The key to securing your future isn’t waiting for inherited wealth, writes Nick Stewart.
Nick Stewart is a financial adviser and chief executive at Stewart Group
OPINION
The headlines are attention-grabbing all seem to agree: The largest transfer of wealth in history is coming. But how much of this narrative holds up to scrutiny? There are several myths that need addressing.
Myth 1: Scale
While estimates suggest USD124 trillion (215t) in assets will transfer from older generations to younger ones in the US by 2048, these numbers require context.
In New Zealand, the scale is proportionally significant, with estimates suggesting over $300 billion in wealth transfer expected over the next decade.
As noted by family wealth consultant Jim Grubman, the annual transfer rate remains relatively stable at around 1% to 2% of total wealth a year, consistent with historical patterns. This principle holds true in New Zealand’s market as well.
“What we’re seeing isn’t unprecedented in percentage terms,” says Grubman. “The larger absolute numbers reflect overall growth in household wealth rather than a dramatic shift in transfer patterns.”
Compared to many other developed nations, New Zealand’s inheritable wealth includes a large portion of property wealth — rapid house price appreciation has significantly impacted this.
However, recent data from Statistics NZ shows property ownership rates among younger generations have declined significantly, making inherited wealth potentially more impactful for those who do receive it.
The absence of comprehensive capital gains tax and inheritance tax makes this wealth preservation somewhat easier (assuming all parties involved are making sound financial decisions). New Zealand also has unique cultural dimensions to consider, including Māori concepts of intergenerational wealth (taonga tuku iho).
Myth 2: Concentration
Perhaps the most significant misconception is that this wealth transfer will be broadly distributed. US data tells a sobering story:
New Zealand shows similar concentration patterns, with the top 10% of households holding approximately 59% of all wealth, according to the latest Reserve Bank data.
A critical factor often overlooked is the impact of our economic position relative to other OECD nations. With a lower GDP per capita than most developed peers, Kiwis often need to consume more of their assets during retirement to maintain comparable lifestyles and healthcare standards.
“The reality of New Zealand’s economic position means retirees frequently need to draw down their assets more aggressively than their counterparts in wealthier OECD nations,” says Dr James Wilson, economist at Victoria University of Wellington. “This higher rate of asset consumption directly impacts the amount of wealth available for intergenerational transfer.”
This economic dynamic is particularly evident in healthcare spending. While New Zealand’s public healthcare system provides significant support, private healthcare and retirement village costs still present substantial financial challenges.
“The reality is that many retirees will need to use their assets for their own care,” says Dr Sarah Chen, a retirement planning specialist. “Long-term care costs alone can consume a substantial portion of what might have been inherited wealth.”
Myth 3: Investment Behaviours Once Inherited
Another common assumption is that the Great Wealth Transfer will dramatically reshape investment patterns as younger generations (Gen Z & Millennials) take control — but Grubman’s research says it isn’t likely.
“We often see young investors become more conservative as they acquire family obligations and approach retirement themselves,” Grubman says. “The dramatic shift in investment patterns many predict may not materialise.”
Truly, KiwiSaver data does show younger investors gradually shifting to more conservative funds as they age, despite initial preferences for growth options.
Culture & Wealth Transfer Planning
New Zealand’s bicultural foundation adds another layer to wealth transfer planning. Māori perspectives on collective wealth and intergenerational responsibility offer valuable insights for all New Zealanders considering wealth transfer, such as:
Younger generations need their own plans
Given New Zealand’s lower GDP per capita compared to other OECD nations and the likelihood of higher asset consumption in retirement, younger generations need to be particularly proactive.
Rather than assuming a windfall inheritance, they would be wise to get their ducks in a row sooner than later and develop their own financial planning strategies using independent, trusted financial advice. Fostering open family discussions about wealth transfer can also head off any shocks later down the track.
Consider New Zealand-specific investment vehicles such as KiwiSaver and PIE-enabled funds. These are great options tax-wise, acting essentially as good core investment options that investors can add to bit by bit to take advantage of compound interest over time.
What About the House?
With median house prices significantly high relative to incomes, inherited property wealth can be transformative for recipients. However, this also means a potential impact on family relationships and equity — especially if it’s the beloved family home.
Proper estate planning is crucial to making sure property wealth transfers go as smoothly as possible. Part of this is thinking about property management and transfer strategies, as well as tax implications.
The Role of Independent Financial Advice
Given these complexities, working with an independent financial adviser provides the most stress-free route for both wealth holders and potential inheritors.
In New Zealand, financial advice is strictly regulated under the Financial Services Legislation Amendment Act. Independent advisers need to:
Much Ado, and Much To Do…
While the Great Wealth Transfer represents a significant economic event, the reality is more nuanced than headlines suggest. Take them with a grain of salt.
In Jim’s words to me, “Across the world, advisers to affluent families have been told about this massive wave of wealth that is coming to the next generation. In reality, most of that wealth transfer is at the very top and in highly industrialised countries where wealth normally accumulates. Places like New Zealand remind us to keep our feet on the ground, our values at the forefront, and our attention on family issues. Advisers and families shouldn’t get carried away by all the hype getting passed around”.
The key to securing your future isn’t waiting for inherited wealth, but developing sound financial strategies with professional guidance.
An independent financial adviser can provide the objective perspective needed to navigate these waters successfully, ensuring both generations maintain financial security — regardless of how the Great Wealth Transfer ultimately unfolds on our shores.
Joel Hintz's proudest moment was lifting the Log o' Wood as his side arrived in Napier.