Advisors take notice: Ultra-high-net-worth millennials are already engaged in their family finances.
More surprisingly, the generation comprised of those born between 1980 and 1995 also making many of the decisions concerning family wealth, according to “Proving Worth,” a study conducted by OppenheimerFunds and Campden Research that was released on Wednesday.
According to the study, 59 percent of the 32 ultra-high-net-worth millennials surveyed in September and October sit on a committee or board that manages their family’s wealth, but only 18 percent make strategic wealth management decisions. Instead, millennials are more likely to make decisions on impact investing, 31 percent, and philanthropy, 29 percent.
Those interviewed came from families with at least $35 million.
“There is a need and willingness on the part of millennials to engage with financial advice,” says Ned Dane, the head of the Private Client Group at Oppenheimer Funds. “They want advisors to bring them ideas that are highly aligned to the impact issues they’re trying to focus on. There is an interest in philanthropy, but millennials also perceive that they lack knowledge of concepts like impact and socially responsible investing. That’s where the opportunity lies for advisors.”
Dane, who co-authored the study, said that families may be putting philanthropy into the hands of younger generations because that’s where their interest lies. Almost all of the studies respondents, 96 percent, said they were interested in philanthropy, and 69 percent expressed an interest in socially responsible investing.
“Families are giving the millennials a voice at the table, but in most cases they’re not at the head chair,” Dane says. “It seems that those families have recognized that philanthropy and impact investing is a specific talent for this generation and in many cases they’ve given the keys to the car to the millennial.”
Dane’s study found that human rights causes dominate ultra-high-net-worth millennial philanthropic interests. The sectors of impact investing most relevant to respondents were education, water resources, the environment, gender equality and economic justice.
“They were less interested in anything around the feel-good aspects of philanthropy,” Dane says. “For millennials, philanthropy is about a higher purpose."
Millennials also tend to be results-driven, even with their philanthropic investments, says Dane. The study showed that young wealth is most concerned with accountability, long-term returns, sustainability and measurability of success.
Qualitative research shows millennials learn philanthropic lessons from their parents or grandparents, and the research shows that 69 percent of millennials will source their financial advisors through a personal network of family and friends, and another 44 percent will leverage their network of professional colleagues.
“Advisors should engage the younger generation by offering them education,” Dane says. ”Teaching broader financial topics or even basic financial literacy can be a great entry point. Talk to existing clients and ask them to let you help get their kids ready for a wealth transfer.”
Millennials tend to have a more conservative outlook on investing than previous generations, according to the study. They are most concerned with protecting their family legacy, preserving family wealth or growing their family wealth.
“Advisors are well equipped to help millennials with protecting or growing family wealth,” says Dane. “Preserving and perpetuating family legacy is more difficult because it involves behavioral choice and aligning values and takes an extended process of discovery.”
The study showed that 75 percent of millennials intend to dedicate at least half of their inheritance to their own next generation, whether they had children or not.
Generation Y is also seeking advice to help with wealth transfer — in fact, the study found that 90 percent of millennials value assistance with wealth transfer, more than any other type of advice, an issue that the financial industry has a poor track record of dealing with, says Dane.
“Many in the wealth community are accustomed to serving the present holders of the wealth, so their infrastructure and organization is oriented towards serving a more experienced client,” Dane says. “You’re now going to have less experienced clients that think of the world a little differently. You need to prepare your team and environment to engage this client.”
