Vanguard survey reveals challenges as inflation pressures inheritance plans across generations
A new survey from Vanguard Canada explores the challenges of the ‘great wealth transfer,’ where $1tn is expected to move from boomer parents to millennial children.
Inflation and rising living costs are prompting younger investors to depend heavily on inheritances.
Among respondents aged 18-34, 34 percent said inheritances are crucial to their financial goals, while 61 percent identified them as important to achieving investment targets.
Generational divides in wealth transfer expectations are stark.
The study found 31 percent of respondents do not expect to leave an inheritance or are unsure, despite 49 percent recognizing the importance of inheritance for their children's financial future.
At the same time, 57 percent of investors under 35 either expect to receive or have already received an inheritance. However, 39 percent of younger respondents do not consider it important to pass on their assets.
“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, head of Sales and Distribution at Vanguard Investment Canada Inc.
“This is a difficult conversation for many people and expectations may not match reality. A financial advisor can help navigate this tricky discussion with the whole family to ensure a more seamless transition.”
Older investors face additional challenges. More than one-third (35 percent) expressed concerns about requiring their assets later in life for unexpected healthcare costs, prolonged retirement, or to manage inflation.
A quarter of older respondents anticipate needing their home as a source of retirement income, further complicating wealth transfer plans.
Despite recognising the significance of inheritance, 25 percent of respondents over 55 currently lack a wealth transfer plan, while only 15 percent are working with a financial advisor to address this.
Financial planning plays a vital role in addressing estate planning uncertainties. According to the survey, 48 percent of respondents have a financial plan, but only 32 percent include wealth transfer in their planning. This omission risks creating unmet expectations for younger generations.
However, respondents working with financial advisors reported greater optimism, with 83 percent stating their advisors positively influenced their financial outlook.
The survey also highlights risks for financial advisors. Research indicates 70 percent of women change financial advisors within a year of a spouse’s death, and 66 percent of children do so after receiving an inheritance.
Cianfarani highlighted the importance of proactive communication, stating, “The survey findings reveal a clear need for more structured wealth transfer planning, but it goes beyond just transferring assets. The advisor needs to prepare their clients for this transfer.”
They further explained that the primary reason families fail to maintain wealth during an asset transfer is the lack of communication and trust.
According to Cianfarani, advisors play a crucial role in facilitating these conversations, which has a lasting positive impact on families.
