A version of this article first appeared in CNBC’s Inside Wealth newsletter by Robert Frank, a weekly guide for high-net-worth investors and consumers. sign up Receive future editions directly to your inbox.
The wealth gap between wealthy millennials and their peers is the largest of any generation, according to a recent study, creating a new wave of class tensions and resentment.
Even though the majority of millennials struggle with student loans, low-wage service jobs, unaffordable housing, and low savings, the millennial elite is surpassing previous generations. According to this study, the average millennial has 30% less wealth at age 35 than baby boomers of the same age. However, the top 10% of Millennials have 20% more wealth than the top baby boomers of the same age.
“Millennials are so different from each other that it doesn’t really make sense to talk about the experience of the ‘average’ Millennial,” study authors Rob Gruyters, Zachary Van Winkle, and Annette Eva Fasan said. writing. “There are some millennials who are doing very well, like Mark Zuckerberg and Sam Altman, but there are others who are struggling.”
The study found that millennials (generally defined as people between the ages of 28 and 43 today) repeatedly face financial headwinds. They came of age during the financial crisis, have lower rates of home ownership, have more debt than assets, have low-wage, insecure jobs, and are less likely to form two-income families.
At the same time, the authors say the top 10% of millennials are benefiting from increased pay for skilled jobs. As they say, “returns to high-status job trajectories have increased, while returns to low-status trajectories have stagnated or declined.”
According to the report, Millennials who “attended college, held graduate-level jobs, and started families relatively late” will ultimately have “higher levels of wealth than baby boomers following similar life trajectories.” ” was obtained.
huge wealth transfer
There may be another factor creating enormous wealth for millennials: inheritance. In a phenomenon known as the “Great Wealth Transfer,” baby boomers are expected to inherit between $70 trillion and $90 trillion in wealth over the next 20 years. Much of the money is expected to be donated to the children of millennials. Those worth more than $5 million will account for nearly half of that total, according to Cerulli Associates.
Wealth management firms say some of that wealth is already beginning to be passed on to the next generation.
“There is a major asset transfer underway that we have all been talking about for the past 10 years,” said John Matthews, head of private wealth management at UBS. “Currently, the average age of billionaires in the world is almost 69 years old. So this whole transition or transfer of wealth is going to start to accelerate.”
As more wealth is transferred in the coming years, tensions between millennials are likely to increase further. As millennial “nepobabies” flaunt their wealth on social media, class wars within the generation intensify, leading to less affluent millennials spending and flaunting extravagant lifestyles to maintain it. there’s a possibility that.
According to a Wells Fargo survey, 29% of affluent Millennials (defined as having investable assets ranging from $250,000 to more than $1 million) said, “In order to impress others, I use something that I can’t afford.” “I sometimes buy things,” he admits. According to the study, 41% of affluent Millennials admit to financing their lives with credit cards or loans, compared to 28% of Gen Xers and 6% of Baby Boomers.
The battle between wealthy millennials and other generations may also shape their attitudes toward wealth. For more than 40 years, the vast majority of millionaires and billionaires in America have been self-made, and most of them are entrepreneurs. According to a study by Fidelity Investments, 88% of American billionaires are self-made.
However, inherited property may become even more common. For the first time in at least nine years, a UBS study found that among newly minted billionaires last year, heirs who inherited their fortunes amassed more wealth than self-made billionaires. did. And for the first time in 15 years, all billionaires under the age of 30 on Forbes’ latest billionaires list inherited their wealth.
“extreme” wealth
The surge in wealth among millennial heirs is also creating a lucrative new market for wealth managers, luxury companies, travel companies and real estate brokers.
Clayton Origo, one of Manhattan’s top luxury real estate brokers, has built a thriving business targeting cash-rich millennials. The founder of Compass’ Hudson Advisory Team has sold over $4 billion in real estate and regularly brokers his $10 million-plus transactions. He says the “vast majority” of his recent business has come from buyers in their 20s and 30s with inherited property.
“I just sold a $16 million apartment to someone in their mid-20s, and the buyer accessed a family trust,” he said. “The wealth behind these children is enormous.”
Inherited wealth became Oligo’s specialty. He said he is working on building closer relationships with family offices, trusts and the young money elite who flock to New York members-only clubs like Casa Cipriani.
This pattern is well known. A wealthy family calls requesting a rental property for their son or daughter. In a few years, they want to buy a two-bedroom condo in a new high-security building downtown for $5 million or he wants to buy $10 million.
“My job is working very quietly and very carefully with some of the richest families in the world,” Origo said.
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