There are tensions - and healthy differences - in how HNW generations invest, treat philanthropy and view careers, a study of US families shows.

Baby Boomer and older investors invest more aggressively than Millennials do, holding higher proportions of portfolios in stocks, a survey that reveals perhaps surprising contrasts between generations shows.

The survey, conducted by US Trust - part of Bank of America - finds that generational diversity causes both innovation and some tension among families and businesses. Millennials are challenging traditional ways of thinking about managing money, philanthropy and career goals, the US Trust Insights On Wealth And Worth survey, published today, showed.

The organization polled 808 high net worth households in the US, defined as each having at least $3 million in investable assets. 

In terms of investing, the study found that Baby Boomers and older investors are relying primarily on stocks, bonds and cash with aggressive equity allocations of 60 per cent, on average, that conflict with their lower risk tolerance and importance placed on asset preservation. By comparison, millennials have only 41 per cent of their portfolios allocated to stocks and bonds, but they have large cash positions (47 per cent of their portfolios on average) reserved primarily for opportunistic acquisitions, the survey said. 

“Traditional investments are giving way to alternative, opportunistic and personalized strategies by a new generation of investors looking for growth, income and positive impact,” the report said. 

Some 39 per cent of millennials own private equity investments and tangible assets (37 per cent), which include residential investment property (63 per cent), farmland (24 per cent), timber (23 per cent), and oil and gas properties (36 per cent). Millennials also are driving growth and interest in impact investments, with 88 per cent saying a company’s impact on the society and environment is an important basis of their investment decisions. 

Family values
Almost two-thirds of respondents to the survey said it is “important” to leave a financial inheritance to their heirs but fewer than half of them (42 per cent) are confident that their children will be good stewards of family wealth. Even fewer adult children (37 per cent) are confident in their parents’ ability to manage family money wisely, suggesting considerable potential for conflict.

Among other findings, some 55 per cent overall, and 78 per cent of Millennials in particular, attribute some share of their wealth from inheritance. Even so, lengthening lifespan is a cause of problems, creating challenges that families aren’t all prepared for. Some 70 per cent of respondents, for example, said they aren’t prepared for unexpected health issues; 67 per cent aren’t prepared for long-term care costs for aging parents, and 64 per cent aren’t prepared for the time and resources to look after aging parents.

Philanthropy
HNW families in the US are overwhelmingly generous with time and money; some 74 per cent contribute financially to philanthropy; 69 per cent volunteer time and talent to non-profits. The data reveals some generational differences, however. Some 61 per cent say they support similar issues and organizations as their families, but nearly half show their support in different ways.

About one in three Baby Boomers and older parents think their children don’t share the same commitment to giving as their generations do. On the other hand, seven in 10 Millennials don’t think their parents are as committed to philanthropy.

Millennials are three times more likely than Baby Boomers and the Silent Generation to view the jobs and solutions they think they create through business ownership and social enterprise as their way of giving back. 

Career and work
Some 89 per cent of respondents said diverse generational perspectives improve results at work but almost half of working men and women think they are competing for the same job with an older or younger generation. Some 52 per cent of Millennials think they cannot advance careers because of older colleagues working later in life. 

The survey is yet another exploration of how generational differences create opportunities for wealth managers to think about how they segment clients and respond to their needs. As seen in the recent UK election, the younger generation's attitude towards economics and politics can have dramatic effects. To view a recent article on why wealth managers need to keep on top of such concerns, see here.