In 2015, OppenheimerFunds partnered with Campden Wealth to study the wealthiest members of this rising generation to deepen our understanding of how they think and view the world. Together we produced Proving Worth, which shows that affluent Millennials have a conservative streak when investing their family’s assets, are strongly committed to philanthropy, and seek to forge a lasting impact on society through their wealth.
But while Proving Worth was indeed eye opening for our clients, we realized there was still much for the financial services industry to learn about the next generation of wealthy investors. For instance, how exactly do Millennials invest their personal wealth? What does the typical wealthy Millennial portfolio look like? And what do they really think of the services advisors provide?
To answer these questions – and more – we partnered with Campden Wealth to study this demographic once again. Our latest report, “Coming of Age: The Investment Behaviors of Ultra High Net Worth Millennials,” examines how Millennials are positioning their personal investments. It also explores areas of overlap and divergence in the management of their personal and family portfolios.
Most of the Millennials who participated in our survey are in their early-to-mid thirties. They already possess a strong understanding of what it takes to manage substantial wealth thanks to years of experience working in the financial services sector and their family office.
Older Millennials have had an influential voice in their families for years now, but are more likely than not to have some differences of opinion with their parents on investing and wealth management. For instance, when they eventually take over the family investments, 33% of the Millennials we spoke with said they plan to incorporate environmental, social and governance (ESG) standards into their family portfolios.
29% added that they plan to change their family’s long-term investment objectives. And another third said that although they view impact investments to be “moderate-to-high” risk, they still plan to shift more of their family’s assets to such instruments over the next five years.
Wealthy Millennials Realize: Nothing Ventured, Nothing Gained
A little more than one-in-four have been involved in over 20 deals in the past five years, the survey showed. Additionally, 65% played a role in more than five deals during that time frame.
When taking a closer look at their personal portfolios, many of the Millennials we surveyed are invested in assets that are perceived to be of moderate risk. However, with their family portfolios, Millennials expressed no qualms about steering assets into riskier, potentially less liquid vehicles like hedge funds or private equity.
But even as Millennials express an interest in taking on risk, their investments, interests and knowledge are primarily U.S.-focused. We believe this suggests there’s an opportunity for advisors to teach them the merits of investing internationally as well as the importance of further diversifying their portfolios.
An Uneasy Dynamic Between Wealthy Millennials and Advisors
Millennials continue to value what a good advisor has to offer and they typically seek professional advice before making big investment decisions.
But Coming of Age unearthed some inconvenient truths about the relationship between Millennials and family wealth advisors as well. Those who are experienced in managing investments expressed misgivings over the fees advisors charge, and voiced concerns over a lack of structure in how advisors work with their family.
Savvy advisors will recognize that cultivating the next generation of wealthy clients will require them to patiently dispel myths through education and personal relationships. To remain relevant, they will need to position themselves as a trusted second voice on the quality of potential investment deals.
Our goal with both studies – Proving Worth and Coming of Age – is to provide advisors with a clear picture of the young adults who are heirs to the fortunes of their most important clients. By better understanding the priorities and attitudes of these young adults, advisors will be in a better position to serve them once the family wealth officially changes hands.
This is the latest installment in our monthly series about issues facing high-net-worth families and their advisors. To learn more about what HNW Millennials want from their advisor, take an interactive look at the Coming of Age study.
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These views represent the opinions of OppenheimerFunds, Inc. and are not intended as investment advice or to predict or depict the performance of any investment. These views are as of the publication date, and are subject to change based on subsequent developments.