There is a generational divide among wealthy Americans when it comes to investing. According to a survey published today by Bank of America Private Bank of over 1,000 high-net-worth individuals, 72% of younger generations (millennials and Gen Z) believe it's no longer possible to achieve above average returns by investing solely in traditional stocks and bonds, which is more than double the number of older investors (Gen X, baby boomers, and the Silent Generation) who share that sentiment.
The survey found that Gen Z and millennials are exploring opportunities away from traditional markets, with about one-third of their portfolios dedicated to alternative investments and cryptocurrencies; the older generations said they're putting just 6% into these categories. It's then perhaps unsurprising that on average, three-quarters of portfolio allocations among the 44-and-over crowd are in stocks and bonds, with this number dropping to 47% for the younger group.
“While the majority of high-net-worth individuals are optimistic about stock market growth, millennials and Gen Z investors are looking beyond traditional stocks and bonds," Jeff Busconi, head of wealth management strategy at Bank of America Private Bank, said in a video accompanying the report.
Zooming in further, the younger generations surveyed are allocating 14% of their portfolios specifically to crypto, while around half of this demographic owns at least some crypto. By contrast, the older groups have allocated just 1% of their portfolios to crypto. Moreover, when it comes to the greatest opportunities for growth, 28% of the younger group ranked crypto and digital assets second—behind only real estate—compared with just 4% of the older generations, which ranked those assets 11th, tied with private debt.
The younger investors also reported that they're allocating three times as much of their portfolios to alternative investments (17%) compared with those of respondents 44 and up (5%). Unlike stocks and bonds, alternative investments include hedge funds, private equity, and real estate, and “often employ more sophisticated strategies, such as hedging, leverage, and investment concentration,” according to Bank of America. The vast majority of younger generations said they plan to allocate more of their portfolio to these alternative investments in the future, and the survey also found social media to be the primary source of financial content for about half of Gen Z and millennials, compared with just 6% of the older generations.
"These generational differences amid the great wealth transfer, already in motion, makes preparing and planning all that more critical,” Busconi added.
The Great Wealth Transfer refers to an intergenerational transfer of assets underway in the U.S., as Gen X, baby boomers, and the Silent Generation (77 and up) pass along their significant holdings over the next two decades. This transfer could be worth as much as $84 trillion, with $72 trillion of that going to heirs and the rest to charities, according to the consulting firm Cerulli Associates.
