Magnanimous Millennials

The millennial population has slightly surpassed the over 73 million baby boomer population and stands to inherit $40 trillion over the next 40 years. Given the potential trillions that will transfer, the wealth management industry is actively researching this important demographic cohort.

Various studies describe millennials as a future-oriented group with a strong sense of familial and social responsibility. Similarly, wealthy millennials possess interesting attributes, which we will further explore in this column.

The 2008 global financial market crisis may explain millennials” tendency toward a more conservative investing style. According to a Merrill Lynch study, millennials are more self-directed investors who are skeptical and equate financial advisors with salesmen. Further, Brookings Institution research concluded that most millennials “would rather go to the dentist than listen to what bankers are saying.”

Studies indicate that millennials do seek guidance, and they will look to spouses, parents and friends for financial advice. A UBS study concluded that money does matter to this group, as 4 out of 5 millennials believe that money can buy happiness; however, their tendency is not to chase higher returns nor try to outperform the market.

Entrepreneurship and an innovative and inventive spirit characterize this youthful group. A record 46 millennials joined the recent Forbes annual billionaires list, including
Evan Spiegel, 25, the $1.5 billion founder of Snapchat; Elizabeth Holmes, 31, the $4.5 billion founder of Theranos; and Mark Zuckerberg, 31, the $41.6 billion founder of Facebook. It may be no surprise that this generation has strong tendencies to focus on personal success.

The use of wealth for social good is a millennial propensity, as cited in a Spectrum study. Impact philanthropy and social responsibility are driving forces typical in the millennial mindset, which has enabled considerable growth and innovation in alternate forms of charitable giving.

Interestingly, this outlook translates into consumer behavior. A Brooking Institution report concluded that
84 percent of millennials” purchasing decisions were influenced by a company’s involvement in social causes.

Millennials with inherited wealth tend to be more anxious around their stewardship role in sustaining family wealth. Many are the progeny of “larger-than-life” parent personalities and wealth creators, who worry that they will not live up to their parents” expectations. Conversely, the older generation worries that providing too much information regarding the family wealth will de-motivate the younger generation. A Fidelity study concluded that 67 percent of millennial families have not had estate planning discussions with parents. This lack of communication and information sharing can lead to disastrous financial consequences.

Many millennial studies conclude that this demographic worries about aging (baby boomer) parents and assumes they will provide for their care in later years. Additionally, millennials have concerns regarding their parents” financial situations and the ability for wealth to sustain them.

The ability to bridge the apparent communication gap between the millennials and their parents can lead to enhanced family relationships today and enable better odds of intergenerational wealth transfer success. Family offices can initiate, organize and support these important conversations, incorporating them with the other wealth management activities of the family. We will explore communication strategies in a future column. ?

Julie Neitzel is a partner and advisor with WE Family Offices in Miami and a board member of the Miami Finance Forum. Contact her at Julie.Neitzel@wefamilyoffices.com or 305.825.2225.

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