This is a significant portion of the total wealth available in the world which will empower the emerging generation of investors to determine where, and how, their capital is directed and will undoubtedly place an onus on financial services companies – and particularly lenders – to step up to the mark and manage this transition aptly.
Digital expectations are growing
It is important to consider that the next generation of high and ultra-high-net-worth individuals (HNWIs) is digitally native and as such, will have elevated expectations of financial service providers’ ability to meet their needs.
The role of technology must therefore be acknowledged, and fast, as a means to improve efficiency and better engage with clients. However, the financial services sector has typically lagged when it comes to digital adoption.
Indeed, this technological gap was exposed at the height of the pandemic, when the need for innovation took on a new sense of urgency. Understanding and demonstrating agility to respond to the digital needs and preferences of the next generation of wealth will be key in building and maintaining strong client relationships.
That said, a greater reliance on technology does not mean that the need to offer a bespoke service should be forgotten. Financial service providers, and lenders in particular, must find the sweet spot between digital support and human interaction, as millennials’ expectations of authenticity and personalisation are higher than their predecessors’.
Social responsibility matters
It is expected that this new class of investors could be markedly different from those before, with young wealth holders increasingly inclined to mobilize their money for social and environmental good.
This reshuffle of financial priorities, which has deepened in the wake of the pandemic, will no doubt have ripple effects for years to come, as Environmental, Social and Governance (ESG) considerations continue to rise in importance for the next generation of investors.
In fact, according to a recent report by PwC, assets in sustainable investment products in Europe are forecast to reach €7.6tn by 2025. This would represent a more than threefold jump in assets, taking their share of the European fund sector from 15% to 57%.
Elsewhere, research from Deloitte suggests that a majority of millennials are at a tipping point on key societal issues, including climate change, inequality and discrimination. The research highlighted respondents are actively seeking to influence policy and business actions on matters that are important to them. From leaning on their values when it comes to spending or adjusting their relationships with companies based on their approach to environmental, social and political issues, the study portrays a generation eager to provide the necessary push to hold institutions accountable, in order to bring meaningful change.
This generational shift in attitudes and priorities towards ESG factors will undoubtedly carry far-reaching implications for those of us working in the finance industry. Business leaders would be wise to acknowledge the growing collective social consciousness and determine whether their organisation’s stance on ESG issues aligns with their performance and the way they conduct business.
Property holds its appeal
The perpetual buoyancy of the UK property market can be largely attributed to the enduring interest of HNWIs.
Real estate is the model of a cornerstone sector for the UK economy, performing exceptionally even in the face of global economic turmoil. As the sector has seen years of irresistible growth, investors increasingly gather proof cases that the property market is a safe haven asset for both short- and long-term yield. This is evidenced in industry data. House prices have continued to rise healthily despite four interest rate hikes in as many months – while asking prices have also reached record levels.
Knight Frank’s latest Wealth report provides an interesting portrayal of the different way in which the next generation of ultra-high-net-worth individuals view property. Their study depicts shifting preferences and a more global outlook, with younger people of this cohort inclined to be more geographically diverse and motivated to look further afield with their investments.
The data reveals a shrewder and more practical approach towards property investments, with many younger investors viewing them in the wider context of portfolios, and likely to be driven by liquidity and returns over location or emotional attachment considerations.
Brokers and lenders should pay close attention to how younger investors’ global ambitions and preferences continue to evolve, as the need for speed, flexibility and connectivity is likely to achieve a greater dimension in the sector. Doing so will prove invaluable in ironing out the challenges and better serving the needs of the next generation of wealth.
Alpa Bhakta is chief executive of Butterfield Mortgages Limited
