Millennials are a powerful force in the global economy. For example, these individuals born between 1982 and 1998 already account for more than a quarter (27 percent) of the population and hold $16.9 trillion of the world’s total private wealth, according to a new collection of research put together by UBS Wealth Management.
The latter could rise to $24 trillion by just 2020, or roughly 1.5 times the gross domestic product (GDP) of the United States in 2015. A major factor behind this rapid growth will be one of the largest intergenerational wealth transfers in history that is set to occur over the next few decades. Indeed, Baby Boomers, those between 52 and 70 years of age today, are expected to pass down to their children around $30 trillion between 2011 and 2050 in North America alone.
Another thing that will be supportive of Millennial wealth creation going forward is this age group's apparent eagerness to strengthen its financial standing. Yesterday, for instance, we learned that young adults have made great strides in recent years to reduce debt and establish an emergency fund. Even better, the focus appears to not just be on the near-term because a new Aegon poll found that more than a third of young Americans said that they “always make sure they are saving for retirement.”
Add to all of this the fact that even the oldest members of Generation Y have yet to reach their peak income years and it becomes clear that Millennials will have a significant amount of wealth that needs to be properly invested. That could be a challenge for many young adults because a recent analysis by Bank of America Merrill Lynch found that when it comes to asset allocation, Gen-Y investors tend to hold equities at a level that is too low, and bonds at a level that is too high, given their age (distance from retirement).
On the bright side, many young adults appear open to the idea of receiving advice from a financial professional. In fact, an earlier report from Cerulli Associates found that 79 percent of surveyed Americans between the ages of 30 and 39 said that they would be open to paying for professional financial advice, and 73 percent of respondents under the age of 30 stated the same. Both of those figures are marked increases from earlier surveys and well above the level of eagerness to pay for financial expertise reported by older generations.
Sources: UBS, Business Insider, BCG Global, Aegon, Twitter, BofAML, ThinkAdvisor, Cerulli AssociatesPost author: Charles Couch