Generation Y millionaires take more risks, take more advice

Baby Boomers looking a little dull...

Next-gen millionaires are more bullish investors than their older generation counterparts, with almost four in ten buying into high-risk asset classes such as venture capital and derivatives.

That’s according to new research by US-based financial services firm Fidelity Investments, which surveyed over 540 individuals with investable assets of at least $1 million.

It found that eighty-one per cent of Generation X and Y millionaires – those up to 48 years old – said they preferred to pursue aggressive investment strategies, compared to 27 per cent of the baby boomers.

Wealthy next-gens also had a more diversified investment portfolio than the older generation. 51 per cent of Gen X and Y millionaires, for example, owned foreign currency; 43 per cent invested in international individual securities; 39 per cent bought into venture capital; and 38 per cent chose derivatives. The baby boomers’ figures (respectively) were 6, 27, 12 and 10 per cent.

In the short term, the next-gens surveyed planned on making changes to their portfolio, while 39 per cent of the baby boomers were more conservative and didn’t plan on adding anything until the end of the year.

But the younger HNWs weren’t just more bullish about investing, they were also more confident about their own abilities, with 71 per cent considering themselves knowledgeable about investing, compared to 44 per cent of their old-generation counterparts.

Asking for advice

Perhaps surprisingly, then, the report found that next-gens millionaires were also more likely than the older generation to turn to financial advisers for investment recommendations, with 92 per cent using a financial adviser, compared to 68 per cent of the baby boomers.

According to the study, the financial crisis was the main reason why the young HNWs sought financial advice, with 69 per cent of those surveyed admitting doing so because of more volatile market conditions. This compared to only 17 per cent of the baby boomers.

However, next-gens remained very much involved in their investment decisions, with those working with an adviser saying they independently managed almost half of their own assets. In comparison, baby boomers HNWs who have financial advisers said they managed only a third of their wealth by themselves.

61 per cent of the Gen X and Y millionaires also said they made their own investment decisions but used advisers as sources of information and to get a second opinion. Only six per cent admitted to delegate their decisions entirely to an adviser, compared to one in five of the baby-boom generation.

According to the report, next-gen millionaires tended to use other people as their sounding board when making investment decisions. Apart from their advisers, they were more likely to turn to family and friends, with 23 per cent of those surveyed doing so, compared to only thirteen per cent of the older generation.

Work hard, play hard

But younger millionaires aren’t just focused on how to maximise their money, the research found. In fact, they were more likely to indulge in comforts than the older generation. Eighty-seven per cent of Gen X and Y HNWs, for example, spent their holidays abroad every year, compared to only 56 per cent of the baby boomers. Similarly, 63 per cent of the next-gens millionaire owned a second home and nearly four in ten flew first class, compared to 21 and 5 per cent respectively for the older generation.

And if they liked to spend more, Gen X and Y millionaires also liked to give more, as they averaged $54,000 in annual philanthropic donations, compared to $12,000 for their older counterparts. They also volunteered more of their time to charitable causes, with 82 per cent volunteering or serving on charity boards, compared to less than 50 per cent for the baby boomers. 

This piece first appeared on Spear's Magazine

Read more by Giulia Cambieri

Photograph: Getty Images

This is a story from the team at Spears magazine.

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Will Euroscepticism prove an unbeatable advantage in the Conservative leadership race?

Conservative members who are eager for Brexit are still searching for a heavyweight champion - and they could yet inherit the earth.

Put your money on Liam Fox? The former Defence Secretary has been given a boost by the news that ConservativeHome’s rolling survey of party members preferences for the next Conservative leader. Jeremy Wilson at BusinessInsider and James Millar at the Sunday Post have both tipped Fox for the top job.

Are they right? The expectation among Conservative MPs is that there will be several candidates from the Tory right: Dominic Raab, Priti Patel and potentially Owen Paterson could all be candidates, while Boris Johnson, in the words of one: “rides both horses – is he the candidate of the left, of the right, or both?”

MPs will whittle down the field of candidates to a top two, who will then be voted on by the membership.  (As Graham Brady, chair of the 1922 Committee, notes in his interview with my colleague George Eaton, Conservative MPs could choose to offer a wider field if they so desired, but would be unlikely to surrender more power to party activists.)

The extreme likelihood is that that contest will be between two candidates: George Osborne and not-George Osborne.  “We know that the Chancellor has a bye to the final,” one minister observes, “But once you’re in the final – well, then it’s anyone’s game.”

Could “not-George Osborne” be Liam Fox? Well, the difficulty, as one MP observes, is we don’t really know what the Conservative leadership election is about:

“We don’t even know what the questions are to which the candidates will attempt to present themselves as the answer. Usually, that question would be: who can win us the election? But now that Labour have Corbyn, that question is taken care of.”

So what’s the question that MPs will be asking? We simply don’t know – and it may be that they come to a very different conclusion to their members, just as in 2001, when Ken Clarke won among MPs – before being defeated in a landslide by Conservative activists.

Much depends not only on the outcome of the European referendum, but also on its conduct. If the contest is particularly bruising, it may be that MPs are looking for a candidate who will “heal and settle”, in the words of one. That would disadvantage Fox, who will likely be a combative presence in the European referendum, and could benefit Boris Johnson, who, as one MP put it, “rides both horses” and will be less intimately linked with the referendum and its outcome than Osborne.

But equally, it could be that Euroscepticism proves to be a less powerful card than we currently expect. Ignoring the not inconsiderable organisational hurdles that have to be cleared to beat Theresa May, Boris Johnson, and potentially any or all of the “next generation” of Sajid Javid, Nicky Morgan or Stephen Crabb, we simply don’t know what the reaction of Conservative members to the In-Out referendum will be.

Firstly, there’s a non-trivial possibility that Leave could still win, despite its difficulties at centre-forward. The incentive to “reward” an Outer will be smaller. But if Britain votes to Remain – and if that vote is seen by Conservative members as the result of “dirty tricks” by the Conservative leadership – it could be that many members, far from sticking around for another three to four years to vote in the election, simply decide to leave. The last time that Cameron went against the dearest instincts of many of his party grassroots, the result was victory for the Prime Minister – and an activist base that, as the result of defections to Ukip and cancelled membership fees, is more socially liberal and more sympathetic to Cameron than it was before. Don’t forget that, for all the worry about “entryism” in the Labour leadership, it was “exitism” – of Labour members who supported David Miliband and liked the New Labour years  - that shifted that party towards Jeremy Corbyn.

It could be that if – as Brady predicts in this week’s New Statesman – the final two is an Inner and an Outer, the Eurosceptic candidate finds that the members who might have backed them are simply no longer around.

It comes back to the biggest known unknown in the race to succeed Cameron: Conservative members. For the first time in British political history, a Prime Minister will be chosen, not by MPs with an electoral mandate of their own or by voters at a general election but by an entirelyself-selecting group: party members. And we simply don't know enough about what they feel - yet. 

Stephen Bush is editor of the Staggers, the New Statesman’s political blog. He usually writes about politics.