It is common knowledge that the UK is currently seeing the largest intergenerational wealth transfer ever. The King’s Court Trust estimates that over the next 30 years, £5 trillion will be transferred from baby boomers to future generations, with the asset transfer likely to reach its peak in 2035.
The emerging generation of investors will be able to choose where and how their capital is directed thanks to this sizeable portion of the global wealth available. This will undoubtedly put pressure on financial services companies, especially lenders, to rise to the occasion and manage this transition effectively.
Expectations for digital are rising.
As a result of being digital natives, the next generation of high and ultra-high net worth individuals (HNWIs) will have higher expectations of the capacity of financial service providers to meet their needs.
Therefore, it is imperative to quickly recognize the significance of technology as a way to boost productivity and engage customers better. The use of digital technology has, however, generally lagged in the financial services industry.
In fact, this technology gap became apparent at the height of the pandemic, when there was a greater need than ever for innovation. Building and sustaining great client relationships will depend on an ability to recognize and adapt to the digital demands and preferences of the next generation of wealthy people.
Social responsibility is important.
This new class of investors is expected to be markedly different from previous generations, with young wealth-holders increasingly inclined to mobilize their money for social and environmental good.
This reordering of financial priorities, which has intensified in the aftermath of the pandemic, will undoubtedly have long-term consequences, as Environmental, Social, and Governance (ESG) considerations continue to rise in importance for the next generation of investors.
According to a recent PwC report, assets in sustainable investment products in Europe are expected to reach €7.6 trillion by 2025. This would represent a more than threefold increase in assets, increasing their share of the European fund sector from 15% to 57%.
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 organization’s stance on ESG issues aligns with their performance and the way they conduct business.
The 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 ways in which the next generation of ultra-high-net-worth individuals view the 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.
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.
