By Robert Frank – CNBC
The wealth gap between wealthy millennials and the rest of their age group is the largest of any generation, creating new class tensions and social resentment, according to a recent study.
Even though the vast majority of millennials struggle with student debt, low-wage service jobs, unaffordable housing, and little savings, the millennial elite is outperforming previous generations. According to the study, the average millennial has 30% less wealth at age 35 than baby boomers at the same age. However, the richest 10% of millennials have 20% more wealth than the richest baby boomers had at the same age.
“Millennials are so different from each other that It doesn’t make much sense to talk about the ‘average’ experience of a millennial.” wrote study authors Rob Gruijters, Zachary Van Winkle and Anette Eva Fasang. “There are some millennials who are doing extremely well – think Mark Zuckerberg and Sam Altman – while others are doing poorly.”
The study concludes that millennials – typically defined as those between the ages of 28 and 43 today – have faced several financial storms. Having come of age during the financial crisis of 2008 and 2009, they have less property, more debt than assets, low-wage and unstable jobs, and lower rates of two-income family formation.
At the same time, the authors stated that the top 10% of millennials have benefited from higher rewards for skilled jobs. In the words of the authors: “Returns to high-status career paths have increased, while returns to low-status careers have stagnated or declined.”
[Una brecha de riqueza de 1 millón de dólares separa ahora a las familias blancas de las latinas y negras, según estudio]
According to the report, millennials who “went to college, found graduate jobs, started families relatively late” and ended up having “wealth levels higher than baby boomers with similar life trajectories.”
The great transfer of wealth
There may be another factor that generates so much wealth among millennials: inheritances. In what is known as “the great wealth transfer,” baby boomers are expected to inherit between $70 and $90 trillion over the next 20 years. Much of that amount will go to the children of the millennial generation. According to Cerulli Associates, people with wealth of $5 million or more will account for almost half of that total.
Wealth management companies say some of that wealth has already begun to trickle down to the next generation.
“The great transfer of wealth, which we have been talking about for the last 10 years, is already underway”said John Mathews, head of the Private Wealth Management division at UBS. “The average age of the world’s billionaires is almost 69 years old right now. So this whole transition or transfer of wealth will begin to accelerate.”
[La economía crece menos de lo esperado en el primer cuarto del año a un ritmo anual del 1.6%]
Tensions between the millennial classes are likely to rise as more wealth is transferred in the coming years. The display of wealth on social networks by the so-called nepo babies millennials could aggravate intragenerational class warfare and push non-wealthy millennials to overspend, or create the appearance of lavish lifestyles so as not to be left behind.
A survey by Wells Fargo found that 29% of affluent millennials (defined as those who have between $250,000 and more than $1 million in investable assets) admit that they “sometimes buy items 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 Gen Xers and 6% of baby boomers.
The battle between wealthy millennials and everyone else could also shape their attitudes toward wealth. For more than four decades, the vast majority of millionaires and billionaires in the United States have been self-made, and they are mostly entrepreneurs. According to a study by Fidelity Investments, 88% of American millionaires have worked to get rich.
However, Inherited wealth could become more common. According to a UBS study, among last year’s new billionaires, heirs to fortunes accumulated more wealth than billionaires who worked to get rich in at least nine years. In addition, all billionaires under the age of 30 on the latest Forbes list of billionaires inherited their fortune, a phenomenon that occurs for the first time in 15 years.
“Extreme” wealth
Rising wealth among millennial heirs is also creating a lucrative new market for wealth management firms, luxury companies, travel companies and real estate agents.
Clayton Orrigo, one of Manhattan’s top luxury real estate agents, has built a thriving business off of wealthy millennials. The founder of Compass’ Hudson Advisory Team has sold more than $4 billion in real estate and regularly brokers transactions worth more than $10 million. He said the “vast majority” of his business lately comes from buyers in their 20s and 30s with inherited wealth.
[Esto es lo que necesitaría ganar una familia de cuatro para vivir con comodidad en cada uno de los estados de EE.UU.]
“I just sold a 16 million dollar apartment to a twenty-something year old. The buyer had accessed the family trust,” he explained. “The wealth behind these young people is extreme.”
Inherited wealth has become Orrigo’s specialty. He explained that he works by forging close relationships with family offices, trusts and the young money elite who mingle in New York private clubs like Casa Cipriani.
The pattern is the same: A wealthy family calls to ask for a rental apartment for their son or daughter; A few years later, they want to buy a $5 or $10 million two-bedroom apartment in a new high-security building downtown.
“My job is to work very discreetly with the richest families in the world,” Orrigo said.
