Bank of America Private Bank Study Finds Younger Investors Turning to Alternatives, Sustainability and Digital Assets to Create Wealth

October 11, 2022 at 9:00 AM Eastern

Bank of America today released the 2022 Bank of America Private Bank Study of Wealthy Americans (PDF), which found significant generational differences in approaches to investing, giving and wealth planning.  The findings show that the shift in influence and control over the largest share of U.S. personal wealth — $84 trillion is expected to pass primarily from the baby boomers to Gen X and millennials through 20451 — could have significant implications for families, wealth managers, charitable organizations and financial markets going forward.

A message from Jeff Busconi, Head of Private Bank Services at Bank of America

A message from Jeff Busconi, Head of Private Bank Services at Bank of America

JEFF BUSCONI: Hi, I’m Jeff Busconi, Head of Private Bank Services at Bank of America.

For generations, Bank of America has been helping individuals and families create lasting meaning for their wealth. Our insights and expertise come from more than 100 years of serving wealth creators and multiple generations of families. It also comes from extensive data driven research that the private bank conducts beyond our own clients to identify emerging trends.

I’m pleased to share the findings from our latest research. The 2022 Bank of America Private Bank Study of Wealthy Americans looks at shifting generational attitudes about wealth during a period of substantial social and economic change and amid the largest generational transfer of wealth in US history.

The market research firm Cerulli Associates estimates that 84 trillion will transfer primarily to the next generation by the year 2045. In the coming years, generational differences will have significant implications not only for families and their advisors, but for businesses, charitable organisations, the markets and economy.

Let me share some of what our research found. Younger investors are far more likely to use alternative investment strategies to build their wealth. Most don’t think it’s possible to get ahead by investing only in stocks and bonds anymore, so they’re turning to private markets and investing in tangible assets such as real estate and other direct investments.

This group is also three times more likely to use sustainable investments than older generations and believe it is possible to create positive change and good financial returns at the same time. This younger generation is intentional in how they use their wealth including charitable giving. They make greater use of structured giving vehicles like Donor Advised Funds and charitable trusts.

Yet for all that, we found that only half of parents think the next generation is well-prepared to handle the family wealth they stand to receive, suggesting the need for better, more productive conversations and planning.

I invite you to explore more of the findings from the 2022 Bank of America Private Bank Study of Wealthy Americans, by visiting privatebank.bankofamerica.com


“Wealth planning is inherently multi-generational,” said Katy Knox, president of The Private Bank at Bank of America.  “As we see among our client families, financial behaviors and values take shape early in life and live on in the legacies passed from one generation to the next. 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.”

Younger generations engaging in new investment strategies: 75% of investors between the ages of 21 and 42, compared to 32% of investors over age 43, do not think it’s possible to achieve above-average returns solely with traditional stocks and bonds.

  • Eighty percent of young investors are looking to alternative investments, such as private equity, commodities, real estate, and other tangible assets. They 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).
  • Whereas investors over the age of 43 maintain that U.S. equities offer the best opportunity for growth in the future, young investors think the greatest growth opportunities lie somewhere in the transformative digital asset space. Nearly half (47%) have cryptocurrency holdings.
  • Ownership of sustainable investments have doubled since 2018, from 12% to 26% of wealthy people. Nearly three-quarters (73%) of millennials compared to 21% of older respondents use sustainable investments, which 72% of all survey respondents agree can make a positive impact in the world.

The family wealth talk is happening but starts late and doesn’t equate to financial preparedness:  68% of parents surveyed say they have talked with their children about their family’s wealth, including how much money the next generation stands to inherit.

  • On average, parents don’t initiate conversations about family wealth and the transfer of wealth until their children are at least 27 years old.
  • Only 51% of parents think their children are well prepared to handle family money or any inheritance they stand to receive. 
  • Fifty-eight percent of respondents have limited or no understanding of trusts. Among those without a trust, the younger generation is more inclined to consider using them in their estate plans (91%) than older generations (56%).

Different paths to a better world:  82% of parents who are philanthropically engaged believe that they and their children share the same philanthropic vision and goals.  However, just 41% of older generations think the next generation’s philanthropic efforts will be equally effective as their own. The younger generation is more optimistic about their ability to achieve philanthropic goals – 87% believe their giving will be more effective than earlier generations.

  • When making charitable giving decisions, 76% of respondents, including 88% of women, prefer to establish their own philanthropic identity apart from their family.
  • Just half (51%) of all donors support the same causes as their parents.
  • Younger generations are far more likely to gift through a structured vehicle, including a donor-advised fund (30%), charitable trust (51%), and/or family foundation (14%) than older generations do (15%, 14%, and 4%, respectively).

Art as an asset: While most art owners collect for the aesthetic value (63%) and only a small number plan to sell it quickly for profit (9%), art is a dynamic market:

  • Sixty percent of art collectors have purchased a piece in the past 12 months.
  • A near equal number (58%) plan to sell a valuable work in the next 12 months.

A larger role for wealth advisors to meet people’s needs: While satisfaction with wealth advisors is high — 97% of survey respondents are satisfied, including 74% who are very satisfied with their advisor relationship — the survey found gaps between the topics people want to discuss with their advisor and the conversations taking place.

The three topics high net worth people most want to discuss with their advisor today are:

  • Tax planning (88%)
  • Estate planning (81%)
  • Investing in an inflationary environment and best use of funds amidst rising-interest rate (both 80%)

Approximately a third of people who want to are not discussing or discussing enough these topics with their primary advisor. The findings show that for a wide range of areas – from estate planning to the strategic use of credit, and from philanthropic planning to investing for positive social or environmental impact – wealth managers have a significant opportunity to add value and build more robust relationships with next-generation clients.

Visit https://www.privatebank.bankofamerica.com/articles/wealth-study-2022.html for additional insights from the new 2022 Bank of America Private Bank Study on Wealth.

Methodology

Escalent, an independent market research company, conducted an online survey on behalf of Bank of America from May-June 2022. The survey consisted of 1,052 high-net-worth (HNW) respondents throughout the U.S. Respondents in the study were over the age of 21 with at least $3 million in investable assets, excluding primary residence. The margin of error is +/- 3, reported at a 95% confidence level. The respondents are a nationally representative sample of the U.S. high-net-worth population and not necessarily clients of Bank of America or its wealth and investment management businesses.

Bank of America Private Bank

Bank of America Private Bank (privatebank.bankofamerica.com) helps high-net-worth individuals, families and institutions grow, preserve and share wealth and achieve unique goals. Private Bank client teams take a tailored approach to delivering specialized services and expertise, providing boutique-style private banking that leverages the global resources of Bank of America, one of the world’s leading financial institutions. These dedicated teams provide customized solutions for wealth structuring, trust and estate planning, and philanthropy, combined with leading investment capabilities and a full range of sophisticated banking and lending solutions. The business also offers specialized capabilities in the areas of art services, sustainable investing, business ownership and succession planning, and specialty asset management.

Bank of America

Bank of America is one of the world’s leading financial institutions, serving individual consumers, small and middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services. The company provides unmatched convenience in the United States, serving approximately 67 million consumer and small business clients with approximately 4,000 retail financial centers, approximately 16,000 ATMs, and award-winning digital banking with approximately 55 million verified digital users. Bank of America is a global leader in wealth management, corporate and investment banking and trading across a broad range of asset classes, serving corporations, governments, institutions and individuals around the world. Bank of America offers industry-leading support to approximately 3 million small business households through a suite of innovative, easy-to-use online products and services. The company serves clients through operations across the United States, its territories and approximately 35 countries. Bank of America Corporation stock (NYSE: BAC) is listed on the New York Stock Exchange.

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Reporters may contact:

Julia Ehrenfeld, Bank of America
Phone: 1.646.855.3267
julia.ehrenfeld@bofa.com

 

Footnotes

1 Cerulli U.S. High-Net-Worth and Ultra-High-Net-Worth Markets 2021