Over $60 trillion will pass into the hands of millennials and Generation Z before 2048, according to Cerulli Associates. Young people are betting on cryptos, ETFs, and alternative assets, clashing with the conservative profile of their parents.
The largest intergenerational wealth transfer in history is underway. According to the consultancy Cerulli Associates, over $60 trillion in the United States alone will change hands to millennials and Generation Z before 2048. This massive flow is redefining investment strategies and forcing private banking to adapt to a client profile that is radically different from that of their parents.
The Generational Clash in Investment Portfolios
Private bankers are increasingly hearing the same complaint: "my client is very conservative with their wealth, but their children want to invest in cryptocurrencies or Nvidia." This phrase reflects a real conflict between the prudence of baby boomers, accustomed to fixed income and dividends, and the risk appetite of the new generations, raised in a context of almost uninterrupted stock market rises.
90% of people aged 21 to 45 want to invest more in alternative assets like private equity and real estate, according to the latest study by Bank of America. In contrast, among those over 60, that percentage plummets to 15%. The gap is evident and poses a significant challenge to wealth managers, who must rethink their offerings and communication style.
Cryptocurrencies, AI, and ETFs: The New Preferences
Digital assets are the clearest example of this divergence. Almost half of millennial investors own cryptocurrencies, according to a survey by the French bank Natixis, compared to a third of Generation X and only one in six baby boomers. But beyond cryptos, young people want to take advantage of the rise of artificial intelligence and feel comfortable with risk, as noted by a private banking manager at Goldman Sachs.
The appeal of the classic stock and bond portfolio has diminished. The new generations prefer ETFs and products that incur lower fees but align with their investment philosophy. Additionally, they seek early access to startups before they go public, avoiding being the last to participate in IPOs. Banks are already offering their wealthy clients early access to some of the largest private companies in the world.
The Risk of Euphoria and the Need for Education
The last 15 years have been exceptionally bullish in the stock market, except for the Covid hiatus. In Spain, the market has provided notable returns in the last five years. This creates a false sense of security among novice investors, who may believe that investing is synonymous with guaranteed success. "Investment is methodology and discipline," remind the trainers of the investment and trading course at Estrategias de Inversión, which has been training investors for over 20 years.
For wealth managers, the revolution is twofold: on one hand, they must adapt their products and fees; on the other, learn to speak the same "investor language" as the new generations. It’s not just about changing the tone, but understanding that the risk profile and objectives have mutated. The wealth transfer is not just a transfer of money, but a paradigm shift in the way of investing.
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