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November 4, 2023

How the ‘rising generation’ of UHNWs will shape the future of wealth management

For the annual Family Barometer, Julius Baer surveyed wealth management advisers around the world on the behaviours of the next generation of UHNWs. Their findings suggest change is on the horizon

By Stephanie Bridger-Linning

Millennials and Gen Zs from ultra-high-net-worth families could prove to be a disrupting force in the wealth management sector, a new study suggests.

Julius Baer surveyed more than 1,500 wealth management advisers and experts from around the world on the key considerations of UHNW clients and their families for the annual Family Barometer, published in collaboration with PwC.

The report, co-presented by Guy Simonius, head of family office services at Julius Baer, and Jürg Niederbacher, partner, leader private clients and family offices at PwC Switzerland, focuses on the behaviours and ambitions of the so-called ‘rising generation‘ of 18-40-year-olds born into UHNW families.

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[See also: What is succession planning? How to pass on wealth, control and knowledge to the next generation]

It suggests this group has a more risk tolerant approach to investing than older generations – and have clear priorities when it comes to finding the right advisers. Wealth managers must be willing to adapt and innovate if they want to have an effective relationship with this rising generation, who are driven by a desire for real-time updates at the touch of a button.

The report also highlights the importance of taking a gradual, long-term approach to succession planning; one that is supported by the expertise of a professional adviser. 

Involving the rising generation is a gradual process

More than half (55 per cent) of survey respondents noted the rising generation begin making their first substantial independent investments between the ages of 26 to 35. This is true across all four regions surveyed: the Americas, Europe, Asia and the Middle East

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[See also: Who’s afraid of the big bad next gens?]

This period from the late 20s to early 30s is around the same time that the majority of families start involving children in decisions about wealth management (52 per cent of respondents). A similar proportion introduce the next generation to wealth managers at around the same age.

Yet the critical stage of giving the next generation voting rights on decisions involving family wealth comes later: the majority of respondents (56 per cent) noted families wait until children are 35 years old or older. 

The next gen learns through experience with family-funded investments

UHNW families often provide the younger generation with an opportunity to learn through experience by giving them a significant sum of money to invest.  

Globally, most respondents (62 per cent) reported this typically ranges in value between $250,000 and $2 million.

American and European families favour sums at the lower end of the scale ($250,000-$1 million) while families living in Asia and the Middle East are more likely to give their children more to invest ($1million-$2million). 

[See also: The 2023 Spear’s Wealth Management Indices]

Yet before they reach this stage, the rising generation might have been experimenting with smaller sums, sometimes from as early as their late teens. 

‘When we first get introduced to our client’s heirs at a young age, or have them attend one of our programs, they often don’t know the first thing about investing – but that changes,' explains Kevin Tay, group head South East Asia at Julius Baer. ‘Yet, we see regularly that clients give their children small amounts of capital to try out trading. That’s very often how it starts.’

A greater appetite for risk

Figures show 18-40 year olds are willing to take bigger risks than their parents when it comes to investment, although the degree to which this is true varies depending on region. 

Two thirds (64 per cent) of respondents in the Middle East reported the rising generation has a higher risk appetite, slightly higher than the figure reported in the Americas (62 per cent). The figures were significantly lower in Asia (49 per cent) and Europe (47 per cent), although they still represented a greater proportion of respondents than those who reported a ‘lower risk appetite’ or ‘same risk’. 

Next gen UHNWs have clear expectations for wealth management advisers 

A large number of millennial and Gen Z UHNWs grew up with the instant gratification granted by the internet – and this same desire for immediate responses and satisfaction governs their approach to wealth management, the survey suggests. 

‘Real-time updates’ topped the list of priorities when selecting a wealth manager, followed by cost transparency/low fees, and the reputation of a firm. 

[See also: Ex-RBC Wealth Management duo aim to shake-up industry with ‘value-driven’ advice firm for HNWs]

There was only slight regional disparity: the Americas, Europe and Asia all reported real-time updates as the most important factor, followed in each case by cost transparency/low fees. Reputation of the firm came third in the Americas, while Europe and Asia listed a ‘broad investment universe’. 

Respondents in the Middle East noted the most significant difference in priorities: reputation took the top spot, ahead of real-time updates and ‘availability of a personal adviser’. 

How to adapt to the needs of the rising generation? Innovation is key

Going forward, the most successful advisers will be able to blend this desire for immediate updates with a trusting, long-term relationship, the report suggests. 

Tay notes there is scope for both approaches. ‘It all depends on what you're looking for,’ he explains. ‘If you want to trade actively, you will do that immediately on a digital tool or application. The young like to try out investing with some investment capital at hand. 

[See also: Trusts continue decline as self assessments fall and HMRC bureaucracy intensifies]

‘When it comes to major long-term investment strategies, though, they like to be in a trusted environment. It’s important to make a distinction between individual trades and long-term relationships.’

Patrick Akiki, financial service leader at PwC Switzerland, says advisers must ‘adapt and innovate their services’ in order to effectively cater for this next generation. He continues: ‘Understanding their desire for personalised support and involvement, providers can offer tailored investment options, interactive platforms and educational resources. 

‘By leveraging technology and analytics, they can deliver real-time updates and cost-effective solutions, while building a strong reputation for meeting the evolving needs of the rising generation.’

Find more leading advisers in the Spear's 500 Wealth Management Indices


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