A version of this story first appeared in CNBC's Inside Wealth newsletter with Robert Frank, a weekly guide for high-net-worth investors and consumers. Sign up to receive future versions directly to your email.
According to a recent research, the wealth difference between affluent millennials and the rest of their age group is the widest of any generation, causing a new wave of class friction and animosity.
Even while the great majority of millennials struggle with college debt, low-wage service jobs, costly housing, and poor savings, the millennial elite outperforms prior generations. According to the survey, the average millennial had 30% less money at 35 than baby boomers did at the same age. However, the wealthiest 10% of millennials have 20% more. Wealthier than the top baby boomers of the same age.
"Millennials are so different from one another that it is not particularly meaningful to talk about the 'average' Millennial experience," stated the study's authors, Robert 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 struggling."
According to the report, millennials – those currently aged 28 to 43 — have suffered recurrent financial challenges. Coming of age during the financial crisis, they had lower homeownership rates, higher debt-to-asset ratios, low-wage and precarious occupations, and lower rates of dual-income family formation.
At the same time, the authors claim that the top 10% of millennials have profited from Higher pay for skilled occupations. According to the authors, "The returns to high-status work trajectories have increased, while the returns to low-status trajectories have stagnated or declined."
According to the survey, millennials who "went to college, found graduate level jobs, and started families relatively late" were wealthier than Baby Boomers with identical life paths. Another element that may be contributing to millennial wealth is inheritance. In what is known as "the great wealth transfer," baby boomers are estimated to pass down between $70 trillion and $90 trillion in wealth over the next 20 years. The majority of that is likely to go to their millennial offspring. Cerulli Associates predicts that people with a net worth of $5 million or more will account for roughly half of that amount.
money management organizations report that some of that money has already begun to trickle down to the next generation.
"The great wealth transfer, which we've all been talking about for the last 10 years, is underway," said John Mathews, head of UBS' Private Wealth Management business. "The average age of the world's billionaires is around 69, right? now. So the whole change or wealth transfer will begin to accelerate."
Tensions between the millennial classes are expected to rise as more money is transferred in the coming years. Wealth displays on social media by millennial "nepo babies" may exacerbate the intra-generational class conflict, leading nonwealthy millennials to waste or create the illusion of opulent lifestyles in order to keep up.
According to a Wells Fargo poll, 29% of wealthy millennials (defined as having investable assets ranging from $250,000 to more than $1 million) admit to "sometimes buying items they cannot afford to impress others." The poll found that 41% of wealthy millennials use credit cards or loans to support their lifestyles, compared to 28% of Gen Xers and 6% of baby boomers.
The The conflict between wealthy millennials and the rest may also impact their attitudes about money. For more than four decades, the great majority of millionaires and billionaires in America have been self-made, mostly as entrepreneurs. According to a Fidelity Investments research, 88% of American billionaires created their money on their own.
However, inherited riches might become increasingly typical. According to a UBS survey, among newly minted billionaires last year, heirs who inherited their riches outearned self-made billionaires for the first time in at least nine years. For the first time in 15 years, all of the billionaires under the age of 30 on Forbes' most recent billionaires list inherited their riches. The increase in wealth among millennial heirs is also generating a lucrative new market for wealth management organizations, luxury brands, vacation agencies, and real estate brokers.
Clayton Orrigo, one of Manhattan's leading luxury real estate salespeople, has created a successful career around wealthy millennials. The creator of Compass' Hudson Advisory Team has sold over $4 billion in real estate and frequently arranges deals for more than $10 million. He claims the "vast majority" of his recent business comes from customers in their 20s and 30s with inherited riches.
"I just sold a $16 million apartment to someone in their mid-20s, and the buyer accessed the family trust," he told me. "The wealth that is behind these kids is extreme."
Orrigo now specializes on inherited riches. He claims he attempts to establish strong ties with family offices, trusts, and the young money elite who frequent New York membership clubs such as Casa Cipriani.
The pattern is familiar: A affluent family calls to inquire about a rental for their son or daughter; a few years later, they want to purchase a $5 million or $10 million two-bedroom apartment in a new, high-security building downtown.
"My gig is working very quietly and very discreetly with the wealthiest families in the world," Orrigo said in a statement.
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