High-net-worth individuals think that American stocks provide the best chances for asset growth; however, the 2024 Bank of America Private Bank Study of Wealthy Americans indicates that younger investors share this belief less strongly.
The demand for everything from digital assets and gold to investment real estate and private equity is being driven by Millennials and Gen Z, who are increasingly going outside of the conventional stock and bond markets to grow their wealth.
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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.”
The demand for alternative strategies is being driven by younger investors
Compared to only 28% of investors over 44, 72% of younger investors (those between the ages of 21 and 43) think it is no longer feasible to obtain above-average investment returns by investing exclusively in traditional equities and bonds.
According to the report, among younger high-net-worth individuals:
- 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.
Transferring wealth
Regardless of how important it is to share and sustain family finances, gaps in planning, communication, and supervision have the potential to undermine these well-intended aims.
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By GlobalData- 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 with intent
A sense of duty (52%) and the desire to have a long-lasting beneficial influence (40%) are the main motivators behind giving back, which is a nearly universal characteristic among the wealthy. Generational differences exist in the places they donate and other interests, such collecting art and antiques.
- 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%).
Bank of America Institute predicts a “Great Wealth Transfer” involving $30trn in US wealth transfer to women, influencing financial decision-making, philanthropic giving, and more over the next decade.
