Boomers, Millennials and the $1 Trillion Question

Jose Alancherry, Vice President, Retail Client Portfolio Management, TD Asset Management Inc.
 

By any financial measure, we are living through times of increasing disparity in wealth accumulation between various generations. Baby boomers, born between 1946 and 1964, control almost 50% of Canada’s wealth¹. Millennials, despite making up the largest share of the labour force, hold just a small fraction of it (10%) ¹. But this isn’t just a social or political issue. For investors, it has profound implications for everything from consumer trends to housing, taxation, and long-term portfolio construction.

Let’s explore why the gap has widened, what’s at stake, and how Canadian investors, of all generations, can position their portfolios for the generational shift ahead.

The root of the gap: Timing, policy, and asset inflation

Several structural factors worked in favour of the boomer generation, some of which were:

• Real estate appreciation: Boomers bought homes when prices were modest and mortgage rates, though high, were offset by rapid wage growth. Over the decades, those homes became wealth engines.
• Public sector pensions and benefits: Many boomers were able to retire with defined benefit pensions — a luxury far less common today
• Financial bull markets: From the 1980s onward, boomers benefited from one of the longest stock and bond market rallies in history, right as many of them entered the workforce

Meanwhile, millennials came of age during the 2008/09 Global Financial Crisis and entered the workforce in a more precarious economy. They’ve generally faced higher housing costs, lackluster wage growth, and massive student debt loads. Their delayed entry into asset ownership has only compounded the problem.

Why It matters for investors today

Understanding the wealth gap isn’t about litigating how we got here, it’s about identifying how capital flows, consumption patterns, and public policy are likely to evolve in response to generational shifts.

Changing consumer demand - Millennials aren’t just younger, they’re different consumers. Due to a mix of economic circumstances and preferences, they are more likely to rent, delay homeownership, and prioritize experiential spending. This means sectors like Technology and digital service, affordable housing, experiential services (e.g., travel, wellness), among others may remain in favour. At the same time, as millennials mature, evolve, and gain/inherit more wealth, their spending and investment patterns could begin to normalize and mirror that of previous generations.

Rising fiscal demands for ageing society - As boomers retire and draw on public health care and pensions, governments may feel the pressure to raise revenues. This creates new risks and opportunities for portfolio planning, especially for high-net-worth investors and tax optimization strategies.

How to invest through the Wealth Transfer

Here are some strategies Canadian investors can consider to help navigate this:

1. Balance between defensive and growth assets - Boomers may prefer defensive stocks and relatively safer assets like Guaranteed investment Certificates (GICs) and bonds, while millennials, being younger, have tended to prefer growth equities and alternative assets (an example being cryptocurrencies). A balanced approach, combining income with innovation, may be the most resilient strategy, especially as intergenerational wealth transfers begin.
2. Plan for policy risk - The wealth divide may also be playing its part in shaping politics. Policies enacted are often a response to public sentiments. For investors, this introduces an additional layer of policy risk that must be considered.
3. Invest in the economy of tomorrow - Consider gaining exposure to areas that align with spending patterns of millennials and future generations. Some examples of these wants and needs include:
   • Housing - As a result of delayed wealth creation, millennials have been relatively late to household formation compared to former generations. However, the demand is real and as the first wave of millennials enter the housing market, expect this trend to accelerate.
   • Alternative real assets - Interest in tangible, inflation-hedging assets. Real assets of every range, from farmland and timberland to Infrastructure REITs are in vogue once again as inflation is something consumers are now keenly aware of.
   • Thematic investing - Drawn to future-focused, narrative-driven opportunities. Clean energy, biotech, artificial intelligence (AI) and space exploration are some examples of themes that have been topical in recent years.
   • Digital assets - Trust in decentralized systems and digital economies. Cryptocurrencies, blockchain, decentralized finance (DeFi), once buzzwords have now become mainstream and are more widely accepted by younger generations.

Final thought: A bridge, not a wall

Over the next 20 years, Canada is set to experience the largest intergenerational wealth transfer in history. As boomers pass on their wealth, over $1 trillion will move into the hands of millennials and Gen Z².

How this capital is invested, or spent, will reshape markets. It could fund the next tech boom, inflate new asset classes, or reprice legacy industries. Investors who can anticipate this shift will be better positioned than those who cling to outdated assumptions.

Rather than viewing the generational wealth transfer as a challenge, it can potentially be a roadmap for what’s next. By understanding the values, behaviours, and constraints of both generations, investors can make smarter, more comprehensive portfolio decisions. Because in the end, whether you’re 28 or 68, the market rewards those who look forward.

¹ Source: Statistics Canada, The Daily: Survey of Financial Security, 2023.

² Investor Economics ISS market Intelligence, 2024.

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