A recent World Economic Forum report paints a bleak picture for young people across the globe. In addition to the mental health crisis caused by the pandemic, they are facing rising inequality, climate change, and automation.
Facing the highest inflation in a generation, young people are turning to investments in search of a better future. Gen Z has demonstrated a heightened consciousness for spending and savings habits, as 12% have already initiated their retirement savings, while 35% plan to begin saving in their 20s. This is a marked change from previous generations, who often didn't start thinking about retirement until they were in their 30s or 40s.
How Gen Z invests
However, the prospects for young people's investments are dismal. According to Credit Suisse's investment returns yearbook, they can expect average annualized returns of just 2%. This is far below the historical average of over 5% real returns.
In a "low-return world," Gen Z is turning to high-return, high-risk investments. A poll of 2,000 UK investors showed that 62% of Gen Z have invested in alternative investments like cryptocurrency, fine wine, and art, compared to just 46% of investors overall.
Further, the majority of users on StockX, the world's largest online marketplace for buying and selling limited edition products, are Gen Zers. And it's not just because they're more comfortable with technology. Gen Zers are savvy investors who are looking for ways to hedge against inflation.
Though young, Gen Z has already shown itself to be a force to be reckoned with when it comes to investing, with 9 in 10 surveyed saying they were investors or had considered investing. Given their earlier start, their unparalleled interest in alternative investments, and their willingness to take risks, Gen Z incomes are projected to surpass those of millennials by 2031. They are the future of wealth, and they are shaping the future of investing.
Today’s wealthy Gen Z
Very little has been written about the unique financial challenges and opportunities that will face Gen Z’s wealthy segment. Indeed, RBC's Wealth Management Report defines "younger HNWIs" as "people born between 1965 and 1997," leaving out Gen Z altogether.
This is a huge oversight, considering that there are already 2,000 Gen Z and millennial millionaires in the UK alone, an increase of 100% from the previous year. And this number is only going to grow, with 59 percent of Gen Z surveyed expecting to become millionaires through cryptocurrency investments.
What's more, a full 60% of China's college students say they expect to be millionaires. With such high expectations, it's no wonder that Gen Z is already making waves in the world of high finance. In fact, Gen Z is seeing its share of billionaires, including Kylie Jenner, Alexandra and Katharina Andresen, Kevin David Lehmann, and Wang Zelong.
This is just the beginning, and as Gen Z's interest in alternatives grows, we can expect to see even more young HNWIs in the years to come.
Catering to Gen Z HNWIs
The rise of Gen Z HNWIs will have a profound impact on the future of wealth. As such, it's important for RIAs to start catering to this demographic now.
One key is to offer alternative investments that cater to Gen Z's interest in high-risk, high-return assets. Enter Gridline, a digital wealth platform that enables access to professionally managed alternative investment funds with lower capital minimums, fees, and greater liquidity.
The firm's mission is to open up access to top-quartile private market alternative investments, historically only available to sophisticated family offices and endowments — allowing individuals to invest in a transparent, efficient, and lower-cost manner.
In other words, Gridline is committed to making it easier for everyone—not just the wealthy few—to invest in private markets in a way that aligns with their values. This is something that Gen Z HNWIs are sure to appreciate.