The study from the US private bank delved into the details of how different HNW age groups think about financial markets, sources of return, where they obtain financial data, and more.

A Bank of America Private Bank survey of more than 1,000 high net worth adults founds that all age cohorts give high marks to their personal financial security. But views diverge sharply on the economic outlook, with younger people far more upbeat than those aged 44 and above.

Younger people (21 to 43), defined here as Gen Z and Millennials, are twice as optimistic as older wealthy people about the US economy. The divide is even sharper about the global economy; nearly half of younger people say the global economy is very strong, compared with just 6 per cent of Gen X and older.

Younger people are also much more optimistic in their views of the US political environment, with many more saying that the US is “on the right track.”

Gaps between the views of different cohorts are important because about $84 trillion is expected to pass from seniors and Baby Boomers to Gen X, Millennials and their heirs through 2045.

The transfer to Gen X in particular is well underway, though annual transfers to Millennials are expected to surpass Gen X by 2040, the bank said in its 39-page report. (The study drew responses from 1,007 people who had at least $3 million in investible assets and were at least 21 years of age. The data was taken between January and February of 2024.)

One of the most eye-catching finds was that among younger people, six investment areas ranked above traditional areas such as fixed income and domestic equities as being those with greater opportunities for growth: Real estate; crypto/digital assets; private equity; personal company/brand; direct investment into companies; and those focused on “positive impact.” On the other hand, among those aged 44 and above, the top choice as a growth market was domestic equities, followed by real estate and emerging market stocks. Crypto/digital assets did not even feature.

“If these investment preferences actually are a marker of cautious mindsets, the past could be to blame, with two market crashes shaping a key decade of development for younger people. It’s easy to see how a two-and-a-half-year bear market (2000-2002) and a 50 per cent-plus loss in stock prices (2008-2009) could instill skepticism about the stock market in a generation of wealthy Americans,” authors of the report said. 

“There’s also the significant shift of information sharing and authority-sourcing underway in the age of social media. Half of younger people prefer to get their financial content from social media, which could be promoting untested advice as easily as it sources researched and verified guidance,” the report said. 

Stocks, rates and cash
The subject about which wealthy people show the most consensus – and optimism – is about the S&P 500’s outlook. A majority say they expect stocks to rise.

The study found that most (58 per cent) of those it surveyed have financially adjusted to higher rates, with 91 per cent of younger people doing so. “Younger people are generally more reliant on debt than older people, particularly with housing and education loans. Half of younger investors made changes to their investment approach as higher yields changed the opportunity set, while only 37 per cent of older investors did so.”

The study found that younger respondents also adjusted more around cash, increasing cash in hand as rate rises made other liquidity options more costly.

In terms of investment trends more broadly, younger people are more skeptical of traditional investments such as listed equities and bonds. Asked if they agreed with the statement “it is no longer possible to achieve above-average investment returns by investing solely in traditional stocks and bonds,” 72 per cent of younger people agreed. Some 28 per cent of those in the older group agreed.

Tech love
When it comes to technology, younger wealthy people show “more understanding and embrace” of technology changes, including the latest advancements in artificial intelligence, the report said.

Nine in 10 younger people say they are familiar with AI developments, compared with just half of the Gen X, Baby Boomer and senior population. Younger people have more confidence in the potential of AI to improve investment returns, and they are far more likely to say that AI impacts the way they invest or manage their wealth.

Transfer strains
Outside of investment, the report also examined wealth transfer. It found that 38 per cent of respondents said the lack of instructions causes strain.

Other matters of estate governance – communication and trust – also factor in for many families. Across all age groups, “interpersonal family dynamics” were given as the top source of strife, with 65 per cent of those aged 44+ giving this as a reason, and 41 per cent of younger respondents doing so. Across all groups, 38 per cent said “unequal distribution of assets” was a cause of strife; 25 per cent cited “lack of clear instructions and documentation.”

The survey noted that less than half (48 per cent) of wealthy US citizens have the basics of an estate plan in place.