The Great Wealth Transfer: How smaller banks can compete

Smaller financial institutions must invest in digital solutions to impress the Millennials and Gen Z consumers who are set to inherit trillions.

This content was originally featured in a BAI by ProSight article in July 2025.

Starting now and spanning the next few decades, we will witness the largest intergenerational transfer of wealth in history, dubbed the Great Wealth Transfer. This shift is poised to transform the global financial sector, including how wealth is managed, invested and preserved.

According to Cerulli Associates, an estimated $124 trillion in wealth will be transferred to the next generation of inheritors by 2048, with $105 trillion expected to go to heirs and $18 trillion donated to charities. Baby Boomers and older generations will be passing down nearly $100 trillion, which represents 81% of all transfers.

The upcoming wealth transfer brings significant opportunities to engage digitally savvy Millennials and Gen Z consumers with the seamless banking experience they expect. Large financial institutions utilize advanced technologies to attract new customers, while smaller banks and credit unions can face challenges given their resources.

Here, I’ve outlined solutions to tap into the newfound wealth that Millennials and Gen Zers are set to inherit.

Building brand loyalty and trust

Challenge: Larger financial institutions hold sway over Millennials and Gen Z consumers with their strong brand presence, advanced technologies and extensive resources. According to at least one survey, 69% of Millennials and 79% of Gen Zers rely on large banks as their primary financial institution. Only 6% of Millennials and 2% of the Gen Z cohort consider a community bank their primary financial institution, making it harder for smaller financial institutions to secure a foothold.

Solution: Smaller financial institutions can differentiate through personalized banking services and community ties that find customers where they live and do business. Banking advisors are crucial trust builders with their customers. Here are some ways advisors can position themselves as trusted partners to high-net-worth clients:

• Leverage community ties and deliver personalized services: Tailor wealth management offerings, like estate planning, investment strategies and other services, by holding workshops, webinars or personalized consultations to educate clients. This bridges generational knowledge gaps and contributes to smooth wealth transitions.
• Data-driven engagement: Leverage tools like predictive modeling and real-time data analytics to anticipate client needs, offer next-best recommendations and support proactive decision-making.
• Human + AI collaboration: Generative AI has taken the financial sector by storm with solutions like automated analysis and rapid insights. But human advisors remain indispensable as they add context, empathy and clarity, eliminating “noise” and aligning AI recommendations with individual client goals.
• Upskill advisors: Educating advisors in emerging advanced technology tools like generative AI, predictive analytics and client relationship platforms is imperative to meet the expectations of digitally savvy consumers.

Meeting digital-first expectations

Challenge: About 45% of Millennials and Gen Zers do not remember the last time they visited a bank in person. Tech-savvy heirs prefer digital-first banking for its convenience and what they expect to be a seamless experience.

Solution: Smaller financial institutions must invest in a robust digital banking platform and do away with legacy systems urgently. Financial institutions should invest in the following key digital banking features to remain relevant in this fast-paced banking play:

• Mobile banking capabilities: According to one study, nearly 93% of Millennials prefer mobile apps for banking and financial services and expect essential features like transfers, payments, mobile check deposits and wealth management.
• Real-time payments: In the US, most younger consumers (72%) frequently send or receive money through peer-to-peer payment services, compared to 35% of Baby Boomers. Financial institutions must provide options like Zelle, real-time payments, and or FedNow Faster Payments Service to keep Millennial and Gen Z inheritors in their fold.
• Third-party integration: Financial institutions should look for API-based platforms that seamlessly integrate with third-party solutions such as bill payment or merchant services for an optimal user experience.

Cybersecurity and fraud protections

Challenge: Large financial institutions invest heavily in fraud protection, especially cybersecurity, for their customers. Studies say 54% of Millennials and 60% of Gen Zers expect their banks to heavily invest in cybersecurity measures.

Solution: Small banks and credit unions should provide robust fraud protection, including continuous monitoring and real-time alerts, to gain the loyalty of these customers.

• Automation and AI: Financial institutions should automate routine tasks like data processing, document generation, client onboarding, customer service (chatbots), fraud detection and personalized financial advice with the help of AI tools, thereby delivering exceptional customer service.
• Blockchain: Blockchains can streamline payments, compliance checks and asset transfers, improving efficiency and reducing costs. They also offer new investment opportunities and payment methods.
• Enhance cybersecurity tools: Media reports say that the global cybercrime rate is growing at 15% annually and that losses will hit $10.5 trillion this year, up from $3 trillion in 2015. Investing in AI-driven behavioral analytics tools, quantum-safe cryptography, cybersecurity mesh architecture, etc. enables small financial institutions to meet expectations through the Great Wealth Transfer and beyond.

Addressing regulatory challenges & market volatility

Challenge: Economic uncertainty and market volatility can impact the value of transferred assets, and tax and inheritance regulations can be complex to navigate for Millennials and Gen Z inheriting wealth for the first time. Some large financial institutions offer advice on regulatory impositions and trending market volatility to high-net-worth individuals.

Solution: Smaller financial institutions can partner with regulatory consultants or fintech firms to deliver tailored advice on regulatory compliance and tax management. Offering tools to simplify regulatory navigation builds credibility and helps retain high-net-worth clients.

Meet ESG expectations

Challenge: Millennials and Gen Zers generally place a higher value on environmental, social and governance (ESG) principles and expect transparency in their financial dealings. Smaller financial institutions must align with these values to appeal to this demographic, while meeting any shifting legal and regulatory reporting expectations in this area.

Solution: ESG transparency is essential for building trust and loyalty with this new generation of clients. Wealth managers can become trusted partners by closing transparency gaps through innovative technologies, advocating for improved data and aligning their solutions and investments with their impact and values.

The Great Wealth Transfer represents both a challenge and a historic opportunity for smaller banks and credit unions. By addressing these challenges head-on with targeted solutions, smaller financial institutions can excel in this evolving financial landscape.