Once known as the largest generation of the American population, Baby Boomers, identified as people born between the years 1944 and 1964, are about to transfer $68 trillion in wealth to the younger generations in the coming years. Today, Baby Boomers overwhelmingly control the majority of wealth in the United States and with more than 10,000 Baby Boomers turning 65 every day, experts agree that it will be the biggest wealth transfer in American history.
As of July 1st, 2019, Pew Research noted that Millennials officially overtook Baby Boomers
as the largest generation. Born between 1981 and 1996, Millennials were also the most diverse and most educated
generation until Generation Z, born after 1996, took those titles from them. With even the youngest Millennials out of college and now in the workforce, much has been done to study their habits and preferences as their sheer size will be controlling consumer demand for years to come just as the Baby Boomers did when they were the largest generation. With that said, the Great Wealth Transfer will see trillions of dollars passed on to the largest, most diverse, and most educated generations in American history. Businesses everywhere are already taking note of this and credit unions should also be on alert for this shift in wealth.
Working with these younger generations as they inherit their wealth will mean understanding their needs and preferences to build new relationships with them. This means placing all of today’s profitable business practices on the table and gauging their viability and profitability in the future. The youngest Baby Boomers turn 57 this year so it is easy to ignore the issue and believe there is still time to prepare. However, the oldest Baby Boomers turn 77 this year, presenting a conundrum for credit unions who are unprepared for the wealth transfer.
Much has been noted about the technologically savvy generations and how financial institutions went through a digital transformation to accommodate them. Goldman Sachs noted in their investor Insights
that Millennials came of age during peak technological change, globalization and economic disruption, making them the first generation of digital natives whose affinity for technology determines which companies they do business. Their unique experience growing up in a time of disruption has seen them become the slowest generation to get married and make large ownership purchases. In essence, the standard relationships that financial institutions have created may not fit the mold for Millennials and Generation Z.
In order to attract and serve these specific segments, credit unions should properly address their new and unique preferences. Much of the messaging concerning value propositions in banking, however, is based on the assumption that different generations will have similar experiences. This is not the case for Millennials and Gen Z. This makes the consumer experience even more important than ever before for these digital natives who expect a modern experience. And this means credit unions need to perform a full analysis of their digital capabilities. While some have recognized the need to pivot and update their digital offerings, many are still lagging behind and risk losing out on these new segments.
Millennials and Generation Z expect the full digital experience delivered with high level competitive services. They are smart, savvy, college-educated, and unlike previous generations, they are less loyal and will move on to a different financial institution if their consumer experience does not match their expectations. With $68 trillion in wealth on the line, there has never been a better time to revisit and invest in your credit union’s digital offerings and capabilities to capture your share of the Great Wealth Transfer.