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A version of this article first appeared in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly guide to wealthy investors and consumers. Sign up to receive future issues straight to your inbox.
The wealth gap between wealthy millennials and the rest of their age group is the widest of any generation, causing a recent wave of class tensions and resentment, according to study recent research.
Even as the extensive majority of millennials struggle with student debt, low-wage service jobs, affordable housing and low savings, the millennial elite is outperforming previous generations. According to the study, the average millennial at age 35 has 30% less wealth than baby boomers at the same age. However, the richest 10% of millennials have 20% more wealth than the top 10% of baby boomers at the same age.
“Millennials are so different from each other that it doesn’t make much sense to talk about the ‘average’ Millennial experience,” wrote the study’s authors, Rob Gruijters, Zachary Van Winkle and Anette Eva Fasang. “Some millennials are doing exceptionally well – like Mark Zuckerberg and Sam Altman – while others are struggling.”
The study found that millennials – now typically defined as people aged 28 to 43 – face recurring financial hardships. They are growing up in a financial crisis, have lower rates of homeownership, more debt than their assets, low-wage and unstable jobs, and lower rates of dual-income family formation.
At the same time, the authors claim that the top 10% of millennials benefited from higher wages for skilled work. As they put it: “Returns to high-status job paths have increased, while returns to low-status paths have stagnated or declined.”
The report found that millennials who “went to college, found graduate-level jobs, and started families relatively behind schedule” achieved “higher levels of wealth than baby boomers with similar life trajectories.”
Great wealth transfer
There may be another factor creating so much wealth among millennials: inheritance. In the so-called “Great Wealth Transfer,” baby boomers are expected to hand over between $70 trillion and $90 trillion in wealth over the next 20 years. Much of this is expected to go to their millennial children. According to Cerulli Associates, nearly half of that total will be high-net-worth individuals worth at least $5 million.
Wealth management firms say some of that wealth has already started trickling down to the next generation.
“The great transfer of wealth that we have all been talking about for the last 10 years is underway,” said John Mathews, head of UBS Private property management department. “The average age of billionaires in the world is now almost 69 years elderly. So this whole transformation, the transfer of wealth, will start to accelerate.”
Millennials’ class tensions are likely to escalate as more wealth is transferred in the coming years. The display of wealth on social media by Millennial “nepo kids” can contribute to intra-generational class warfare and cause non-wealthy Millennials to overspend or create the appearance of a lavish lifestyle to keep up.
A study by Wells Fargo found that 29% of affluent millennials (defined as having between $250,000 and over $1 million in investable assets) admit that they “sometimes buy things they can’t afford. to impress others.” According to the study, 41% of affluent millennials report 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 approach to wealth. For more than four decades, the extensive majority of America’s millionaires and billionaires have been self-made, mostly entrepreneurs. A study by Fidelity Investments found that 88% of American millionaires were self-made.
However, inherited wealth could become more common. A study by UBS found that among the newly formed billionaires last year, heirs who inherited their fortunes amassed more wealth than self-made billionaires for the first time in at least nine years. And all billionaires under 30 on Forbes’ latest billionaires list inherited their wealth for the first time in 15 years.
“Extreme” wealth
The rise in wealth among millennial heirs is also creating a lucrative recent market for wealth management firms, luxury companies, travel agencies and real estate agents.
Clayton Orrigo, one of Manhattan’s top luxury real estate agents, has built a successful business on affluent millennials. The founder of Compass’ Hudson Advisory Team has sold over $4 billion in real estate, and brokers regularly complete over $10 million in transactions. He says the “extensive majority” of his business lately has come from people in their 20s and 30s with inherited wealth.
“I just sold a condo for $16 million to a 20-something, and the buyer used the family trust,” he said. “The wealth behind these children is enormous.”
Inherited wealth became Orrigo’s specialty. He says he is working to establish close relationships with family offices, trusts and the juvenile financial elite who gather in Modern York membership clubs such as Casa Cipriani.
The pattern is familiar: a wealthy family calls, asking for a rental for their son or daughter; a few years later, they want to buy a two-bedroom apartment for $5 or $10 million in a recent, secure building in the city center.
“My company works very quietly and very discreetly with the richest families in the world,” Orrigo said.
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