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Wealth Management: Where Do Young Millionaires Invest?


When it comes to modern wealth management, young millionaires have shown us some fabulous ways on how to manage wealth.

Imagine yourself waking up tomorrow as a millionaire.

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What would you do with your money and how would you manage it?

Apparently, it seldom happens when you are both young and millionaire at the same time.

Sounds like a dream come true, right?

Yes, indeed; finding yourself as a millionaire is something that you would always want to happen.

Achieving a millionaire status is like a dream come true to many of us, yet this position brings in a lot of responsibility.

Especially, how to manage your wealth, so your financial stature is not hurt in any ways.

Wealth ManagementThere are a plethora of distinct ways to achieve this financial stature and it takes real wealth management efforts to reach here.

A recent statistics from Capgemini Consulting noted some unique ways through which these young millionaires manage their wealth.

In order to achieve their goals, many young people are investing money to build a strong business, yet few kiss the summit.

Research has proven that these young millionaires seem to be more conservative unlike their boomer counterparts and like to hold on to their wealth.

They are less prone to invest their money in stocks and more likely to stack up cash while investing in other alternatives.

Here we will go through some savvy tips how young millionaires invest their money and it may be helpful for you to achieve your goals faster.

When someone attains a high net individual stature or HNWI, media covers their part of the journey.

However, seldom we can learn about the ways how they did their wealth management.

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What Is HNWI?

Let us learn how young millionaires invest their money so you can attain your goals if you are thriving to become the next HNWI.

We all want to achieve the HNWI status, however, do you actually know what HNWI is?

As per the World Wealth Report by Capgemini, a person having investable assets worth $1 million and even more is a HNWI.

This has to be excluding the consumer durables, collectibles, his primary residences etc.

Reports suggest that over the last 8 years, this specific sector has doubled and apparently, the growth is robust.

In the US alone, it has grown upto 7.8% counting to 5.2 million people in 2016 on the contrary to 2015, where it was merely 2%.

The potential growth of these millionaires leaves us wondering how wealth management advisors cater to their needs.

People are keener to seeing how the advisors manage the wealth of these millionaires.

Young millionaires have a completely different perspective of managing their wealth.

They have different needs and a new perspective of how they will do wealth management unlike before.

Especially, those who have played with risks such as opening a venture, investing in real estate or even investing money in the markets.

They just do not blindly make investments like their parents or predecessors did.

How Young Millionaires Behave? Their Wealth Management Perspective

You would find it really interesting to notice the divergence of these young millionaires compared to their parents.

Young Millennials are able to rank higher and keep demanding more from their wealth management advisers.

They just do not show a blind eye to the advisors like their predecessors did.

Younger millionaires exhibit less trust in their wealth managers and have less confidence on the entities they represent.

This shift in their attitude has emerged as a threat to most wealth management advisors.

Planners have realized the threat and are forced to bring a change in their strategy of conducting their business.

However, this is actually a good thing to happen considering the dubious ways they did business before.

What Young Millionaires Want from Their Wealth Management Planners?

Wealth management is a service sector and needs to focus sharply on the needs of clients, not on the gains of a planner.

The planners now are adopting new technologies, unique meeting process and are getting specialized on the client’s needs.

This is in order to stand out from the rest and deliver what these young HNWI fellas are looking for.

These young millionaires frankly deserve this level of service.

Young millionaires are more demanding and they require sophisticated wealth management services.

Millennials are thriving for a robust digital experience, nothing short of it.

They want their financial advisors to understand their needs better and are ready to let them go, in case they fail.

Millennials have high propensity of hiring a new advisor if the existing one is unable to satisfy them.

Young millionaires want to stand out unique from their counterparts.

Hence, they have very specific and unique wealth management needs.

They consider their financial stature as more complicated and think it has a global scope.

They look out constantly for wealth managers who has a thinking of everything on a global scale.

Young millionaires never shy back from hiring other field experts to achieve better customized services for their needs.

They prefer low costing, robust digital experience services from their planners.

They prefer expert wealth management teams having the leverage of automated investing strategies to outpace others.

Young millionaires keep a track of four specific concerns.

Rise in educational costs.

Well-being of their family should anything bad happen.

Higher education Access.

Easy availability of Credits.

How Young HNWI Invest Money and Do Wealth Management?

Young millionaires are nowadays doing the opposite to what they did before.

Most young millionaires took calculated risks prior to amassing wealth, which eventually, paid off.

However, when they achieve a good financial stature, these risk players become risk averse.

This may come to you as a surprise since entrepreneurs are generally risk players.

When they see good amount of cash stashed in their accounts, their attitude towards risks changes.

They begin to realize how hard they worked to enjoy this financial success they are having now and not ready to lose it.

The perspective towards their money and risk attitude changes substantially.

Wealth management is completely different and varies from people to people.

However, some of the common ways young millionaires do wealth management are as follows.

Stashing Cash Is One Wealth Management Process

You heard it right.

Young millionaires like to stash up their cash.

Although, it is true that they do not earn anything on this, but they still like to keep it liquid.

They have a peace of mind upon keeping liquid cash in their account.

It also keep the doors for new investment opportunities open.

According to the research, 17% of young millionaires think they can pounce right away on to new opportunities if they have liquid cash.

Another 31% of young millionaires claimed that they can enjoy the lifestyle they want only if they have liquid cash.

It includes vacation expenses, shopping expenses and fine dines whenever they want to.

However, people who worries more on paying off their bills and debt may not have the similar perspective.

Nevertheless, the motivations of millennials keeping cash isn’t that distinct from the ones who look forward to doubling their cash flow.

Capgemini study reported that 28% young millionaires think stacking up cash is a preventive measure in times of volatility.

This actually related to the study which shows that young millionaires are risk averse.

They do not like playing risks with their cash savings, inspite of the fact that they may not need the cash soon.

Greg Popera, a private wealth management advisor associated to Merrill Lynch said keeping liquid cash comes with a cost too.

When you don’t invest on real estate, stock etc, you are actually depriving yourself from potential higher returns.

It is important to invest some part of savings into bonds, stocks or other investments so you don’t miss out on high yields over time.

Tax Efficient Wealth Management:

There is an old saying, ‘the more money you have, the more problems arise’.

Storing up loads of cash does not signify that you will face no problems.

They might change pattern and can get bigger at times, for example, taxes can bring in problems for you.

Making investments in municipal bonds, Roth IRA, real estate, insurance etc. can help ease these taxes.

It will in return make a good, tax discounted investment portfolio.

Start-Up Investment: A Good Way to Wealth Management

A young millionaire can understand how hard it is to proceed with a start-up.

Those making money from this scaling, starting and selling journey understand just how complicated it is.

They express interest in funding private start-ups both financial as well as strategically.

However, due diligence and proper analysis of the start-up should be done to protect the money.

Real Estate Investments:

Even if it is a bit risky, but investing in real estate is also a good wealth management strategy.

You can benefit from real estate investments such as cash flow, depreciation.

Spreading Bets Is a Good Wealth Management Strategy:

As for the investments, young millionaires do not believe in investing towards any single avenue.

Almost 30% of young millionaires keep their assets with wealth management planners.

They help young wealthy to construct good portfolio by investing into stocks, bonds and other avenues.

However, a sheer 40% of the portfolios are divided into less popular investments like real estate, a venture or other alternative avenues.

Financial planners say that these investments, which include gold, hedge fund etc. behave different to that of a stock market.

The stock market of Britain plunged when it announced leaving European Union, however, gold prices soared high.

Likewise, investing into real estate is creating rental, steady income not dependent to their business or stock markets.

Investing money to businesses or start-ups can lead to potential returns when the company performs well.

However, since these come with risks, young millionaires invest only 13% of their money compared to that of liquid cash.

Consulting with Friends and Researching on the Web for Better Wealth Management

Coming to wealth management, young millionaires look out to take family and friends help alongside researching on the web.

Unlike their older generations, they do not straight away hire professional help.

Compared to 27% of all aged millionaires in USA, only 17% of young millionaire assets are with professional financial planner.

TD Ameritrade reported that 28% of young millionaires take friends’ help on the contrary to 15% seeking professional financial help.

Tej Vakta, senior leader with Capgemini Financial services says young millionaires do not rely on conventional wealth management.

Young millionaires want their wealth management professionals to offer online services so they can track their wealth real time.

Millionaires of all ages now are demanding more for online services unlike before.

On the contrary to 49% in 2015, 67% of millionaires this year demanded online services like robo-advisors.

Investing with Purpose Is Very Important for Wealth Management

Besides boosting their investment portfolio, many young rich people now intend investing for social causes.

They want to ensure their bucks are going to the socially responsible companies.

They look forward to investing in companies that does social welfare such as climate change.

This is also called socially responsible investments, offering aid to companies that work for a cause.

They also ask wealth managers for the exclusion of sectors such as alcohol companies, gun manufacturers and tobacco manufacturers.

Investments such as mutual funds, exchange trading funds, which offer similar avenues are on the verge of rising.

A Bank of America unit, U.S. Trust reported that since 2015, this intention of social investments to make impact is on the rise.

34% Generation X and 60% of young investors started the use of social impact investments since 2015 regularly.

Richard Dale Horn, senior VP of UBS Financial Services stated these investments as Feel Good Investments.

However, it is important to evaluate that you don’t end up investing huge on a single sector.

A proper balance is necessary for better wealth management.

Using Buckets Is a Good Wealth Management Process

A proficient wealth management expert can inform you that it’s not all about the money you have.

What impacts is how you spread out your money.

This specific concept of investment is known as diversification.

It is not just confined to your 401K mutual fund investments, but leaves impact here too.

Young millionaires never rely on one Investment Avenue and look forward to making several investments.

This include bonds, stocks, equities etc. alongside non-conventional investments such as Real Estate.

You can find the best usage of Buckets in the real estate investment sector.

They can hold on to REIT, otherwise known as Real Estate Investment Trust and general regular income not relying on their own business.

This regular income helps in purchasing smart avenues to grow more money and setting up small business to further diversify.

The most lucrative part of using Buckets is that you are diversifying your risk and not have to face a Bernie-Madoff scenario.

If you see one bucket not performing well, cut it off right away and look onto the others.

Young Millionaires Are Curious on Wealth Management

Millionaires under the age of 40 very well understand how important it is to have a wealth management expert.

When you achieve the HWNI or millionaire stature, you presumably have an efficient lawyer and CPA with you.

However, they are always curious and reluctant to listen to only one person’s decision.

Young Millionaires like to know more and never get tired of searching for alternative solutions.

Millenials take the help of family, friends and the internet to leave no stones unturned.

They are always hungry and in a hurry to skyrocket.

Bottom-Line: Road to Wealth Management

There are undoubtedly tons of ways to become wealthy and perform better wealth management.

You can create your company, or invest like Warren Buffet or even create a successful app.

However, what is the common message you get?

Regardless of the fact how you create your money and become wealth, smart planning is what helps you survive in the long run.

I have come across many people who became wealthy, but they eventually lacked proper planning.

You can be the winner if you can leverage the immense power of smart wealth management planning.

It will assist you in shaping your financial life and do proper wealth management in a way that lets you do everything you want.

You can have fun in your life, go after your dreams, help the society and take care of everything that matters.

Wealth management got nothing to do with planning.

It begins with your dreams, high hopes and goals.

Your wealth management planning is simply the roadmap to realizing your goals and ensuring all your dreams come true.

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