How Wealthy Millennials Are Changing Investing, Giving and Work

Millennials are challenging traditional approaches to investing, philanthropy and pursuit of life and career goals, according to the newly released U.S. Trust Insights on Wealth and Worth survey.

At the same time, family traditions and financial support are the foundations of success and multigenerational family wealth planning, the survey found.

Phoenix Marketing International conducted a nationwide survey in January and February of 808 high-net-worth and ultra-high-net-worth adults with at least $3 million in investable assets, not including the value of their primary residence. In addition, 40 survey participants agreed to anonymously share their personal perspectives and experience in conversations with researchers.

Generational diversity is a source of both tension and innovation in families and businesses, according to the survey.

With regard to investing, baby boomers and older investors rely mainly on stocks, bonds and cash with aggressive equity allocations of 60%, on average, that conflict with their lower risk tolerance and the importance they place on asset preservation.

For their part, millennials allocate only 41% of their portfolios to stocks and bonds, but have 47% of their portfolios, on average, in cash positions primarily for opportunistic acquisitions.

“As many as five different generations are now active in the workforce and contributing to family dynamics and financial decision-making,” Keith Banks, president of U.S. Trust, Bank of America Wealth Management, said in a statement.

“Perspective and participation of multiple generations are highly valued, but are also complex and require advanced planning and communication.”

The study found a considerable multigenerational financial interdependence but also emerging conflicts and distinctly different approaches in several areas.

Investing

The survey found that traditional investments were making way for alternative, opportunistic and personalized strategies by younger investors looking for growth, income and positive impact.

Nearly half of high-net-worth investors owned or were interested in private equity investments, and about a third also owned or were interested in venture capital and hedge funds, with the youngest and wealthiest investors more likely to invest in more sophisticated, nontraditional assets.

Four in 10 investors currently owned, and another 27% said they were interested in, tangible assets, particularly residential investment real estate and commercial property.

Nearly half of tangible asset owners said they used them for diversification of their investment holdings. Forty-five percent overall and 56% of millennials said they used them to generate income.

Millennials were also much more likely to have inherited tangible property and to want to create or pass on a family legacy to the next generation.

Taking into consideration long-term political, environmental and demographic trends and investment opportunity, high-net-worth investors in the survey thought technology, infrastructure and healthcare investments offered the best potential for investment returns.

Family

Although some two-thirds of respondents said it was important to leave a financial inheritance to the next generation, only 42% of parents were very confident their children would serve as good stewards of family wealth. And just 37% of adult children were very confident in their parents’ capacity to use family money responsibly.

Fifty-five percent of all survey participants, and 78% of millennials, attributed some portion of their wealth to receipt of a family inheritance.

Despite this interdependence and connection, the survey found that increased longevity was throwing up new challenges that families were financially unprepared to deal with.

Seventy percent of respondents said they would be caught out by unexpected health issues in the family, 67% by long-term care expenses for aging parents, 64% by time and resources to provide care and attention for aging parents and 63% by financial support needed by aging parents.

Philanthropy, Impact Investing