There has been a paradigm shift in investors’ priorities as they begin to explore more socially conscious investments. It is likely that the upheavals brought about by this pandemic will likely accelerate this trend towards impact investing. As wealth passes hands from yesterday’s founders to tomorrow’s millennials we explore what this shift in attitudes will mean for wealth advisers in the future.
The Billionaire’s Golden Era
In 1987 there were less than 200 billionaires in the world. By the turn of the century these had risen to approximately 500 and since then, during the course of the 2000s, the total wealth and number of billionaires has grown exponentially, practically tripling to 1,500+ billionaires. What is most notable is the rapid rate of growth in the amount of wealth held by these billionaires.
What will happen in the coming years?
Evidenced by the above graph, the wealthiest families in the world have an abundance of assets under management, with over US$ 2,200 Billion in their control.
In the coming years this wealth will go through the generational cycle and pass onto these UHNWI’s children and heirs. Looking to the future, the wealthy CEOs, Investors and Founders of major businesses are seeking solutions to future-proof their capital, in an ever more volatile world.
Read more: Sustainable Investment – Doing Good and Getting Richer can be synonymous
Shifting Attitudes and Investment Priorities
Throughout history, major crises have led to a shift in attitudes that have paved a seismic change in the world. By way of example, the Second World War catapulted millions of women into the workforce in government roles, corporate roles and industry roles; manufacturing, food and beverage, munitions etc…, instigating female empowerment and the importance of gender equality at work.
In a similar fashion, this 2020 pandemic itself has elevated the demand for environmental and sustainable business practices.
Covid-19 has tipped global markets into an economic crisis which is fuelling a surge in appetite for investment opportunities that ‘give-back’. Impact investment funds, previously less prevalent, have been growing in popularity this year. These funds are channelling investors’ funds into clean energy initiatives, sustainable food production enterprises and technologies that protect the world we inhabit.
Impact investing is taking on an increasingly more predominant role as all stakeholders – investors, suppliers and customers are keen to be involved in ‘socially conscious’ ventures. Governments too are under pressure to enact laws and policies that motivate companies to consider environmental, social and governance matters.
In this era of Greta Thunberg and George Floyd it would appear that activism, in all its forms – environmental, racial and gender – is trending – for a reason.
Global priorities and social attitudes are shifting and as a result, tomorrows UHNWIs will have dissimilar priorities to those of their predecessors. Tackling issues such as the depletion of natural resources, transparency, workers’ rights and pollution will be at the forefront of investors’ minds- as opposed to merely being an afterthought.
Evolving Times
For those professionals advising affluent clients, this is a time to listen more. Listen to the evolving needs of clients who want to and in fact need to adapt to this progressively ‘socially conscious’ world.
One initiative that has recently been launched is Beyond, a forward-looking company that caters to socially conscious next-generation business owners, young innovators, visionaries, and tomorrow’s investors. Beyond arranges trips across the world for a select group of investors to explore “attractive investment opportunities, modern technologies and social enterprises that are sustainable and impactful” as well as lucrative for the family.
It is a prime example of where the world is heading.
Where projected financial returns on an investment are as important to attracting investors, as the social and environmental impact that these investments have on the communities around them.
Family businesses themselves will need to adjust to the demands of both their external client base and also internally, to their next generation of decision makers’ priorities. It is therefore quintessential for advisers to be attuned to their clients’ needs.
Providing solid advice and guidance on succession planning and asset protection to safeguard today’s wealth for future generations on the one hand and assisting in the transitions that are happening in family businesses across the world as the next generation assumes control of their family’s assets.
