Whether it’s from the “great wealth transfer” – which anticipates about $84 trillion in wealth will be passed down to Gen X, millennials and Gen Z over the next couple decades – or from accelerated entrepreneurial success, the Los Angeles wealth landscape is getting younger.

Brad Larsen, managing director and senior market executive for Bank of America Private Bank Los Angeles, said the number of L.A. clients who qualify for BofA’s Private Bank, meaning they have at least $3 million in investable assets, has quadrupled in the last few years.

While some of this is a result of inheritance, Larsen finds L.A. wealth to be less legacy based than other large cities like Chicago and New York, roughly estimating that about half of L.A.’s younger wealth clients come from family money and half are self-starters.

“L.A. is a younger wealth market,” Larsen said. “It’s a lot of first-generation money and homegrown wealth here.”

Debbie Chan, an L.A.-based tax principal at BDO USA who specializes in serving high net worth individuals, said she finds diversity and variety in the types of wealth here in Los Angeles and how that wealth is generated. In her practice, she primarily sees entrepreneurial wealth with some generational wealth mixed in.

With a thriving tech space on the West Coast and the ease and cost efficiency at which someone can now start a digitally operated business, new companies are performing better even under tough economic circumstances, Larsen said. He dubbed this concept as “the advancement of the asset light era.”

“What we’ve seen over the last year or so is companies are able to withstand and keep their margins where they were, even though inflation happened, even though there’s other outside (factors), because they’re able to run their companies more efficiently with that asset light,” Larsen said, adding that starting a business is no longer as “asset and capital intensive” as it once was.

For those who do come from successful families, many are further propelling the family business by integrating technology and creating an online presence.

“That opens up a whole new revenue stream and makes mom and dad’s existing company a lot more profitable and a lot more valuable, because they bring that younger generation thinking to an established business,” Larsen said.

With a new generation of wealth comes a new way of thinking about asset allocations. Younger high net worth individuals are placing less emphasis on stocks, looking to alternative assets, cryptocurrency and outside-the-box real estate opportunities.

Stocks and alternatives

A 2024 BofA Private Bank study of wealthy Americans found that high net worth investors ages 21 to 43 allocate about 28% of their portfolio to stocks, compared to 55% for those 44 and older.

Brittany Boals Moeller, who leads Goldman Sachs Private Wealth Management’s strategy for the next generation of wealth creators and inheritors, said she has observed a “view among many that traditional asset classes like fixed income and equities are somewhat commoditized.”

While Boals Moeller has noticed this across age groups, she does find it to be more common among the younger generation. One explanation is the market they have grown up with.

“Aside from the financial crisis, and obviously during Covid, (younger generations) have had a market – and the U.S. equity market in particular – that’s performed so well,” Boals Moeller said.

With a history of taking risks and having those risks pan out, the younger generation is more inclined to strive for growth, whereas Boals Moeller said prior generations may be more focused on preserving capital. Nonetheless, she still finds value in properly constructed public equity portfolios to produce results for clients.

Additionally, Chan finds that second generation wealthy individuals may have a bit more of a risk appetite in their nature having grown up around money.

“Because of the foundation their family has established, I think that (second generation) is able to take a little bit more risk and have a little bit more opportunity to try some different things,” Chan said. “That’s why I think we see some of that differentiation between what they’re investing in… They want to be able to take that wealth and see what they can then do with it on their own as well.”

In terms of where younger investors are putting their money instead, Larsen said much of it boils down to tangible assets like commercial real estate and privately held businesses/private equity.

Not only does this apply to diversified private equity, but also co-investment opportunities, Boals Moeller said. With companies staying private for longer, having access to a private company as it continues to grow can be quite lucrative for an investor.

Additionally, she finds the younger generation gravitating toward “thematic investing” in things such as AI or global infrastructure.

“Some clients really want to lean in and have additional exposure (in these areas),” Boals Moeller said. “We’ll help them think about a basket of securities that we can construct around a particular theme.”

Chasing crypto

Another investment trend with a generational tilt that comes as no surprise is cryptocurrency. A BofA study found that crypto and digital assets were ranked second by wealthy Americans between 21 and 43 as the greatest growth investment opportunity compared to being ranked last by the 44 and up group.

Chan estimates that about 85% of her younger clients have invested in crypto in one form or another.

There’s an argument to be made that crypto is the young person’s gold in that the two share an appealing yet volatile reputation.

Because of this, Chan finds that most of her clients aren’t necessarily building their portfolios around crypto but instead are viewing it as another avenue to grow the wealth they have already built.

Boals Moeller echoed this point, adding that she doesn’t see clients taking large positions in crypto, though there is significant interest and curiosity particularly with younger investors.

Interestingly, however, Larsen finds that when comparing young high net worth individuals in Los Angeles versus other regions, the pull toward crypto weakens. Based on conversations with clients across different geographic areas, Larsen estimates that young, wealthy Angelenos are about 25% less interested on average in investing in crypto than other young investors.

A potential explanation for this is differences in the wealth landscape in L.A. which places great magnitude on real estate versus somewhere like Silicon Valley which is more focused on tech.

“Our younger generation here in L.A. has more often witnessed their parents having more tangible assets, either in commercial real estate or in building a successful physical business,” Larsen said. “Whereas, when you look at the Silicon Valleys of the world, (they) have grown up in that tech industry, and there’s not a lot of physical, tangible stuff around.”

Reevaluating real estate

Real estate remains a steadfast investment priority among wealthy individuals of all ages, though strategies can vary.

“It isn’t necessarily new things but it’s more what’s a better method or better structure,” Chan said.

This could be investing in a real estate investment trust (REIT) to avoid the day-to-day operations, investing in properties with quick turnarounds or exploring private equity real estate funds. On the other hand, Chan finds that first generation wealthy individuals are more likely to invest in real estate directly tied to their own businesses or properties that generate steady income over time.

“(The second generation) is more interested in real estate, not just as part of their existing business, or just as a passive income stream, but really looking at it as (how can I) get greater returns more quickly or structured in a different way that I can access different types of real estate,” Chan said.

For clients who have primarily become real estate owners as a result of their own businesses, Boals Moeller finds they aren’t always interested in fielding new investment opportunities.

Investments can also differ from a creative design standpoint. The younger generation can have different priorities in terms of project execution, opting for innovative architecture and including designated common areas, Larsen said.

Larsen recalled an interaction he witnessed when a client showed his father the property he had designed and the father said he would never have come up with that idea, but that it worked “so tremendously.”

Across all generations, Boals Moeller is seeing high interest in real assets, “focusing on infrastructure, long-term projects that provide very long-term return goals, but that are outsized relative to what you might see in a typical sort of real estate investment that’s more focused on yield,” she said.

Sports, philanthropy and impact investing

Where older investors have the edge over the younger generation is investing in sports teams, though the advantage is driven by available resources, as opposed to interest.

“(Investing in sports) skews more to the older generation, just because you have to have substantial wealth to be looking at a sports team and that under 44 crowd just isn’t at that critical mass yet where that becomes much of an option for them,” Larsen said.

With sports teams’ valuations being so high, Larsen finds that investors also need to put a significant amount of capital into the ambiance of a stadium through restaurants and shops to have other income sources that are driven by the stadium.

To own just 5% of the Los Angeles Lakers – most recently valued at $7.1 billion – an investor would need to put up $355 million.

While the current investor pool for these teams is “extremely upper echelon” and ultra-high net worth, Chan said this could evolve in the future with the recent emersion of private equity investing in National Football League franchises.

Another evolving interest is philanthropy. While the vast majority of wealthy individuals of all ages are involved in charitable giving, younger investors are focused on different causes – namely, homelessness, social justice and climate change, according to BofA’s wealth study.

In addition to charity, these interests can manifest themselves into investment preferences.

Boals Moeller calls this “mission-oriented investments,” where clients aim to translate their values into investment opportunities. A prominent example is investing in companies focused on climate change.

While some research has shown this is more common with younger generation, she finds that within her practice of handling family wealth plans, the younger group can often teach their parents or grandparents about certain issues that matter to them and subsequently generate interest from those conversations.

“Actually coming together and talking about themes like climate change is really uniting, and it bonds people together,” Boals Moeller said. “So rather than talking about how many zeros are behind the portfolio, it’s about something that people care about.”