The news: Attitudes toward investing vary markedly across generations, causing delays in the generational wealth transfer that’s about to begin and posing new challenges for financial advisors, according to a Bank of America report.
The Private Bank Study of Wealthy Americans report surveyed 1,052 high-net-worth (HNW) individuals in the US over the age of 21 and with at least $3 million in investable assets. The survey was fielded between May and June 2022.
Between 2020 and 2030, more than $68 trillion in wealth will transfer from boomers to millennials and Gen Z. Here’s how the younger generations will invest, and what financial advisors can do to prepare.
Younger investors want new asset types: After experiencing the Great Financial Crisis and living through the current volatile economic downturn, younger generations are questioning the transparency of big financial institutions and the integrity of traditional finance markets.
Younger investors favor new investment strategies and goals: Younger investors are more likely to support and invest in companies that reflect their beliefs and values. Many prioritize their goals for sustainability, social justice, and other causes they deem important. This influences not only their investing strategies, but their philanthropic styles as well.
Holding on as long as possible? The interest in new asset classes and prioritization of new investment strategies could be causing older generations to hesitate when it comes to passing the baton.
But younger generations may agree with these assessments.
What role should advisors play? Financial advisors have quite a bit of work to do to adjust toward the attitudes of younger investors, and it won’t be easy.
Though younger generations are typically more digitally inclined and more likely to bank online, financial advisors can still provide value to these cohorts. Studies have shown that younger investors value in-person interactions in addition to technological solutions, especially when the experience is unique and provides an opportunity to improve financial literacy.
Advisors should embrace the differences in these younger generations and enhance their knowledge on different asset types and new investment strategies. But they should also demonstrate their value when it comes to traditional financial planning topics. Across all age groups, respondents said they wish their advisors spent more time discussing tax planning (88%), estate planning (81%), and investing in high inflationary and high interest rate environments (80%).
This article originally appeared in Insider Intelligence’s Banking Innovation Briefing—a daily recap of top stories reshaping the banking industry. Subscribe to have more hard-hitting takeaways delivered to your inbox daily.
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