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According to a new report from Bank of America Private Bankyounger, wealthier investors have a very different view on how best to invest than their older peers, preferring real estate, cryptocurrencies, digital assets and private equity to U.S. stocks.
Nearly three-quarters of investors aged between 21 and 43 years they believe that “it is not possible to achieve above-market returns using only traditional investments such as stocks and bonds,” says Michael Pelzar, the private bank’s chief investment officer. «This contrasts with the older generation [dai 44 anni in su] who believes they can achieve above-market returns only with stocks and bonds.”
This shift in attitude is understandable when you consider that younger individuals were trained as investors in a different environment than their older counterparts, Pelzar says.
«They’ve experienced a couple of market crashes, like the financial crisis and the dot-com bubble , and for the first time they saw a much higher correlation between stocks and bonds,” says Pelzar. These experiences appear to have influenced their preference to distribute the risk by further diversifying the asset classes in their portfolios.
The results of the survey
The answers to survey reflect the opinions of just over 1,000 people with at least investable assets 3 million dollars who are not necessarily clients of the bank or its wealth and investment management divisions, one strategy which, according to Pelzar, provides “a better understanding of what is happening more generally and what it means for how Americans are approaching their heritage.”
According to the study, 18% of respondents have assets between 5 and 10 million dollars and 15% have assets greater than $10 million.
The younger generation who responded allocated approximately 19% of their investments to bonds and 28% to stocks compared to the older generation, who also allocated 19% to bonds but as much as 55% to stocks.
Younger investors, on the other hand, allocated 17% of their assets to alternative instruments, such as private equity and the venture capital, and 14% of their assets in cryptocurrencies and digital assets. Older investors allocated just 5% to alternative investments and 1% to cryptocurrencies.
In the coming years, 93% of younger investors surveyed plan to allocate a larger share of their investments to alternativescompared to only 28% of those aged over 44.
The differences between the two groups of investors are even more marked when they are asked “where they expect to have the greatest opportunities to create wealth”.
Investors aged 44 years and older consider the US stocks as the best opportunity (41%), followed by real estate (32%), emerging market stocks (25%) and international stocks (18%). Investors under the age of 43 put the first place real estate sector (31%), followed by cryptocurrencies and digital assets (28%), private equity (26%), and finally your company or personal brand (24%).
The latter refers to trust that younger investors have the opportunity to grow their wealth through private companies or family businesses. “Many of this generation are confident in their ability to add value, to generate capital appreciation through their actions,” says Pelzar.
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No to emerging markets, yes to works of art
Overall, younger investors placed more weight on the ability to create future growth of more investments than older investors, indicating a greater weight to US stocks. Other categories that have obtained at least 20% approval from younger investors include direct investments (22%) and investments in companies with a positive impact (21%).
The fact that younger respondents showed relatively little interest in the titles of emerging markets or international also reflects their past as investors. Over the past decade, U.S. stocks and other asset classes, including real estate and private equity, have outperformed.
«When you look at the growth opportunities for the younger generation, even in the alternative instruments space, there is a greater inclination towards private equity and venture capital, and less towards hedge funds», probably because the latter have underperformed in recent years, Pelzar says.
Younger investors also prefer to own thephysical gold (compared to funds invested in gold mining stocks, for example): 45% already own it today and another 45% say they are interested in owning it.
«The younger generation pays more attention to durable goods as part of their investment and investment strategy wealth management compared to the older generation,” says Pelzar. In addition to gold, they indicate assets such as real estate, artwork And collectibles into broader investment strategies. Many also view gold as a hedge against inflation, which continues to be a concern even though it has declined. “This reveals a profound lack of confidence in traditional assets.”
These sharply divergent views on investing have “real implications for wealth managers and advisors in terms of interacting with different generations,” he says. “It is important to take these different preferences and desires into account.”
What will happen is yet to be seen. It is not clear, for example, how assets such as cryptocurrencies will behave within a portfolio compared to other more traditional ones. THE consultants they will need to be clear about the risks for investors who have a predilection for unconventional assets. “Time will tell how the situation will evolve,” says Pelzar.
The knot of succession
Among other key insights, the study found that half of all wealthy individuals in the United States lack the basic elements of a succession plan.
According to data from Cerulli Associates, a market intelligence firm based in Boston, this could be a problem, given that, according to estimates, between now and 2045 84,000 billion of wealth dollars to heirs and non-profit organizations. Last week, London-based data firm Altrata said that within the next decade, $31 trillion will be passed on globally to those with $5 million or more in investable assets.
“Families are surprisingly underprepared for wealth transfer,” says Pelzar.
It’s easy to see why. Not just there succession planning it’s an emotional topic that’s easy to put off for another day, but there are also the practical aspects of preparing documents.
“When we see problems with families, it tends to be because there has been a lack of communication, a lack of engagement with the next generation,” Pelzar explains. This leads to a situation where parents allocate assets differently between children, often for reasons valid ones that are not explained or understood in advance, potentially causing bad feelings.
“Family conflicts are the last thing you want to pass on to your heirs,” explains Pelzar.
(Translated from the original version by Milano Finanza Editorial Staff)
