Let’s talk about some trends. More money is being bequeathed to more people than ever before; and there are more wealthy people than ever before. Estimates of the dollar value of the Great Generational Wealth Transfer vary from $70 trillion to upwards of $120 trillion over the next 25-30 years. Everybody is angling to catch a bit of that money in motion as millennials and Gen Xers collect inheritances from baby boomers.

The younger cohorts have different expectations when it comes to financial planning and investing than their elders, starting with a more active, data-driven approach. Experian found that 62% of millennials and 67% of Gen Z use generative AI to help with personal financial needs.ⁱ Digital natives value personalization, digitization, and transparency in pretty much everything from brand advertising and marketing to investing and retirement planning.

Let’s take a look at the numerous trends and lucrative opportunities they present for institutional asset managers, family offices, and individual retail investors.

Wealth concentration and the power of HNW investors

While the generational monikers like Gen X are artificially determined, the dollars involved are very real. However, most US wealth is concentrated among 1.5% of the population. HNW and ultra-high-net-worth (UHNW) are set to account for an astonishing 42% of the total wealth transfer, about $36 trillion.ⁱⁱ HNW investors are even more interested in highly personalized investment solutions than Gen Z and Millennials at large.

Fund managers have taken notice of the upside of reaching the retail investor across several asset classes, most notably private credit, real assets, actively managed ETFs, and thematic. Further, HNW investors are ~50% more likely to be currently investing in alternative assets than mass market investors.ⁱⁱⁱ When you’re talking about targeting the wealthy retail segment, separately managed accounts (SMA) become a key instrument in accessing these classes, while offering them the desired flexibility, customization, and tax benefits. HNW investors are increasingly using SMAs as part of a holistic planning strategy to minimize tax liabilities across their estate prior to and after transfer.

The upside of SMAs as a growth opportunity for IAMs

SMAs have the look and feel of passive investment vehicles like ETFs but are more flexible and directly indexed. Cerulli reported that as of the end of 2024, direct indexing strategies account for 37% of manager-traded assets reported by SMA asset managers, more than doubling since 2020.ⁱⁱⁱ Additionally, Morgan Stanley and BlackRock have acquired firms such as Parametric and Aperio to bolster SMA capabilities for institutional portfolios, and in April, TIAA's investment manager, Nuveen, launched its branded High Income Municipal Separately Managed Account. UHNW investors and some corporations have been moving to use SMAs for greater customizability of strategies and tax planning, since they offer direct ownership instead of being part of pooled vehicles. SMA adoption has a sizeable upside since many investment advisors have not yet jumped into the SMA field of play.

HNWIs and younger generations prefer active investing

HNW individuals who are organizing their estates for future generations see the benefits of SMAs through offsetting tax liabilities, especially given the changing global tax and regulatory regimes. They can execute tax harvesting in their SMAs, recording a loss in an investment that has taken a hit. This offers the potential to outperform the index on an after-tax basis. The ability for investors to personalize their portfolios/strategies across a wide range of asset classes and the flexibility to rebalance portfolios as needed is important because wealthy retail investors and family offices take a more active investing approach.

Close to half of all advisors in a global survey are reallocating portions of their portfolios to active strategies in areas where they have high conviction.^iv Moreover, today’s changing perspectives and geopolitical landscape are motivating larger investors to allocate differently based on personal socially responsible investment and ESG criteria. HNW and UHNW individuals are more likely to pursue sustainable investments along ESG guardrails, especially the socially conscious younger cohorts that inherit into the HNW class.

The future of investing is tactical and personalized

For wealth managers and IAM, the administration of SMAs can be burdensome, particularly when accounting for and calculating tax liabilities. Higher operational overhead can come with SMAs if firms operate without a certain level of automation, at least in the calculation. IAMs can win the hearts and wallets of institutional investors and family offices by providing advanced automation in SMA management and reporting.

Large investors will often make numerous status inquiries into current returns, capital balances, and commitments. They will want to obtain analyses of performance over time, version over version, realized over unrealized—and their portfolio will not likely be limited to SMAs. All modes of reporting – tax, regulatory, performance – require accurate allocations of data at various levels, like individual accounts, account clusters, strategies, etc. Today it’s common for UHNW individuals and family offices to have estate planning strategies spanning multiple geographies and regulatory jurisdictions which benefit from investment accounts tailored to their specific needs. IAMs’ ability to deliver precise analyses in real-time to investors with asset classes of differing durations, risk profiles, and benchmarks will be in position to take advantage of the great generational wealth transfer through SMAs.

Seizing the opportunity: trends that drive growth

With the right operational infrastructure, it is reasonably straightforward for IAMs to offer SMA products and keep their investors happy. Portfolio automation can broaden investor access by making SMAs scalable for clients with $100K or more, not just high-net-worth individuals, thanks to advancements in technology. The $84 trillion dollar opportunity presents itself in various forms. In fact, 70% of millennials now manage their wealth digitally, and “70% of Millennials and Gen Z are likely to change advisors after inheriting wealth, choosing modern, tech-enabled financial services.”^vi They are starting to invest at a younger age and have a strong interest in discussing new investment opportunities (millennials: 56%).^vii In general, and even more so in the UHNW space, investors are demanding increased personalization and access to a broader range of products in response to a more complex and more globalized estate.

This assortment of trends points to future growth in SMAs, but as Cerulli notes, “a significant runway for adoption remains.”

5 Key Takeaways:

Q1: What is the Great Generational Wealth Transfer?

A: It's an unprecedented $84 trillion shift in wealth, primarily from baby boomers to Gen X and millennials, occurring over the next 25–30 years.

Q2: Why are SMAs gaining popularity among HNW investors?

A: They offer flexible, tax-efficient, and highly personalized strategies, ideal for estate planning and active investment management.

Q3: How are younger investors influencing the financial landscape?

A: Millennials and Gen Z favor digital tools, ESG-aligned investing, and personalized services—prompting changes in how wealth is managed.

Q4: What’s the role of institutional asset managers in this transition?

A: They must streamline SMA operations with automation and real-time reporting to meet the complex needs of global, wealthy investors.

Q5: What investment trends should advisors focus on?

A: Private credit, real assets, direct indexing, and thematic ETFs—all delivered via scalable, tech-enabled platforms to meet rising demand.

Arcesium related sources:

1. Retailization of Private Markets whitepaper, https://www.arcesium.com/resources/retailization-private-markets

2. How Reporting Can Be Your Edge with Retail Investors.

3. How Investment Managers Are Rewriting the Playbook for Growth

ⁱ CNBC, November 4, 2024. https://www.cnbc.com/2024/11/04/how-to-use-artificial-intelligence-for-personal-finance.html

ⁱⁱ The Great Wealth Transfer: A new era in wealth management, https://fisv.com/perspectives/the-great-wealth-transfer-a-new-era-in-wealth-management

ⁱⁱⁱ World Economic Forum, 2024 Global Retail Investor Outlook, March 26, 2025.

https://www.weforum.org/publications/global-retail-investor-outlook-2025/key-insights-global-retail-investor-outlook-2025/

^iv Cerulli, Direct Indexing Assets Close Year-End 2024 at $864.3 Billion, April 10, 2025. https://www.cerulli.com/press-releases/direct-indexing-assets-close-year-end-2024-at-864.3-billion

^v ETF & Vanguard, 2024 ETF Report: Global Investor

Survey, https://www.etf.com/sites/default/files/2024-11/etf.com_ETFReport_GlobalInvestorSurvey%202024.pdf

^vi The Great Wealth Transfer: A new era in wealth management, https://fisv.com/perspectives/the-great-wealth-transfer-a-new-era-in-wealth-management

^vii Investment News, Technology, personalization in focus for advisors amid wealth transfer risks, February 4, 2025. https://www.investmentnews.com/fintech/technology-personalization-in-focus-for-advisors-amid-wealth-transfer-risks/259182

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