The UK's Telegraph recently ran an interesting article on wealthy millennials and how they are spending and investing their money. Many choosing alternative investments and luxury goods over traditional investments such as stocks and bonds.
The Telegraph article states "Research has shown that those under 34 are much more likely than other generations to own other ‘alternative’ investments, including art, jewellery and fine wines – and are shunning more traditional assets such as stocks, shares and bonds in the process."
The Telegraph reports
Source: The TelegraphIn today’s social media era, where appearance is everything, a share certificate no longer cuts the mustard, explained 32-year-old watch collector Silas Walton. “Young millionaires want to show off their wealth: you can’t wear stocks and shares so they put their money elsewhere,” he said.
He runs A Collected Man, a business selling investment-grade luxury watches, and said a significant number of his clients fall into this ‘millionaire millennial’ bracket.
“The typical buyer is usually a 30-year-old male, based in London, often working in the City or the head of a start-up,” he said. “It won’t be their first watch. They’ll have probably spent a few years following watch blogs and Instagram accounts, and will be looking to invest between £10,000 and £30,000.”
One of his richest clients under the age of 40 has spent in total more than £1m on A-grade time pieces over the past few years.
“Because there’s so much demand from wealthy millennials – particularly for vintage steel sports watches – our older clients are starting to realise that this is where they should be investing too. They’ve actually started copying the younger ones,” Mr Walton said.
What are they buying?
As a result, prices have started to pick up. The sleek design of the steel Patek Philippe Aquanaut 5065 is a favourite with young investors, said Mr Walton. Its price has doubled to around £25,000 over the past 18 months, while the cost of a steel Audemars Piguet Royal Oak 14700 has gone up from £9,000 to £20,000 over the same period. “The most desirable watches can easily sell on Instagram for £50,000 within half an hour.”
Mr Walton was an investor long before he started his horology business. He previously worked in private equity and used to own a number of stocks and shares. “But I sold them all a few years ago,” he explained. “I realised that if I was going to invest, I might as well invest in something I understand.”
It is not just watches that young investors are splashing their cash on. Research has shown that those under 34 are much more likely than other generations to own other ‘alternative’ investments, including art, jewellery and fine wines – and are shunning more traditional assets such as stocks, shares and bonds in the process.
The generational investing gap
For Dr Pete Brooks, a behavioural scientist who works with Barclays bank, much of the reason lies in the financial circumstances this group grew up in. “This is the generation that came of age during the Great Financial Crisis of 2007,” he said. “Seeing the disastrous effects of events like these in your formative years has a lasting impact on what you do with your money and can give people a mistrust of investment companies that lasts a lifetime.”
Barclays found that 25 to 34-year-olds are around three times more likely to invest in fine wines than people aged 35 and above, and twice as likely to invest in art or antiques. Around 10pc of the younger age group had invested in art, while 15pc had invested in wine.
Millennials are getting a taste for wine
Tom Gearing, 32, bought his first investment wine at age 13. “I went to an auction at Christie’s with my Dad and we bought a 12-bottle case of 1959 Domaine de la Romanée-Conti, Romanée-Conti for £16,000 – I was even allowed to hold the paddle,” he recalled. Today, that particular vintage is worth £16,000 a bottle – 1100% more than what he paid 19 years ago.
During university, Mr Gearing started a business selling fine wines to investors which, over time, has morphed into Cult Wines – a wine investment service managing £120m on behalf of its clients.
“We’ve been really surprised by how much interest there is from younger people,” he said. “They tend to invest much more heavily than our older clients: usually around 10 to 15pc of a £1m portfolio.”
Very few of these uber-rich millennials will hold government bonds as their parents or grandparents would have done, Mr Gearing said. “They consider wine to be their safe haven – a low-risk option for balancing their portfolio.” Most, he added, will have money invested in art, jewellery and classic cars too.
Younger investors also tend to be much more engaged with the technical side of things, he said. “They’re so keen to learn. We have a digital platform that allows you to check your portfolio and how the prices of the wines have changed on your phone at any time – they absolutely love it.”
Are these millennial millionaires in it for the money or the passion? According to Mr Gearing, it is a mix. Generally, he said, these young millionaires will already like wine, but at the end of the day, they want their investment to turn a profit.
“Older investors tend to have a bit more wealth so are less fussed if they don’t get a return on their money,” Mr Gearing said. “They just think: ‘Well, if it doesn’t make a return, I can still drink the wine’.”
Investing in a post-crash era
Like Mr Walton, Mr Gearing also comes from a financial background, being the son of an investment banker, and had a near scrape with the City. “I was meant to go and work at an investment firm – but when the financial crash hit my graduate scheme got cut.” That was when he decided to start the wine business.
It was a good time for launching it, Mr Gearing added, as the crisis pushed people away from stocks and shares and towards more esoteric investments.
According to Dr Brooks, this mistrust of financial markets among Britain’s young and wealthy could be here to stay.
“You see throughout history that generations coming of age during an economic crash carry this with them,” he said. “After the Great Depression in America, young people became much less likely to invest in stocks and shares – and this wariness lasted throughout their lifetime.”
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