rethink everything

    How will young entrepreneurs change the face of wealth?


    There is a new status quo in the world of power and ambition. Millennial entrepreneurs lead the charge in innovation and investment, and there are more millionaires under the age of 21 than ever before. But as bedrooms become boardrooms and university assignments become the next tech start-ups, how will this new generation change the face of wealth?

    The millennial generation


    The millennial generation is defined by entrepreneurship more than anything else. And, with more millionaires under the age of 21 than ever before, they are changing the face of wealth and investing. Millennials are not only creating disruptive technologies; they’re expecting the same thinking applied from the companies they do business with. Innovation, seamless ease of use, and transparency are now key components of the value chain. That’s good news for the rest of us, as it’s forcing traditional companies across multiple sectors to adapt or be surpassed.

    Technology and attitudes about wealth are just two of the things that separate today’s young entrepreneurs from other generations.

    These fresh-faced founders grew up customising their own Nikes; even X-box controllers were produced by their own design. It’s no wonder tailored services are now expected, rather than seen as an extra. And when they see a gap in the market, they set up their own companies to address those needs.

    Take 26-year old Londoner Daniel Attia. He didn’t think estate agents were earning their 2% (on average) fees, so he co-founded, an online home buying and selling service with a simple, stratified fee structure. The site launched last year and is creating a buzz in the UK’s billion-pound property business.

    Attia and his business partners together have decades of experience in the property market. They’ve seen how it works from the inside, but are young and hungry enough to follow their instinct, which is that there’s a better, more democratic way to do business. Crucially, they also know that if they don’t disrupt traditional, heavily fee-based industries, someone else will.

    “This is the last real archaic industry that we could see that really hasn’t been touched for so many years. It was just waiting for someone to come and really change it and disrupt it,” Attia says.

    Clients choose from three different fee tiers with total transparency. For entrepreneurs like Attia, that transparency, and strong customer service are the cornerstones of any new business these days. His office responds to calls and emails seven days a week. “Eventually, we want a member of our team to be in the office 24 hours, every day.”

    The benefits of an increasing push from millennial entrepreneurs to deliver on service, convenience and price is creating a positive impact across all sectors.

    There’s a sense that the 20-something tech founders know more about almost everything than any other generation. But, the irony about these young entrepreneurs making their first millions is that their attitudes towards wealth and investing are totally different from those of their parents and other generations.

    Adults born after 1985 grew up in a recession which, understandably, helped shape a fairly conservative view towards investing in the stock market. It also created a sensitivity to market volatility. Although millennials have less financial knowledge than their parents, they have a faster route to wealth, not just from their own successful startups, but also through inheritance.

    More millennial millionaires have inherited wealth than any other generation, according to a study published earlier this year that found that 45 percent of millennials (aged 18-35) had affluent parents, compared with just 28 percent of Gen-X millionaires and 18 percent of baby boomer millionaires. The fiscal safety net has helped drive entrepreneurship among millennials, but is also pushing changes in the way financial advisors interact with customers.

    One California public relations director recently lamented about new client meetings with young tech founders. Typically an hour is scheduled, yet young entrepreneurs are insisting on meetings of no more than 30 minutes. Millennials are changing the rules – replacing long, fancy lunches for short meetings over coffee. Financial advisors are honing their three-minute elevator pitch, rather than poring over pages of documents to prove the value of an investment.

    young entrepreneurs are insisting on meetings of no more than 30 minutes.

    By extension, young entrepreneurs want to be talked to in clear, straightforward terms. Not for them opaque fee structures wrapped up in complicated jargon. Because of startups like Yopa, and Antlos, which allows the non-elite to charter boats and yachts AirBNB-style with upfront pricing, fees without the cloaked mystery are becoming the norm, whether it’s renting a yacht, or making an investment. A report on millennial wealth management by Deloitte suggests performance-based fees, rather than flat fees.

    This is a generation that has taken investment clubs to the next level. Entire online communities connect investors around the world to share ideas and strategies. Millennials are the generation that made cutthroat a bad word, and collaboration paramount. Their willingness to embrace radical transparency, and disclose their holdings to members of their community, online or otherwise, is no different. Entrepreneur Jon Medved (not a millennial) founded OurCrowd to democratise venture capital. With a minimum net worth of USD $1M, anyone can invest alongside billionaires and venture capital gurus. The price of entry is just USD $2,500 and OurCrowd investors include Andreessen Horowitz, Sequoia, GE and others.

    Millennials are the generation that made cutthroat a bad word, and collaboration paramount.

    The opportunity to get in on an Uber or Google before the share price skyrockets is one benefit of sites like OurCrowd. Facebook founder Mark Zuckerberg and his wife, who pledged 99% of their shares in the social media site, with a value of USD $46B, to charitable causes, represent their generation. Other millennials may not have the resources to give away a billion dollars a year for the next three years the way Zuckerberg can, but the commitment to philanthropy and social causes is an important factor for these new millionaires when deciding where to put their money. For this generation, money is not the sole indicator of success, nor do material goods provide the instant gratification they seek; it’s quality of life that matters most.

    Seventy percent of America’s 2016 university graduates are more concerned with office culture than compensation. Nearly all of them believe it’s important to work for a socially responsible company and value personal and professional growth over a higher income. That could explain why, in the city of Chicago, alone, the number of MBAs taking jobs at technology firms (rather than finance) has risen from 6% to more than 12% since 2007.

    Further proof resides in Silicon Valley. Stock options and more zeros on their annual salaries aren’t the things that tempt hotshot developers to switch companies. It’s the flexible work hours, a positive environment, and convenient amenities that have the real value. The ability to work remotely full-time, or even for a few months a year, along with authenticity – a brand that’s true to its customer and its employees are like gold dust. They apply the same expectations of an employer to the companies they work with or patronise, which means that we’re only going to see more brand partnerships be it a social cause, creative or tech.

    There is a sense of obligation to create positive change in the world, which makes alternative or impact investments attractive to 70% percent of millenials. The desire to play an active role in the world isn’t limited to business. It affects their decisions across all aspects of their lives: how and where to travel, and which experiences to seek.

    There is a sense of obligation to create positive change in the world, which makes alternative or impact investments attractive to 70% of millenials.

    It’s never been more important for financial services and other companies to either adapt to suit these new customers, or partner with businesses who can fill the gaps. The emerging affluent are now those with investable assets of USD$50,000 - 250,000 and an annual income of $100,000. The face of wealth is changing and millionaire millennial entrepreneurs are here to stay. After all, young founders may start small, but when they work out the secret to a successful startup, how high is up?

    This is a marketing communication issued by Bank Lombard Odier & Co Ltd or an entity of the Group (hereinafter "Lombard Odier"). It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it aimed at any person or entity to whom it would be unlawful to address such a document. This marketing communication is provided for information purposes only. It does not constitute an offer or a recommendation to subscribe, to purchase, sell or hold any security or financial instrument. It contains the opinions of Lombard Odier, as at the date of issue. These opinions and the information herein contained do not take into account an individual’s specific circumstances, objectives, or needs. No representation is made that any investment or strategy is suitable or appropriate to individual circumstances or that any investment or strategy constitutes a personal recommendation to any investor. Tax treatment depends on the individual circumstances of each client and may be subject to change in the future. Lombard Odier does not provide tax advice. Therefore you must verify the above and all other information provided in the marketing communication or otherwise review it with your external tax advisors.
    Some investment products and services, including custody may be subject to legal restrictions or may not be available worldwide on an unrestricted basis.
    Investments are subject to a variety of risks. Before entering into any transaction, an investor should consult his/her investment advisor and, where necessary, obtain independent professional advice in respect of risks, as well as any legal, regulatory, credit, tax, and accounting consequences. The information and analysis contained herein are based on sources considered to be reliable. However, Lombard Odier does not guarantee the timeliness, accuracy, or completeness of the information contained in this document, nor does it accept any liability for any loss or damage resulting from its use. All information and opinions as well as the prices, market valuations and calculations indicated herein may change without notice.
    Past performance is no guarantee of current or future returns, and the investor may receive back less than he invested. The value of any investment in a currency other than the base currency of a portfolio is subject to foreign exchange rate risk. These rates may fluctuate and adversely affect the value of the investment when it is realized and converted back into the investor’s base currency. The liquidity of an investment is subject to supply and demand. Some products may not have a well-established secondary market or in extreme market conditions may be difficult to value, resulting in price volatility and making it difficult to obtain a price to dispose of the asset.
    European Union Members: This marketing communication has been approved for issue by Lombard Odier (Europe) S.A., a credit institution authorised and regulated by the Commission de Surveillance du Secteur Financier (CSSF) in Luxembourg and by each of its branches operating in the following territories: France: Lombard Odier (Europe) S.A.• Succursale en France, a credit institution and regulated in France by the Autorité de contrôle prudentiel et de résolution (ACPR) and by the Autorité des marchés financiers (AMF) in respect of its investment services activities. United Kingdom: Lombard Odier (Europe) S.A. • UK Branch, a credit institution regulated in the UK by the Prudential Regulation Authority (PRA) and subject to limited regulation by the Financial Conduct Authority (‘FCA’) and the Prudential Regulation Authority (‘PRA’). Details of the extent of our authorisation and regulation by the PRA and regulation by the FCA are available from us on request. UK regulation for the protection of retail clients in the UK and the compensation available under the UK Financial Services Compensation Scheme does not apply in respect of any investment or services provided by an overseas person.
    Switzerland: This marketing communication has been approved for issue by Bank Lombard Odier & Co Ltd, a bank and securities dealer authorised and regulated by the Swiss Financial Market Supervisory Authority (FINMA).
    United States: Neither this document nor any copy thereof may be sent, taken into, or distributed in the United States of America, any of its territories or possessions or areas subject to its jurisdiction, or to or for the benefit of a United States Person. For this purpose, the term "United States Person" shall mean any citizen, national or resident of the United States of America, partnership organized or existing in any state, territory or possession of the United States of America, a corporation organized under the laws of the United States or of any state, territory or possession thereof, or any estate or trust that is subject to United States Federal income tax regardless of the source of its income.
    This marketing communication may not be reproduced (in whole or in part), transmitted, modified, or used for any public or commercial purpose without the prior written permission of Lombard Odier.
    © 2016 Bank Lombard Odier & Co Ltd – all rights reserved

    let's talk.