The Top Concerns Of The UHNWIs – Wealth-X
What keeps the ultra high net worth individuals (UHNWIs) up at night?
Wealth-X conducted an Attitudes Survey in conjunction with Knight Frank to gain insights into the motivations and behaviors of the ultra wealthy around wealth management, philanthropy, wealth transfer and more. The survey was based on the views of around 400 of the world’s leading private bankers and wealth advisors who, between them, manage assets for about 45,000 ultra high net worth (UHNW) individuals with a combined wealth of over US$500 billion.
Respondents were asked to select three pressing issues regarding the UHNW population’s wealth, both for the past 10 years and next 10 years. Globally, succession and inheritance issues (cited by 56% of respondents), wealth taxes (50%) and the global economy (47%) were identified as the three main factors threatening wealth creation over the next decade. After the top three identified risks were legislation directly affecting the wealthy (36%) and stock market volatility (32%). At the bottom of the list of 12 were “Know Your Client” initiatives (4%) and anti-money laundering initiatives (4%).
When asked why their clients were so concerned about handing their wealth to the next generation, 62% of respondents said they didn’t feel their children would be encouraged to make their own wealth, while almost half said they wouldn’t know how to handle the investments.
At a regional level, personal security and safety was high on the agenda in Latin America, with 63% of respondents citing it as a concern that has grown over the past 10 years. Of all the regions, North American UHNWIs placed the most importance on personal and family health; it was the third most prevalent issue for them, selected by 47% of respondents in North America, compared to the global average of 20%.
The No. 1 issue among Asian UHNWIs for the next decade was the global economy, cited by 59% of respondents in the region versus the global average of 47%.
For Middle Eastern UHNWIs, the second largest concern after succession/inheritance was legislation directly affecting the wealthy, named by 50% of the region’s respondents, compared to the global average of 36%.
The survey reflected concerns over increased scrutiny of UHNWIs and their affairs, by both the public and authorities. Almost 70% of respondents said their clients had become more conscious about displaying their wealth in public. A significant number also said that UHNWIs were being made scapegoats for their governments’ failure to address wealth inequality issues.
2016 promises to be a very significant year for the ultra wealthy and for those who advise them, said Marc Cohen, Chief Commercial Officer at Wealth-X. “Growth is slowing and the wealthy are under increased scrutiny, yet significant opportunities remain for those who truly understand how to identify, engage and serve this group.”
Read more about the Attitudes Survey below.
The Top Concerns Of The UHNWIs – The Wealth Report Attitudes Survey
To mark the 10th edition of The Wealth Report, this year’s Attitudes Survey takes a 10-year view. We look back at how the attitudes of UHNWIs to key issues and investment decisions have changed since the report was first published, and look forward to examine the outlook for the next 10 years.
One of the most interesting findings is that a significant proportion of respondents – leading wealth advisors and private bankers from around the world – expect their clients’ wealth to increase at a
slower rate over the next 10 years than the past decade.
Succession and inheritance issues, wealth taxes and the global economy were identified as the main threats to future growth.
We also look at attitudes to philanthropy and property – both remain high on the UHNWI agenda. The majority of respondents said their clients would be increasing their philanthropic activities, while exposure to property as an asset class is also set to grow – 30% of their clients are considering a residential purchase in 2016.
Past editions of The Wealth Report have included contributions from influential thinkers and this year is no exception. On page 14 we interview Lynn Forester de Rothschild, who is at the forefront of the Inclusive Capitalism movement.
Although she still believes capitalism is ultimately the best way to reduce wealth inequality around the world, she says businesses, investors and governments need to take a longer-term view to make it work. A failure to act now could have serious consequences, she says.
The Wealth Report’s Attitudes Survey looks at the changing outlook of UHNWIs
Andrew Shirley, The Wealth Report Editor
To mark the The Wealth Report’s 10th edition, the latest results from our annual Attitudes Survey shed light on how the outlook of the world’s wealthy has changed over the past decade and takes
a look forward to the next 10 years.
This year’s survey, conducted in conjunction with ultra-wealth intelligence consultancy Wealth-X, is based on the views of around 400 of the world’s leading private bankers and wealth advisors who, between them, manage assets for about 45,000 ultra-high-net-worth individuals (UHNWIs) with a combined wealth of over half a trillion US dollars.
As ever, the Attitudes Survey covers a wide range of topics from investment decisions to succession planning. Some of the highlights are analysed over the following pages, but you can find a comprehensive summary of the survey responses, broken down by world region, in the Databank section at the end of the report.
The launch of The Wealth Report in 2007 was, ironically, quickly followed by the beginning of the global financial crisis. At first it seemed as if subsequent editions would be focusing on wealth diminution rather than creation, but that proved not to be the case.
As our analysis of global wealth distribution on page 20 clearly shows, UHNWI numbers have burgeoned around the world, particularly in emerging markets.
But our forecast for the next 10 years is more cautious, with the rate predicted to slow considerably.
This is echoed by the Attitudes Survey. When we asked the respondents if their clients’ wealth had increased at a faster rate over the past 10 years than it would do over the next 10, two thirds agreed.
In Australasia, 84% of respondents predicted a slowdown – unsurprising perhaps as much of the wealth creation in the region has been powered by China’s economic growth, which is now slowing.
Globally, succession and inheritance issues, wealth taxes and the global economy were identified as the three main factors threatening wealth creation over both the past 10 years and the next decade.
“We find our clients to be more multi-jurisdictional than ever before, with families often ending up dispersed across the globe. Many of our clients are also very concerned about matters of succession and how their children will deal with the pressures of inherited wealth,” confirms Deon de Klerk, Head of Africa and International Wealth and Investment at Standard Bank.
At a regional level, personal security and safety was high on the agenda in Latin America, with 63% of respondents citing it as a concern that has grown over the past 10 years. Looking forward, personal and family health was the third most important issue for North American UHNWIs.
Increased scrutiny of UHNWIs and their affairs, by both the public and authorities, was acknowledged by the survey. Almost 70% of respondents said their clients had become more conscious about displaying their wealth in public. A significant number also felt UHNWIs were being made scapegoats by governments for their own failure to address wealth-inequality issues.
This year promises to be a very significant year for the ultra-wealthy and for those who advise them, says Marc Cohen, Regional Managing Director EMEA at Wealth-X. “Growth is slowing and the wealthy are under increased scrutiny, yet significant opportunities remain for those who truly understand how to identify, engage, understand and serve this group.”
Focusing on how UHNWIs manage their wealth, a number of interesting trends have developed over the past 10 years. Not only do 87% of those polled believe that their clients are taking a more active role in the management of their wealth, but 92% agree that the wealth industry has to work harder to earn the trust of its clientele.
Advisors may also need to refocus how they engage with clients. On average almost 80% of respondents said women were taking a more significant role in managing family wealth, while 64% said clients were involving their children in their businesses at an earlier age.
“Having served the parents does not provide us a birthright to serve their next generation. We have to earn it,” says Money K, who heads Citi Private Bank’s Next Generation programme. “They prefer online delivery for market intelligence and execution of transactions.”
As mentioned earlier, succession issues are the biggest worry for UHNWIs around the world with recent research suggesting that it is the second generation, rather than the oft-quoted third, that is most likely to squander the family fortune.
When asked why their clients were so concerned about handing their wealth to the next generation, 62% of respondents said they didn’t feel their children would be encouraged to make their own wealth, while almost half said they wouldn’t know how to handle the investments. Encouraging them to get involved in the family business from a younger age appears to be an obvious solution.
However, as many as two thirds are generally not inspired to join the family business, preferring to pursue entrepreneurial ambitions or other professional careers, says Mr K. “There is a certain restlessness in them to make a difference in whatever they do.”
Many of those who do join the family business say they are not satisfied with the status quo. “Because of globalisation and new technologies, they desire to expand, modernise or reinvent the business to be more relevant and sustainable for the future,” says Mr K.
Although protecting their wealth is a preoccupation for many UHNWIs, giving much of it away is also important. Facebook founder Mark Zuckerberg and his wife Priscilla Chan hit the headlines last year when they pledged to give away 99% of their shares– currently worth $45bn – in the social media giant.
On average, 67% of those who took part in the Attitudes Survey said their clients’ philanthropic activities had increased over the past 10 years, with almost 80% saying activity would increase further over the next 10.
A sense of personal fulfilment was cited as the main motivator, although in the Middle East religious beliefs were considered almost as important.
However, the way the wealthy are giving is changing. The Zuckerbergs, for example, have created a more flexible limited liability company, not a traditional charitable foundation, to oversee their endeavours.
“This is indicative of a wider trend that we have seen across our client base,” says Tom Hall, Head of Philanthropy Services (UK) at UBS. “Not only is philanthropy increasing, so too is the desire to ensure that it is truly effective and actually solving the social and environmental problems of our time.
“Philanthropists are becoming increasingly sophisticated in how they structure their giving and investing, with social impact emerging as a key third dimension along with risk and return in every investment decision.”
See full report below.