Millennials and Gen Z Stand to Become the Richest Generations in History—Yet Banks and Financial Institutions Are Failing to Innovate

By Ben Malena

February 2025

A historic financial shift is underway. Over the next two decades, Baby Boomers will transfer an estimated $90 trillion to their Gen X, Millennial, and Gen Z heirs, making these generations the wealthiest in history. But as this transformation unfolds, traditional banks and financial institutions (FIs) remain largely unprepared to meet the evolving demands of these new wealth holders.

The Largest Wealth Transfer in History

According to a report by Cerulli Associates, Baby Boomers—who currently control the majority of U.S. wealth—are expected to pass down an unprecedented $90 trillion to their Gen X, Millennial, and Gen Z children. Millennials and Gen Z, in particular, stand to benefit the most, as these demographics reach their peak earning years and inherit vast sums from aging parents.

Yet, despite this windfall, a 2023 study by J.D. Power found that Millennials and Gen Z remain largely dissatisfied with traditional banking and investment services. "These generations have grown up with digital-first experiences, and they expect seamless, intuitive financial solutions," says Jeff Fromm, author of Marketing to Millennials. "Banks that fail to adapt risk becoming irrelevant."

Why Traditional Banks and FIs Are Falling Behind

Despite recognizing this shift, many banks and FIs are slow to adopt the digital, hyper-personalized experiences Millennials and Gen Z demand. While fintechs and embedded finance solutions are rapidly innovating, legacy institutions continue to rely on outdated models that focus on in-person service, paper-based transactions, and rigid investment strategies.

A report by Deloitte highlights the disconnect: "Traditional banks continue to focus on legacy infrastructure, while Millennials and Gen Z prefer seamless, mobile-first platforms that integrate investment, banking, and payments into a single ecosystem. The financial institutions that fail to modernize will struggle to retain these new wealth holders."

Key Pain Points for Millennials and Gen Z in Banking and Investing:

• Lack of Personalization: These generations expect AI-driven, customized financial insights, but many banks still push one-size-fits-all solutions.
• Slow Digital Transformation: While fintechs provide instant transactions and frictionless investing, many banks remain tied to lengthy approval processes.
• Failure to Address Ethical and Impact Investing: A Morgan Stanley study found that 85% of Millennials and Gen Z are interested in sustainable investing, yet few traditional banks prioritize ESG (Environmental, Social, Governance) offerings.

Fintechs, Wealth Tech, and Embedded Finance Are Disrupting the Space

While banks lag behind, fintech companies, wealth tech firms, and embedded invest-tech solutions are capitalizing on the shift. Firms like Wealthfront, Robinhood, and embedded investment solutions within digital wallets are reshaping how Millennials and Gen Z engage with their finances. These platforms offer:

• Automated investing with AI-driven recommendations
• Seamless integration of banking and investing
• Low-fee, high-transparency financial services
• Strong ESG and values-based investing options

Wealth tech, in particular, is revolutionizing financial management for younger generations. By leveraging AI, big data, and automation, wealth tech platforms provide:

• Hyper-personalized investment strategies
• Robo-advisors that simplify wealth building
• Real-time financial insights and risk assessments

Embedded finance solutions—integrating investment and wealth-building tools directly into digital ecosystems—are becoming the new frontier. "Millennials and Gen Z expect their financial tools to be as seamless as their social media apps," says Angela Strange, partner at Andreessen Horowitz. "They don’t want to go to a separate institution to invest—they want investments built into their daily financial interactions."

What Banks and FIs Must Do to Stay Relevant

To avoid losing an entire generation of affluent customers, banks and financial institutions must rethink their approach. Here’s how:

1. Prioritize Digital-First Strategies: Develop seamless mobile and web-based investment solutions that integrate with existing banking services.
2. Offer AI-Driven Personalization: Use machine learning to provide tailored investment strategies and financial planning.
3. Embrace Embedded Finance and Wealth Tech: Partner with fintechs to integrate investing solutions directly into banking apps.
4. Enhance ESG and Impact Investing Options: Build robust, transparent sustainable investment portfolios.
5. Improve Financial Education Tools: Millennials and Gen Z value self-directed learning—offering interactive content on wealth building can strengthen customer loyalty.

The Future Belongs to the Innovators

Millennials and Gen Z are not just inheriting wealth; they are redefining how wealth is managed. Traditional banks that fail to innovate will be left behind, while fintech disruptors, wealth tech solutions, and embedded investment platforms will take center stage.

The question is not if financial institutions need to adapt—it’s how fast they can do it before Millennials and Gen Z take their trillions elsewhere.

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