How Millennials and Gen Z Can Reshape US Investing
A guest-authored piece by Kyla Scanlon looks at how Millennials and Gen Zers are going to invest with money inherited via the wealth transfer and the new players we might see in the market because of it.
We are about to undergo one of the most significant economic events in modern history: the Great Wealth Transfer. In the U.S., the Baby Boomer and Silent Generation are expected to leave over $80tn behind (with 15 percent going to charity and the rest going to heirs). This is a lot of money, with 63 percent of the transfers coming from the Baby Boomers. And $16tn is expected to be transferred within the next decade, according to the New York Times.
This isn’t just a transfer of wealth; it’s a transfer of economic power and influence. As (a select few) Millennials and Gen Z stand to inherit, they bring with them new perspectives, values and approaches to investing that are set to reshape the financial landscape – and the financial industry.
The younger generations are markedly different from the Boomers and Silents they are inheriting the money from. Number one, they think differently about portfolio allocation: A 2022 Bank of America study found that 75 percent of Millennials and Gen Z investors believe it’s impossible to achieve above-average returns solely through traditional stocks and bonds.
They like alternative investments. Three, to be specific.
- Private Equity: The private equity sector has experienced explosive growth, expanding from $4.5tn in assets under management in 2015 to $9.8tn in 2022 – a 118 percent increase according to Bain & Company’s 2023 Global Private Equity Report. This is a sign of increased risk appetite among younger investors.
- Angel Investing: The idea of directly supporting innovative startups has led to a 20 percent increase in angel investing, from $24.8bn in 2015 to $29.8bn in 2022. This trend not only offers potential financial returns but also aligns with the desire of many young investors to have a direct impact on the business landscape, according to the Center for Venture Research.
- Entrepreneurship: The focus on creating and investing in their own companies and brands is evident in the 54 percent jump in new business applications in the U.S., from 3.5 million in 2019 to 5.4 million in 2021. Again, it’s control over their financial destinies and the ability to align their work with their passions.
They are also focused on sustainable and impact investing: 73 percent of investors aged 21-42 have exposure to sustainable assets. This isn’t just a passing trend; it’s a fundamental realignment of investment priorities that reflects deeper concerns about climate change, social justice and corporate responsibility.
They want to invest in digital too. Twenty-eight percent of high net worth individuals aged 21-43 years old saw crypto as the second greatest opportunity for growth – just behind real estate – according to the 2024 Bank of America Private Bank Study of Wealthy Americans.
Some are running away from the inheritances entirely. Marlene Engelhorn, profiled by the New Yorker, is a case study of this, putting together a council of 50 members to determine how her inheritance should be distributed.
“Despite the push towards new investment frontiers, real estate remains a favorite among young investors. Many view it as a superior investment, a relic of the American Dream that once was.”
Overall, the changing investment landscape has given rise to new players and platforms designed to cater to the preferences of Millennial and Gen Z investors:
- Fintech companies have captured the hearts of younger investors, offering user-friendly interfaces, lower barriers to entry and gamified features (swipe up to get confetti!). Robo-advisors, in particular, have seen explosive growth, managing $1.5tn in assets as of 2023, with projections suggesting this could reach $2.8tn by 2025.
- AI-driven investing platforms will be next. These technologies promise to offer personalized investment strategies, real-time market analysis and automated portfolio management tailored to individual risk profiles and goals – and people want these digital offerings. Almost three-quarters of affluent Millennials would switch wealth managers if they could have a better digital experience.
The Great Wealth Transfer isn’t just about money changing hands; it’s about a fundamental shift in how we think about and engage with investments. There will be a continued focus on private markets as well as ESG and sustainable investing, with more money allocated abroad. We can expect more market volatility as the investment landscape shifts.
There will be many new players, as the next generation steps up. More technological integration. More digital offerings and experiences. It will be the greatest wealth transfer of our time – and it also might be the greatest economic shift of our time, too.
The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of EQT AB Group.
Kyla Scanlon is an American financial content creator, educator, and bestselling author. Her first book, In This Economy?: How Money and Markets Really Work, was published in May 2024 by Penguin Random House.
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