Young HNW Investors Prefer Alternative Assets High-net-worth individuals under age 44 are choosing more nontraditional investments for their retirement portfolios

Published on July 30, 2024

A recent study by Bank of America revealed that investors under age 44 prefer to invest in alternative assets. The 2024 Bank of America Private Bank Study of Wealthy Americans surveyed high-net-worth (HNW) individuals with at least $3 million in assets. One must have at least $1 million in investable assets to be considered a high-net-worth individual.

Unlike their older counterparts in the Gen X and baby boomer cohorts, nearly three-quarters of millennial and Gen Z respondents said that traditional stocks and bonds will not provide above-average investment returns in today’s environment. The younger HNW investors said they prefer real estate, crypto and digital assets, private equity, and direct investments into companies. They also prefer to invest in companies that focus on positive social impact.

Among this investor group, 93% said they are likely to make more investments in alternative assets in the coming years over publicly traded investments. (Note: although this group favors less exposure in the traditional stocks and bonds than older investors, those surveyed do still hold these assets as part of their portfolio mix with 47% for ages 21-43 vs. 74% for ages 44+).

Given that the younger investing generation has grown up during cycles of severe market downturn after the events of 9/11, the Great Recession, and the pandemic, it might not be that surprising that confidence in traditional markets is less enthusiastic among them. Millennials came of age during a 2.5-year bear market from 2000 to 2002 and then saw the 50% collapse in stock prices a few years later (2008-2009).

Growing wealth among young HNW investors through self-direction

Given the preference for including alternative assets within their portfolios—and blessed with investment time horizon than Generation X and baby boomer investors—the Gen Z and millennial HNW investors today can start crafting a healthy financial future through self-direction.

As noted above and as we wrote about last year in this blog article, many HNW investors are including alternative assets within their portfolios. These individuals understand these are long-term investments through which to build wealth (given that as a group, they have less need for highly liquid assets), that returns are not correlated with the stock market, and that those returns have the potential to outperform traditional investments.

Rather than be limited to stocks, bonds, and mutual funds, investors can include private equity, commercial real estate and real estate-related assets, precious metals, royalties, and so many more non-publicly traded assets within a self-directed IRA. And with high net worth available to invest in what they already know and understand, it’s not surprising that wealthy investors (of any age) are including these alternative assets in their self-directed retirement plans.

White glove service for discerning investors of all generations from Next Generation

High-net-worth individuals with significant investable assets may also expect a higher level of service when it comes to their financial institutions. At Next Generation, all our clients are treated to exceptional service and attention—from the human beings who answer our phones to our resources for investor education.

Our team takes the time to explain the many options and benefits of self-direction as a retirement wealth-building strategy and provides tools to streamline the transaction process as much as possible—from opening a self-directed IRA to transmitting investment instructions to completing the transaction. We also provide both administration and asset custody for our clients’ accounts for additional convenience.

If you’d like to learn more about working with Next Generation as your self-directed IRA administrator or if you have questions about specific alternative assets, we invite you to schedule a complimentary educational session with one of our team members, register for an upcoming webinar (or peruse our webinar library; or contact us at NewAccounts@NextGenerationTrust.com or 888.857.8058