As they look to build wealth, high-net-worth Millennials and Gen Zers are moving outside the scope of the traditional stock and bond market. Instead, more are considering alternatives, including investment real estate, private equity, digital assets, and gold.
According to recent findings from Bank of America (BoFA), 72% of investors between the ages of 21 to 43 believe it is no longer possible to see above average investment returns solely by investing in traditional stocks and bonds.
The sentiment is a newer one among investors— to compare, only 28% of those over the age of 44 believe they cannot build wealth with just stocks and bonds. Whereas 74% of savers over 44-years-old participate in these funds, this number is far lower for younger investors, at 47%.
Instead, Millennials and Gen Zers are planning to capitalize on alternatives to grow their wealth. Seventeen percent of these investors are allocating their investments to alternatives, with 93% planning to allot more within the coming years. Close to half (49%) own cryptocurrencies and another 38% express an interest in owning it, while 45% own physical gold as an asset and an additional 45% are interested in possessing gold.
“We’re living through a period of great social, economic and technological change alongside the greatest generational transfer of wealth in history,” said Katy Knox, president of Bank of America Private Bank. “Our study shows that wealthy Americans are focused on diversification, long-term goals and making a lasting impact with their wealth.”
Communication gaps remain
Despite their interest in attaining and growing wealth, Bank of America’s report finds a slight gap in how investors are communicating with their families about wealth and inheritances. One in five reported experiencing a strain over their inheritance, including 54% of younger investors, either due to a lack of instructions or an absence of communication and trust.
Still, 69% of parents of adult children say they have spoken with them about family wealth plans, with these conversations occurring at the average age of 31 for the adult child.
The research was conducted by Bank of America Private Bank in partnership with research firm Escalent. The findings reflect the responses of 1,007 U.S. individuals aged 21 or older, with investable assets over $3 million.
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