Great wealth transfer might disappoint millennials and gen Z

Article content

Article content

Article content

The great wealth transfer has started, but millennials and generation Z may not inherit as much as they think.

A survey by Vanguard Canada out today found “a sizeable generational gap in expectations” around the wealth transfer that was expected to pass trillions of dollars from baby boomers to their children.

About $1 trillion has been predicted to move from Canadians to their heirs over the next few years, according to Chartered Professional Accountants Canada. This “seismic quantity of wealth” is expected to be the largest generational transfer in Canadian history.

Article content

In the United States the numbers are even bigger, with baby boomers expected to pass more than US$68 trillion on to their children.

Vanguard Canada’s survey found that inflation and the rising cost of living has made an inheritance even more important to younger Canadians.

Thirty-four per cent of those aged 18 to 34 said the money would be crucial to meeting their goals and 61 per cent said it would be important to hitting their investment targets.

Yet the older generation may have other ideas.

While half of the older Canadians surveyed acknowledged that an inheritance was essential for their children’s financial future, a third either didn’t expect to or were uncertain about leaving any inheritance at all, Vanguard found.

“Canadians of both generations, from boomers to millennials, are feeling the pressure of inflation and the rising cost of living, and this impacts the transfer of wealth,” said Mario Cianfarani, of Vanguard Investment Canada Inc.

“This is a difficult conversation for many people and expectations may not match reality.”

The survey found that Canadians over 55 are also facing pressures that could complicate the wealth transfer. Thirty-five per cent were concerned that they would need their assets later in life for unexpected healthcare costs, the needs of a prolonged retirement or to manage the rising cost of living.

Article content

Article content

A quarter of those surveyed expect that they will need to rely on their home for retirement income, “which adds another layer of complexity,” said the survey.

Vanguard Canada, which manages $80 billion in assets, stresses the importance of financial planning to ease the uncertainty of the wealth transfer.

Yet the survey suggests it is often not a priority. A quarter of those surveyed over the age of 55 had no plan in place, 31 per cent had discussed the transfer with recipients and just 15 per cent were working with a financial adviser on a plan.

“While 48 per cent of respondents have some form of financial plan, only 32 per cent include wealth transfer in those plans, potentially leading to unmet expectations for younger generations,” said Vanguard.

And a word of warning to financial advisers. Those who fail to include the whole family in estate planning risk losing clients, said the investment manager.

Seventy per cent of women leave their financial adviser within a year of the death of a spouse, studies show, and 66 per cent of children change advisers shortly after receiving an inheritance.

Article content

Trump 2.0 Q&A

Donald Trump is back and the economic reverberations are just beginning. Will the United States president-elect make good on his threat to impose 25 per cent tariffs on Canada and Mexico? What will that mean for the loonie, the economy and your pocketbook? Join our live Q&A on what Trump means to Canada Thursday, Dec. 5 at 12 p.m. ET. Register here and receive a reminder ahead of the event.

 Sign up here to get Posthaste delivered straight to your inbox.

“Serial disappointment” was how one economist described Canada’s productivity performance.

Data released by Statistics Canada yesterday showed labour productivity fell for the third quarter in a row. It has now declined in nine of the past 10 quarters and is almost 5 per cent lower than before the pandemic.

South of the border U.S. productivity surged 2.2 per cent in its eighth increase in a row.

“The Canada-U.S. productivity differential has become outright obscene,” said National Bank of Canada economists Stéfane Marion and Ethan Currie.

• Today’s Data: Canada international merchandise trade, United States trade balance
• Earnings: CIBC, Bank of Montreal, Toronto-Dominion Bank, Lululemon Athletic Inc. Hewlett Packard Enterprise Co., Kroger Co

Article content

Recommended from Editorial

1. 

   The ‘great horizontal wealth transfer’ is coming

2. 

   Natural disasters are costing Canada more than we think

---

Jennifer Wang spends most of her days as a pharmacist at Toronto General Hospital, but in her downtime, she’s creating content, working with brands and earning more than five figures through her social media side hustle. She’s one of a growing number of young Canadians seeking out another stream of income. Here’s how they do it.

---

Hard-earned truth

In an ongoing series about what the next generation needs to know to build wealth, we offer another hard-earned truth: Good debt can boost investment wealth, but beware its bad twin. Read more 

---

McLister on mortgages

Want to learn more about mortgages? Mortgage strategist Robert McLister’s Financial Post column can help navigate the complex sector, from the latest trends to financing opportunities you won’t want to miss. Plus check his mortgage rate page for Canada’s lowest national mortgage rates, updated daily.

Article content

Financial Post on YouTube

Visit the Financial Post’s YouTube channel for interviews with Canada’s leading experts in business, economics, housing, the energy sector and more.

Today’s Posthaste was written by Pamela Heaven, with additional reporting from Financial Post staff, The Canadian Press and Bloomberg.

Have a story idea, pitch, embargoed report, or a suggestion for this newsletter? Email us at posthaste@postmedia.com.

Bookmark our website and support our journalism: Don’t miss the business news you need to know — add financialpost.com to your bookmarks and sign up for our newsletters here

Article content