Risking the Great Wealth Transfer – How young Aussies spend, save and invest puts future inheritance in jeopardy

Tony Roussos

Young Australians (Generation Z (Gen Z) and Millennials) are putting billions of dollars of inheritance at risk with their current money management behaviours, reveals new research from Findex Group Limited (“Findex”).

The research commissioned by Findex, Australasia’s largest integrated wealth management and accounting firm, explored the spending, saving and investing behaviours of over 1,000 Australians aged from 18 to 80 across metro and regional areas.

Wealth changes hands

A key data point was 43% of Gen Z and 35% of Millennial respondents are ‘expecting an inheritance’ from their parents or grandparents; aligning with the 2021 Productivity Commission report, which  projected that Baby Boomers will pass an estimated $224 billion each year in inheritance by 2050 – creating a $3.5 trillion influx of wealth to the younger generations.

“As a society, we are facing one of the largest wealth transfers in modern history. However, what our research shows is the level of financial literacy and responsible money management among younger Australians calls into question whether they have the skills to ensure they are able to pass a similar inheritance on to their own children,” says Findex Co-CEO Tony Roussos.

Younger Aussies money management habits

While the younger respondents noted they ‘feel confident about managing their finances’ (Millennials 43%, Gen Z 35%), ‘have budgets’ (Millennials 72%, Gen Z 51%) and ‘pay bills on time’ (Millennials 96%, Gen Z 93%), this is at odds with other findings where they prefer to ‘live for today’ (Millennials 63%, Gen Z 64%), ‘spend money over saving for long term’ (Millennials 57%, Gen Z 55%) and ‘have no other investments’ (Millennials 55%, Gen Z 60%).

For those with investments, the majority of younger Australians (Millennials 70%, Gen Z 77%) are prepared to be riskier with their money – cryptocurrencies, for example, are the primary investment choice among Gen Z (42%). 23% of millennial respondents additionally noted that they had less than $20,000 in their superannuation despite the majority noting a $1 million superannuation balance would be the minimum for comfortable retirement.

Financial advice

The research also showcases a strong resistance to receiving professional financial guidance with less than half (Millennials 44.7%, Gen Z 45%) open to using a financial adviser in the future.

They instead prefer to turn to peers (Millennials 21%, Gen Z 30%) for financial advice or opt to do their own research (47% Millennials and Gen Z). A key driver for this is a feeling that they don’t have sufficient assets to justify professional advice (16% Millennials, 17.6% Gen Z) and that financial advisers were too expensive (Millennials 18.7%, Gen Z 15.7%).

Adding to this, the majority (29%) of all respondents were only willing to pay less than $500 yearly for a financial adviser, despite the current industry average sitting at $3,529 per annum.

“This is a wakeup call for the wealth industry to seriously rethink of how we engage with younger Australians,” says Mr Roussos.

“With billions on the line, it is also a clear opportunity for financial advisers to better partner with Baby Boomer clients to not only set up the transfer of family wealth but also to work closely with them to empower their kids and grandkids with the crucial, trusted professional advice.”

“By financial advisers investing the time to build multi-generational client relationships earlier on, the wealth is hopefully secured and grown over the long-term.”

How Aussies engage with financial advisers

Overall, when looking for a financial adviser, Australians consider honesty (47%), expertise (45.5%) and putting client’s interest first (41.7%) as their top three qualities.

Those who have a financial adviser prefer to deal with them face to face (66.7%) with the main financial goals being ‘to build wealth’ (27.1%), ‘have peace of mind’ (26.3%) and ‘to consult with someone with more financial expertise than myself’ (23.7%).

Additional key research figures:

• 43.5% of Australians have a confident level of understanding of how they manage their finances
• Overall, 51.3% of respondents reported they are the primary financial decision makers in their household. However, 47% of Baby Boomers and 35.4% of Gen X share responsibility with their partners
• Top types of investments:
  • Superannuation (60.4%)
  • Share/stocks (44.2%)
  • Cash (39.4%)
  • High interest savings accounts (31.6%)
  • Residential property (27%)
• How Australians decide what to invest in
  • 47.4% Did my own research into the investment and concluded it was a good investment
  • 33.6% Aligns with personal interests
  • 23.6% Advised by a financial adviser
  • 15.3% Recommended by friends
  • 14.2% Aligns with personal values (investing in an ethical and sustainable business)
• 55.1% of Australians do not use a financial planner and do not intend to use one in future
• Key barriers of entry to getting professional financial advice:
  • 32% prefer to manage own money
  • 23% too expensive/can’t afford one
  • 20% not enough assets to justify using one