Generational trends in attitudes to Wealth Management

Generational trends in attitudes to Wealth Management

An analysis of three key trends and changing attitudes set to become more prominent in the wealth management space for HNWI. High Net Worth Individuals (HNWI) in India and the Indian Diaspora community are a rich (pun un-intended) mix of generation X and Y and illustrate well the changing attitudes of HNWI as well as emphasising the challenges globally for wealth management professionals seeking to retain and grow their client base. During the last decade, whilst working with HNWI and corporations I noticed a subtle and acute shift in approaches, expectations and strategies of HNWI in relation to how they manage their wealth.

  • Ethical Wealth management
The recent global crisis affected the wealthy more profoundly than many realise, leading to key changes in the attitude of wealthy individuals. Of course, their wealth was inter-linked in (and based on) highly sophisticated investments and inevitably was diminished but it also made HNWI understand the need for transparency and traceability, concepts which are sometimes an anathema to those seeking privacy for their wealth. More and more of my clients, when considering wealth management and wealth growth strategies, are keen to do so with completely transparent mechanisms. At the simplest level, for example, clients have asked me to register their wills in multiple jurisdictions even though in some countries this means the public and authorities have access to these documents. The second change was the actual realisation of the intrinsic value, influence and destabilising power that a small group have on wider economies, world markets and communities. This brought with it a huge sense of responsibility and re-evaluation of ethical wealth creation and management amongst HNWI, entrepreneurs, corporations, the whole financial sector and governments. The focus on speculative investments encouraging short termism which characterized previous decades and certain generations of HNWI, has shifted from this one-dimension mentality of maximising profits to a multi-dimensional proposition for value creation, which is long term and sustainable. For those in the wealth management industry there is a real need to comprehend the client's imperatives in a more holistic way and offer products and services that fulfill the ethical values that HNWI are demanding.
  • Bionics, Robo-advisers and Technology
Whilst technology has been a disruptor in most sectors, its impact in the wealth management sector has been less disruptive but this is changing with bionics and robo-advisers. It is in relation to technology that the differences in attitudes between generation X and Y amongst HNWI are most stark. Two recent studies revealed the contrast in attitudes and expectations. Capgemini 'World Wealth Report' for example found that a great majority of younger HNWI would transfer their wealth to an automated advisor (robo-advisers), whilst a recent report published in 'Forbes' showed that investors over age 50 tend to be more focused on the security of data and less comfortable with virtual communications with their wealth managers. Despite the differences in the empirical studies, my view is that both generations recognise the value of a mix of digital platforms, data analytics and technological solutions and, therefore, we will see a rise of bionic wealth management - that is wealth managers adding human experience and intelligence to robust processes and systems utilising the best technology and digital platforms that enable fast movement and decision-making in relation to ever changing investments. Advisers in this space therefore need to be prepared to adopt and create technological services without relinquishing human expertise that has to be more specialized, or niche, to justify premiums.
  • Convergence and Expansion of Regulatory frameworks
The issue of tax avoidance and more generally “forum shopping” by HNWI and multinational corporations is increasingly being scrutinised by governments globally. Regulation is on the rise and converging in the UK, Europe, India and the US. More crucially, HNWI risk reputational damage despite the structuring and investments being technically legal. Especially, where it is considered unethical or even too aggressive. HNWI, therefore, need to choose their advisers wisely not just based on tax and legal expertise but also on their ability to give strategic advice that is sympathetic to the values of the client. The adviser should also be prepared to horizon scan the regulatory environment at a broader level in the relevant jurisdictions, and internationally.
Janhavi Dadarkar has her own consultancy and is a Governance Specialist at the Institute of Directors (IoD).

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