Wealthy young people don't believe stocks and bonds are enough

Achieving above-average returns will require alternative investments according to BofA study

Wealthy young people don't believe stocks and bonds are enough
Steve Randall

Young investors say that relying on traditional stocks and bonds is not the way to build wealth.

Alternative investments including real estate, private equity, commodities, and other tangible assets are seen as an important parts of the mix by 75% of those aged 21-42 who do not think stocks and bonds can deliver above-average returns. This is way above the 32% of older investors who think the same.

The findings are part of the 2022 Bank of America Private Bank Study of Wealthy Americans which also reveals that younger investors allocate three times more of their investment portfolios to alternative strategies (16%) and half as much to stocks (25%) than older investors (5% and 55%, respectively).

Nearly half of the younger cohort also hold cryptocurrencies and 72% of millennials use sustainable investments compared to 21% of older investors.

While almost 9 in 10 younger respondents say they will engage in more effective philanthropy than previous generations, just 41% of older generations believe younger donors will match their own effectiveness. 

Advisor role

With the generational wealth transfer beginning, the role of advisors for wealth planning among wealthy families is highlighted by the report.

“As we see among our client families, financial behaviours and values take shape early in life and live on in the legacies passed from one generation to the next,” said Katy Knox, president of The Private Bank at Bank of America. “These research findings point to a larger role wealth advisors and the financial services industry is playing in helping families transition wealth and meet the needs of the next generation.”