forms of investment.

Even with governments covetously eyeing the great wealth transfer, most of it will be handed on to private individuals. This implies changes in the control of private wealth. Women are likely to control more and more global wealth, as around $9 trillion of this money is expected to be passed “sideways” to female partners of wealth creators, rather than being immediately passed to the next generation. However, passing wealth down a generation also increases female ownership: Inheritance has become more equitable in recent decades and Downton Abbey-style primogeniture, with the eldest son inheriting everything, is finally fading into feudal obscurity. If the coming change in generational ownership divides wealth more equally between the genders, that will further increase female control – even so far as the prospect of women holding a majority of the world’s wealth.

Increasing female ownership changes what is demanded of investments. As investors, women are less emotional than men. Women are more inclined to save (in deposits) and invest a smaller proportion of their wealth in financial assets than men. When they do invest, women spend more time researching before committing funds, have greater conviction once decided and are less likely to change strategy in the face of volatility. That combination suggests that longer-term and potentially more complex investment projects will more readily find capital if women wield more control.

If the wealth management industry manages to persuade women to shift from cash savings to more direct financial investment, this provision of longer-term capital in the real economy could become even more significant. Women have traditionally been overlooked by wealth managers; it may be this that has led women to allocate less of their wealth to investments. If wealth managers follow the money and, customizing their advice, manage to change women’s investment behaviour, the pool of money that is directly invested is likely to increase.

The generational wealth transfer and the gender wealth transfer both suggest a shift in priorities for real world investment. Younger groups of investors and women have both traditionally been more active in sustainable and diversity-based investing (ESG). There is a marked increase in reported ESG preferences by Gen X compared to the boomer generation. If wealth passes further down the generations to millennials and Gen Z, investors among them want to influence corporate ESG decisions even more: around 90% want their money to be used to influence companies’ environmental actions. Unless there is some seismic shock to these views, the great wealth transfer should skew investors’ priorities in a way that will lower the cost of capital for the green transition.

The great wealth transfer of the next two decades is a major event. It will help determine who creates real world investment and how much money is available for private sector investment. To the extent that governments either tax or otherwise redirect this flow of wealth, the cost of capital for private investments traditionally favoured by the boomer generation will increase. But the gender and generational shift in ownership has the potential to lower the cost of capital for more complex and longer-term projects and for ESG-focused investments.

This redirection of capital is likely to happen organically, but can also be encouraged. The new owners of wealth need to understand what their investments can do – for them and for the economy at large. The better their financial education, the more effective their investments are likely to be, and the better the eventual economic outcome.