As part of the Proving Worth report, which takes an in-depth look at the values and investing behaviors of ultra-high-net-worth (UHNW) Millennials, we examined how this cohort approaches investing decisions.
Most of the UHNW Millennials we surveyed are not yet making strategic decisions for the family investment portfolio. Instead, they are primarily serving on family office committees or boards for wealth management, philanthropy and non-investment governance.
In most cases, we’ve found that UHNW Millennials are still being groomed for roles as strategic decision-makers for the family portfolio, with philanthropy being a critical stepping stone for guiding this generation into leadership roles.
How Wealthy Families Are Preparing Next-Gen Wealth Holders
Most of the Millennials we interviewed for Proving Worth recounted their experiences of engaging in philanthropy from a young age, almost always under the tutelage of parents and/or grandparents. As their skills and understanding of philanthropic concepts grew and they matured, these Millennials were gradually introduced into greater roles and responsibilities.
This typically meant serving on the family board or even running philanthropic projects of their own. Impact investing, which looks to benefit society while generating a return on investment, is also proving to be a critical testing ground for UHNW Millennials as they grow into decision-making roles for the overall portfolio.
Additionally, the study showed that when the time eventually arrives, this generation will be more than ready to take over strategic decision-making for the family. Millennials have an innate confidence and ability to make up their minds based on their own research and interactions. This is a personality trait that can arguably be seen in stark contrast to the moody ambivalence of Generation X and the well-established, overly optimistic attitude of Baby Boomers.
How Family Shapes UHNW Millennials’ Investment Decisions
As UHNW Millennials grow into strategic decision-making roles for their family offices, parents continue to be a big influence in shaping their views. Virtually all of the Millennials in this study expressed strong ties to their family unit. Said one Millennial we interviewed: “I don’t think my attitudes towards wealth are that different from my parents. They are also broadly conservative, and we have common wealth preservation goals.”
Advisors and Advice Remain Critical
Our research shows that Millennials view advisors as a source of knowledge and advice. Additionally, private banks and trust companies are perceived as particularly important for articulating and defining goals. But one of the most striking aspects of the research is that commercial banks and wirehouses were missing entirely from the dialogue when we asked Proving Worth participants to identify their biggest impact investing influences.
We believe this stems from a level of mistrust that UHNW Millennials have towards Wall Street following the global financial crisis. But the research indicates that advisors can overcome the trust gap by focusing on building lasting and meaningful personal relationships with UHNW Millennials.
In closing, here are three key tips for advisors working with UHNW Millennials:
1. Get used to working with committees, not a lone decision-maker.
Committees and family office boards are already extremely popular, and the days of a single person making unilateral decisions for the family investment portfolio are all but over.
2. UHNW Millennials want advisors to help them find impact investing opportunities.
This cohort is looking to engage the causes they believe in while generating sustainable, long-term returns and they are openly seeking help from advisors to accomplish this goal. Across the board, UHNW Millennials told us they would increase their allocations if advisors helped them find opportunities in impact investing, microfinance, socially responsible investing and venture philanthropy.
3. They need to be taught the value of intelligent risk-taking.
UHNW Millennials want their family’s wealth to last in perpetuity, but need advisors to help them understand this isn’t possible without taking on some level of risk. Our research also indicates that they are open to taking risks, and that they’re interested in getting an advisor’s help in sourcing deals.
For additional insights, check out our interactive web experience, or read our research paper: “How Ultra-Wealthy Millennials Approach Investing Decisions.”