A version of this article first appeared in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly guide for wealthy investors and consumers. Register to receive future editions, straight to your inbox.
The wealth gap between wealthy millennials and the rest of their age group is the largest of any generation, creating a new wave of class tensions and resentments, according to a recent study.
Even though the vast majority of millennials struggle with student debt, low-wage 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 did at the same age. Yet the richest 10% of millennials have 20% more wealth than the richest 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 study authors Rob Gruijters, Zachary Van Winkle and Anette Eva Fasang. “Some Millennials are doing extremely well – think Mark Zuckerberg and Sam Altman – while others are struggling.”
The study finds that millennials – generally defined as people aged 28 to 43 today – have faced repeated financial difficulties. Coming of age during the financial crisis, they have lower levels of homeownership, debts greater than their assets, low-paid and unstable jobs, and lower rates of dual-income family formation.
At the same time, the authors say the wealthiest 10% of millennials enjoyed greater rewards for skilled jobs. As they put it: “Returns to high-status career trajectories have increased, while returns to lower-status trajectories have stagnated or declined. »
Millennials who “went to college, found higher-level jobs, and started families relatively late” ended up with “higher levels of wealth than baby boomers with similar life trajectories.” , according to the report.
The great transfer of wealth
There may be another factor that creates so much wealth among millennials: inheritances. In what’s known as “the great wealth transfer,” baby boomers are expected to pass on between $70 trillion and $90 trillion in wealth over the next 20 years. Much of this should go to their millennial children. High-net-worth individuals worth $5 million or more will account for nearly half of that total, according to Cerulli Associates.
Wealth management companies say some of that wealth is already starting to trickle down to the next generation.
“The great wealth transfer that we have all been talking about for ten years is underway,” said John Mathews, head of UBS’s Private Wealth Management division. “The average age of billionaires in the world right now is almost 69. So this whole transition or transfer of wealth is going to start to accelerate.”
Tensions between the millennial classes are likely to intensify as more wealth is transferred in the years to come. Social media displays of wealth by millennial “nepo babies” could add to intra-generational class warfare and push non-wealthy Millennials to overspend or create the appearance of a style of lavish living to keep up.
A Wells Fargo survey found that 29% of affluent millennials (defined as having assets ranging from $250,000 to more than $1 million in investable assets) admit that they “sometimes buy items that they can’t afford to impress others. According to the survey, 41% of affluent millennials admit to financing their lifestyle with credit cards or loans, compared to 28% of Generation X and 6% of baby boomers.
The battle between wealthy millennials and others could also shape their attitudes toward wealth. For more than four decades, the vast majority of millionaires and billionaires created in the United States have been self-made, most of them entrepreneurs. A study by Fidelity Investments found that 88% of American millionaires are self-made.
Yet inherited wealth may become more common. A UBS study found that among new billionaires last year, heirs who inherited their fortunes accumulated more wealth than self-made billionaires for the first time in at least nine years. And all the billionaires under 30 on the latest Forbes Billionaires List have inherited their wealth, for the first time in 15 years.
“Extreme” wealth
The increase in wealth among millennial heirs is also creating a lucrative new market for wealth management companies, luxury businesses, travel agencies and real estate brokers.
Clayton Orrigo, one of Manhattan’s top luxury real estate brokers, has built a thriving business on wealthy millennials. The founder of the Hudson Advisory Team at Compass has sold over $4 billion in real estate and regularly brokers transactions over $10 million. He says the “vast majority” of his business these days has come from buyers in their 20s and 30s who have inherited assets.
“I just sold a $16 million apartment to someone in their 20s, and the buyer had access to the family trust,” he said. “The wealth behind these children is extreme.”
Inherited wealth has become Orrigo’s specialty. He says he works to forge close relationships with family offices, trusts and the elite young financiers mingling at New York members’ clubs like Casa Cipriani.
The pattern is familiar: a wealthy family calls to ask for rent 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 position is working very discreetly and discreetly with the richest families in the world,” Orrigo said.
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