With $3.5 trillion dollars expected to transfer between generations in the next 20 years as part of the great wealth transfer, many Australians expect to receive some form of inheritance in the next few years. However, the majority have expressed concern about how to navigate the legal, financial and investment complexities this would trigger. This is from a study by Fidelity International (‘Fidelity’).

The Fidelity’s Next Generation research surveyed* over 1000 Australian consumers aged 18 to 59 years old to understand their evolving financial needs and behaviours. The study found that close to 1 in 5 of those surveyed have already received some form of inheritance and 1 in 10 expect to receive even more. A further 2 in 5 believe it is likely that they will receive an inheritance in the future.

Generation X, aged 44 to 59, are likely to be the greatest beneficiary of the ‘Great Wealth Transfer’, with over one-third (35 per cent) of Gen Xs expecting to inherit over $500,000.  This drops to 20 per cent of Millennials (aged 29 to 43) who expect to receive this level of inheritance, and only 13 per cent for Gen Zs (aged 18 to 28).

Lauren Jackson, Head of Wholesale, Australia, Fidelity International says there has been a lot of talk in recent years about “the great intergenerational wealth transfer” and Australians are starting to experience the reality of this.

“Much of the commentary has been focused on the positives of an inheritance and how this could help younger Australians with issues such as housing affordability. However, it is clear that there are also some concerns. The vast majority of next gens say they are worried about managing their inheritance. Over half of next gens say they are likely to change their investment strategy after receiving an inheritance, and two-thirds would consider seeking financial advice or planning to help with this.  There is no doubt that getting professional financial advice could be very useful for these people to help manage the tax implications, legal issues, and investment decisions.”

The research found that the most common uses for an inheritance include investing it (40 per cent), paying off debts (39 per cent), or buying a home (31 per cent). Gen Z are notably even more likely to plan to invest their windfall (48 per cent) than Gen X (41 per cent) or Millennials (35 per cent). When it comes to what types of investment Australians plan to use their inheritance on, real estate came up tops, followed closely by superannuation and high-interest savings accounts.  Australian shares are also a popular choice (see Figure 1).

Lauren Jackson comments: “Our research suggests that most people see an inheritance as a chance to make a meaningful difference to their financial future and they don’t want to waste the opportunity or take risks with it. There is a clear trend towards longer-term investments such as bricks-and-mortar and retirement income.”

When asked about the main concerns of receiving an inheritance, respondents highlighted tax implications, managing the money responsibly, family disputes and emotional stress as top concerns (see Figure 2).  Formal family governance structures to manage the wealth transfer is also a very important consideration for 1 in 5 and somewhat important for close to half of Australians.

Support required to manage the windfall

More than half of Australians also say that they are likely to change their investment strategy once receiving an inheritance, and 2 in 3 would be at least somewhat likely to seek financial advice or planning for this.

Close to 1 in 2 of those who have or are likely to receive an inheritance seek out help from family members, while close to 2 in 5 use or would consider using a professional financial adviser, followed by other professionals like accountants (1 in 4).

Lauren Jackson says that inheritance is a good catalyst for investors to reconsider their financial strategies and seek professional help.

“It is heartening to see that a majority of Australians are not afraid to seek help and are likely to reach out for financial advice once they have received an inheritance. Advisers can play a pivotal role by helping clients realign their portfolios and strategies in response to their new financial reality, ensuring their wealth is effectively managed and grown over time.

“There is a significant opportunity for professional advisers to provide critical guidance on how to handle this financial transition, which often includes legal, tax, and investment challenges. Many next gens require guidance on debt management, investment strategy, alignment with personal values, and managing family dynamics. The financial services industry should be prepared to cater to this growing demand for ‘next gen’ advice,” says Lauren.

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