Generational Divide in Investing, Wealth Management Strategies Revealed in New Research Study

High-net-worth individuals believe U.S. stocks offer the best opportunities for growing assets, but that conviction is less held by younger investors finds the 2024 Bank of America (NYSE: BAC) Private Bank Study of Wealthy Americans.

Millennials and Gen Z are increasingly looking “beyond the traditional stock and bond markets to build their wealth and are driving demand for everything from investment real estate and private equity to digital assets and gold.”

Katy Knox, president of Bank of America Private Bank, said:

“We’re living through a period of great social, economic and technological change alongside the greatest generational transfer of wealth in history. Our study shows that wealthy Americans are focused on diversification, long-term goals and making a lasting impact with their wealth.”

Seventy-two percent of younger investors (ages 21-43) believe it is “no longer possible to achieve above average investment returns by investing solely in traditional stocks and bonds, compared to only 28% of investors over the age of 44 that hold the same view.”

The study found that among younger high-net-worth investors:

  • 47% of their portfolios are in stocks and bonds, far lower than investors over the age of 44 (74%).
  • 17% of their investment portfolios are allocated to alternatives, compared to 5% allocated by older investors. Most (93%) say they plan to allocate more to alternatives in the next few years.
  • Nearly half (49%) own cryptocurrencies and another 38% are interested in owning it.
  • They rank cryptocurrency among the top opportunity areas for growth, second only to real estate investments.
  • 45% own physical gold as an asset and another 45% are interested in owning it. Overall,
  • 41% of the wealthy own (18%) or are interested in buying (23%) physical gold.

Passing on Wealth: Gaps in planning for generational transfer of wealth

Despite the importance placed on sharing and sustaining family money, “gaps in planning, communication and guidance could derail these well-intended goals.”

One in five respondents report having “experienced strain over an inheritance, including 54% of younger respondents.”

Half (52%) of wealthy Americans do “not have the three basic elements of an estate plan, consisting of a will, advanced healthcare directive and durable power of attorney.”

Nearly half (48%) of respondents have not considered hard assets, “including real estate, art and collectibles and other tangible assets, in their estate plans.”

56% of respondents have established a trust; however, only 27% say “they understand trusts and their benefits very well.”

69% of parents of adult children have talked “with their children about family wealth plans.”

They start those conversations only after their children “have reached the age of 31, on average.”

Giving back is a near-universal trait among the wealthy, inspired mostly “by a sense of responsibility (52%) and a desire to make a lasting positive impact (40%).”

However, where they give and other passions, such “as owning art and collectibles, varies greatly by generation.”

91% of the wealthy are “ardent supporters of philanthropy.”

Younger donors are nearly two times “more likely to support homelessness (41%), social justice (33%) and the environment/climate change (32%) compared to older donors (21%, 18% and 17%, respectively).”

40% of the wealthy overall either own or are “interested in an art collection, including 83% of millennials and Gen Z.”

65% of study respondents, including 94% of those “under the age of 44, are interested in collectibles.”

Millennials and Gen Z are at least two times “more likely than older generations to be collectors of watches (46%), wine or spirits (36%), rare or classic cars (32%), sneakers (30%) and antiques (30%).”

In addition to influencing the next generation, the “Great Wealth Transfer” will also contribute to women controlling more wealth than ever before, according to Bank of America Institute.

Over the next decade, $30 trillion in U.S. wealth is expected to be “transferred to women influencing financial decision-making, philanthropic giving and more.”

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