An unprecedented wealth transfer is underway. Over the next two decades, an estimated 124,000 billion dollar in assets will shift globally from the baby boomer generation to younger generations.
Baby boomers hold more than 85,000 billion dollar, while millennials and generation Z lag far behind with 18,000 and 6,000 billion dollar respectively. That imbalance is about to change. The question is whether the next generations are ready to manage that wealth wisely.
Inexperienced heirs
Baby boomers grew up in a time when houses were affordable and the stock market rose thirtyfold. That not only made them wealthy, but also gave them substantial experience with investing. Moreover, a large share of the wealthy within this generation consists of entrepreneurs with sufficient financial knowledge.
The generations now stepping up have not enjoyed that luxury. Millennials struggle with student debt and a stalled housing market, while generation Z is growing up with deep distrust toward the economic future. More than half of the “next generations” count on an inheritance for financial security, yet only one in five baby boomers actually expects to leave something behind.
For asset managers, this poses a problem. The classic risk profile conversation works poorly with clients who have never experienced a market crash. Someone who has never seen 30 percent of their wealth evaporate within a few weeks finds it difficult to estimate how they would react. New investors, after all, have nothing against risk as long as it does not cost them money. Standard risk questionnaires place every client into one of several generic profiles, but lack the nuance needed to uncover real behavioral tendencies. The result is a profile that reflects ambition more than actual risk tolerance.
Gamification as the key to self-knowledge
In this context, gamification means using game mechanics to place investors in simulated market situations and observe their reactions. Imagine a virtual portfolio that responds in real time to historical market scenarios: the crash of 2008, the Covid dip of 2020, or a gradually rising market with sudden sector rotations. How does the investor react when their virtual wealth falls by 40 percent in three weeks? Do they sell in panic, buy more, or do nothing?
These kinds of simulations generate a wealth of behavioral data that a traditional questionnaire would never reveal. Fintech companies specializing in behavioral finance already use psychometrically grounded gamification tools that generate a unique risk tolerance profile for each client. They identify implicit behavioral tendencies and predict the impulsive investment decisions someone is likely to make under different market conditions.
World models determine the optimal mix
The real breakthrough occurs when gamification is combined with artificial intelligence, specifically with so-called “world models.” A world model is an AI system that builds an internal model of the world and can simulate scenarios that have not yet occurred. While traditional models recognize patterns in historical data, world models can calculate the consequences of hypothetical events: what happens to a portfolio if the oil price doubles, if Taiwan is blockaded, or if interest rates rise by 300 basis points? Such models run thousands of scenarios for each investor and link them to the behavioral profile that emerges from gamification. In doing so, AI takes into account personality traits, financial literacy, and life stage.
The result is an investment mix that is no longer determined by the closest-fitting generic risk category, but by a dynamically composed allocation based on the individual’s actual preferences. For one heir this may mean a substantial allocation to private equity and infrastructure, because simulations show that this person handles illiquidity well. For another it may mean a greater weight toward government bonds, because the behavioral profile shows that this investor quickly heads for the exit when volatility rises.
Not a game
Gamification can also backfire. Research shows that certain game elements can actually encourage excessive trading and overconfidence. When investment apps link rewards to trading activity rather than to goal-oriented investing, a dynamic emerges that resembles a casino more than responsible wealth management. The European regulator ESMA explicitly warns against so-called digital engagement practices that undermine the interests of investors. The difference lies in the application: gamification as a tool for self-knowledge is valuable, but as a sales tactic it is dangerous.
The great wealth transfer has begun. Each year, an estimated 1,500 to 2,000 billion dollar shifts from the older to the younger generation. The recipients of that wealth need guidance that aligns with their worldview and their digital habits. The combination of gamification and AI-driven world models offers a way to determine the optimal investment mix in a manner that is both scientifically grounded and personally relevant. It is not a replacement for the human advisor, but a powerful tool that ensures the conversation about wealth begins where it should: with self-knowledge.
Han Dieperink is chief investment officer at Auréus Vermogensbeheer. Earlier in his career he was chief investment officer at Rabobank and Schretlen & Co.