Bank of America: Younger investors turning to digital assets, alternatives, and sustainability

Bank of America released a report titled “The 2022 Bank of America Private Bank Study of Wealthy Americans” on October 11, 2022; it was based on an online survey of 1,052 people aged 21 and over with household investable assets greater than $3 million, conducted May-June. The research highlighted stark differences between generations in investment, spending, philanthropy, and wealth planning.

The $84 trillion in U.S personal wealth, most likely to shift from baby boomers to Gen X and millennials by 2045, will affect future generations; wealth managers; families The bank said it could have a major impact on philanthropic organizations and financial markets.

President of The Private Bank at Bank of America, Katy Knox, said:

Wealth planning is inherently multi-generational. As we see among our client families, financial behaviors and values take shape early in life and live on in the legacies passed from one generation to the next. These research findings point to a larger role wealth advisors and the financial services industry is playing in helping families transition wealth and meet the needs of the next generation.

Alternative investments, including private equity, commodities, real estate, and other tangible assets, are considered important by 75% of 21- to 42-year-olds who don’t believe bonds and equities can generate above-average returns. While 32% of investors over the age of 43 think the opposite. 

Cerulli Associates’ recent survey reveals that after double-digit losses in the bond and stock markets this year, there has been a surge in advisers turning to alternative investments as planners seek more diversification.

The main reasons for alternative allocations were “reduce exposure to public markets,” “downside risks protection,” and “volatility dampening,” respondents said.

According to Investors over the age of 43, U.S. stocks provide the best opportunities for future growth, while younger investors say the greatest growth opportunities lie elsewhere in the transformative digital asset space. Nearly half (47%) own cryptocurrencies.

As compared to older investors, they devote three times as much of their investment to other strategies (16%) and a half to stocks (25%). Since 2018, the share of sustainable investments has doubled, from 12% to 26% of wealthy people.

Nearly three-quarters (73%) of millennials compared to 21% of older respondents, use sustainable spending, which 72% of all respondents to the survey agree can do well in the country.

The 68% of the parents surveyed said that they discuss the family’s wealth with their children, including how much the next generation will receive.

On average, parents don’t discuss family wealth until their children are at least 27 years old. 58% of respondents had little or no understanding of trust. Among those who lack trust, the new generation is more likely to consider using them in their property plans (91%) than older generations (56%).

The 82% of parents who work as philanthropists believe they and their children have the same philanthropic vision and goals.

However, 41% of older generations believe the next generation’s philanthropic efforts will be just as effective as theirs. While 87% of the younger generation believe that they will be more effective in philanthropic activities than the older generation.

Satisfaction with the wealth advisor also seems good. 97% of respondents are satisfied, and 74% of them have a strong relationship with advisors. Here are three topics that high-net-worth individuals will most likely want to discuss with their advisor today:

• Estate planning (81%)
• Tax planning (88%)
• Optimum utilization of funds between investing in an inflationary environment and rising interest rates (both 80%)

Those who do not discuss the above issues with primary advisors move from philanthropic planning to investing for positive social or environmental impact and estate planning to strategic credit use.

The younger respondents included in this study mainly represent the inheritance of wealth because they became part of the older generation on their wealth-building journey. As the younger Self-made people join the wealthy population.

They tend to bring more diversity both in terms of demographics and in terms of perspective. On joining the wealthy population, the younger self-made people tend to bring more diversity both in terms of demographics and in terms of perspective. Changing attitudes among the younger generation will affect the way families invest, spend, and transfer wealth for decades to come.