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A version of this article first appeared with Robert Frank in CNBC’s Inside Wealth newsletter, a weekly guide for the high net worth investor and consumer. Sign up To receive future editions straight to your inbox.
The wealth gap between the wealthy Millennial generation and the rest of their age group is the largest of any generation, creating a new wave of class tension and resentment, according to a recent study,
Even though the majority of the Millennial generation is struggling with student debt, low-paying service-jobs, unaffordable housing, and low savings, the Millennial elite is outpacing previous generations. According to the study, the average Millennial has 30% less wealth at age 35 than Baby Boomers at the same age. Yet the top 10% of the Millennial generation own 20% more wealth than the top Baby Boomers of the same age.
“Millennials are so different from each other that it is not particularly meaningful to talk about the ‘average’ Millennial experience,” wrote the study’s authors, Rob Gruyters, Zachary Van Winkle and Annette Eva Fasang. “There are some Millennials who are doing very well — think Mark Zuckerberg and Sam Altman — while others are struggling.”
Studies show that the Millennial generation – generally defined today as those between the ages of 28 and 43 – has repeatedly faced financial hurdles. As they age during the financial crisis, they have lower levels of home ownership, larger debts compared to assets, lower wages and unstable jobs, and lower rates of dual-income family formation.
Additionally, the authors say the top 10% of the Millennial generation has benefited from greater rewards for skilled jobs. As he put it, “Returns on high-status work trajectories have increased, while returns on low-status trajectories have stagnated or declined.”
The Millennial generation, which “went to college, got jobs upon graduation and started families relatively late,” had “higher levels of wealth than Baby Boomers with similar life paths,” according to the report.
great money transfer
There may be another factor driving so much wealth among millennials: inheritance. In what is known as the “Great Wealth Transfer,” Baby Boomers are expected to lose between $70 trillion and $90 trillion in wealth over the next 20 years. Most of it is expected to be passed on to their millennial children. High net worth individuals, worth $5 million or more, will account for about half of that total, according to Cerulli Associates.
Wealth management firms say some of that wealth has already begun to trickle down to the next generation.
“The great wealth transfer that we’ve all been talking about for the last 10 years is underway,” said John Matthews, head of UBS. Private Wealth Management Division, “The average age of the world’s billionaires right now is about 69 years old. So this whole transformation or wealth transfer will start to accelerate.”
Tensions between the millennial segments are likely to increase as more wealth is transferred in the coming years. The display of wealth on social media by Millennial “Napo Babies” may exacerbate intergenerational class warfare and cause non-wealthy Millennials to overspend or maintain the appearance of lavish lifestyles.
A Wells Fargo survey found that 29% of affluent Millennials (defined as having investable assets of $250,000 to more than $1 million) admit that they “sometimes buy things they want to impress others.” Can’t afford to.” According to the survey, 41% of affluent Millennials admit to financing their lifestyle with credit cards or loans, compared to 28% of Gen Xers and 6% of Baby Boomers.
The battle between wealthy Millennials and the rest may also shape their attitudes toward money. For more than four decades, the majority of millionaires and billionaires made in America have been self-made, mostly entrepreneurs. A study by Fidelity Investments found that 88% of American millionaires are self-made.
Yet inherited wealth may be more common. A UBS study found that among newly minted billionaires last year, heirs who inherited their wealth amassed more wealth than self-made billionaires for the first time in at least nine years. And, all the billionaires under 30 on Forbes’ latest billionaires list have inherited their wealth for the first time in 15 years.
‘excessive’ money
The rise in wealth among Millennial heirs is also creating a lucrative new market for wealth-management firms, luxury companies, travel firms and real estate brokers.
Clayton Aurigo, one of the top luxury real estate brokers in Manhattan, has built a thriving business on money-minded millennials. The founder of the Hudson Advisory team at Compass has sold over $4 billion of real estate and regularly brokers deals in excess of $10 million. He says the “vast majority” of his business recently has been from buyers in their 20s and 30s who have inherited property.
“I sold a $16 million apartment to someone in their mid-20s, and the buyer accessed the family trust,” he said. “The money that’s behind these kids is immense.”
Inherited wealth has become Orrigo’s specialty. He says he works on building close relationships with young money elites in family offices, trusts and New York membership clubs like Casa Cipriani.
The pattern is familiar: a wealthy family calls to seek a rental for their son or daughter; A few years later, they want to buy a $5 million or $10 million two-bedroom condo in a new, high-security building downtown.
“My job is to work very quietly and very carefully with the wealthiest families in the world,” Aurigo said.
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