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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How will Theresa May meet her commitment to low-earners?

The Prime Minister will soon need to translate generalities into specifics. 

The curtailed Conservative leadership contest (which would not have finished yet) meant that Theresa May had little chance to define her agenda. But of the statements she has made since becoming prime minister, the most notable remains her commitment to lead a government "driven not by the interests of the privileged few, but by yours." 

When parliament returns on 5 September, and the autumn political season begins, May will need to translate this generality into specifics. The defining opportunity to do so will be the Autumn Statement. Originally intended by George Osborne to be a banal update of economic forecasts, this set-piece more often resembled a second Budget. Following the momentous Brexit vote, it certainly will under Philip Hammond. 

The first priority will be to demonstrate how the government will counter the threat of recession. Osborne's target of a budget surplus by 2020 has wisely been abandoned, granting the new Chancellor the freedom to invest more in infrastructure (though insiders make it clear not to expect a Keynesian splurge).

As well as stimulating growth, Hammond will need to reflect May's commitment to those "just managing" rather than the "privileged few". In her speech upon becoming prime minister, she vowed that "when it comes to taxes, we’ll prioritise not the wealthy, but you". A natural means of doing so would be to reduce VAT, which was increased to a record high of 20 per cent in 2010 and hits low-earners hardest. Others will look for the freeze on benefit increases to be lifted (with inflation forecast to rise to 3 per cent next year). May's team are keenly aware of the regressive effect of loose monetary policy (low interest rates and quantitative easing), which benefits wealthy asset-owners, and vow that those who lose out will be "compensated" elsewhere. 

A notable intervention has come from Andrew Tyrie, the Conservative chair of the Treasury select committee. He has called for the government to revive the publication of distributional analyses following Budgets and Autumn Statements, which was ended by George Osborne last year (having been introduced by the coalition in 2010). 

In a letter to Hammond, Tyrie wrote: "I would be grateful for an assurance that you will reinstate the distributional analysis of the effects of the budget and autumn statement measures on household incomes, recently and mistakenly discontinued by your predecessor." He added: "The new prime minister is committing her government to making Britain a country that works 'not for a privileged few, but for every one of us'. A high level of transparency about the effects of tax and welfare policy on households across the income distribution would seem to be a logical, perhaps essential starting point." 

Whether the government meets this demand will be an early test of how explicit it intends to be in reducing disparities. 

George Eaton is political editor of the New Statesman.