Retirement
Turning inheritance into impact: The once-in-a-generation opportunity facing Australian families
Retirement
Turning inheritance into impact: The once-in-a-generation opportunity facing Australian families
Australia is on the brink of a seismic shift in wealth distribution, with more than $3.5 trillion expected to be transferred from Baby Boomers to Gen X and Millennials in the next two decades. This unprecedented transfer of wealth presents a unique opportunity for Australians to redefine their financial legacy by investing in a way that aligns with their values and beliefs.
Turning inheritance into impact: The once-in-a-generation opportunity facing Australian families
Australia is on the brink of a seismic shift in wealth distribution, with more than $3.5 trillion expected to be transferred from Baby Boomers to Gen X and Millennials in the next two decades. This unprecedented transfer of wealth presents a unique opportunity for Australians to redefine their financial legacy by investing in a way that aligns with their values and beliefs.
Bruce MacAdam, a married father of three, embodies this shift towards ethical investing. For MacAdam, investing responsibly is not merely an idealistic pursuit but a reflection of his values. "It’s not just about where you put your money - it’s about what kind of world we want to live in," he explains. His family discussions often centre around investing as a way to express who they are and what they stand for. "Our family has always talked about investing is a chance to reflect who you are and what you stand for," he adds.
MacAdam is not alone in his approach. Kevin McDonald, a financial adviser and member of the Ethical Adviser’s Co-Op, notes a broader trend among Australians seeking to invest responsibly. "An increasing number of Australians – across all age brackets – are looking to invest responsibly and away from fossil fuels, weapons, and industries misaligned with social and environmental concerns," McDonald observes. He emphasises that ethical investing has evolved beyond a niche market into a specialised field that underscores the interconnectedness of financial decisions with environmental, social, and ethical outcomes.
The upcoming intergenerational wealth transfer is not just about financial gain but also about the potential for positive impact. "With the big intergenerational wealth transfer over the next two decades, people are asking themselves what can I do with that wealth that aligns with my values and purpose, and how can I ensure this money drives positive changes for the environment and our society?" McDonald says.
This sentiment is echoed by Martin Hesse, who, along with his two brothers, plans to invest any inheritance they receive in a manner that aligns with their values. "If we’re going to inherit this money, we feel a responsibility to make sure it also reflects what Mum stood for," Hesse states. The brothers have discussed investing in clean energy, sustainable resource use, and innovation—areas they believe will continue to make a difference long after they're gone. "I want to do something meaningful with it," Hesse adds.
The trend towards ethical investing is not confined to Australia. A recent Morgan Stanley survey revealed that a majority of investors globally (88%) are interested in sustainable investing, with nearly all Gen Z (99%) and Millennial (97%) investors showing interest. In Australia, a 2024 survey by the Responsible Investment Association Australasia (RIAA) found that 88% of Australians expect their investments to be responsible and ethical, and 65% indicated they would invest more if their investments made a positive impact.
McDonald highlights that this shift reflects a generational change in investment decision-making. "It reflects a generational shift in how investment decisions are made," he says. However, he also points out that beneficiaries often inherit portfolios that are heavily weighted in industries conflicting with their personal values. "Ethical investing has become an increasingly complex space, shaped by evolving ESG standards and shifting community expectations," McDonald notes.
To address this complexity, McDonald advises families to have open conversations about investment intentions and personal values. "We plan for our funerals. Why shouldn’t we plan for how our money should be used?" he asks. He suggests that stating wishes around ethical investing, whether in a will or with a financial adviser, is a responsible step that allows wealth to be directed towards positive outcomes. "What kind of legacy do you want to leave?" he questions, adding that such planning can reduce confusion, conflict, and regret.
McDonald also stresses the importance of closing the educational gap around ethical investing to empower the next generation. He recommends families develop financial plans that include both wealth and values transfer to ensure that money passed down reflects the legacy they wish to leave. "If you care about what your money supports after you're gone, you need to say something now. Don’t just drop a portfolio on your kids or grandkids and hope for the best," McDonald advises. "Have the conversation so you can shape the outcome because a lump sum inheritance with no plan behind it can cause more harm than good."
To make ethical investing part of the legacy, McDonald suggests three practical steps: putting investment intentions in writing, educating the next generation about ethical investing, and choosing a financial adviser who understands personal values. These steps can help ensure that the wealth transfer not only benefits future generations financially but also contributes positively to society and the environment.
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