Do Well, Invest Well
Asia’s digitally connected next generation of high-net-worth individuals are spearheading a new era of wealth management philosophies, underpinned by social and impact investment awareness
Asia’s next generation of high-networth individuals are spearheading a new era of wealth management philosophies
As Asia’s next generation of highnet-worth individuals (HNWIS) take over management of their own financial legacies, they do so with a strong sense of responsibility, according to Jan Boes, head of the client strategy office for UBS Global Wealth Management’s Global Family Office APAC. “They are aware of the hard work previous generations put into creating wealth, and they want to be responsible stewards,” he says.
While many of Asia’s younger HNWIS aspire to use their wealth to effect positive change, they share a number of fundamental beliefs and aspirations with the previous generation. They are aware of the need to sustain the wealth through the generations and those with children also want to set a good example. “Wealth, to this younger generation, is often viewed as a means to an end, but not an end in itself,” says Boes, who says next-gen HNWIS place value on purpose and belief. The focus on socially responsible investment strategies, he adds, often drives the dynamics of the relationships between clients and their wealth advisors and private banks.
BROADENING INVESTMENT INTERESTS
When it comes to putting their wealth to work, Boes says investment preferences among next-gen HNWIS tend to be more diverse than among the previous generation. “In order to reduce complexity, they would opt to work with a few key trusted financial partners,” he says.
While the previous generation of wealth makers was inclined to favour transitional investment asset classes such as equities and bonds, the younger generation is open to exploring a wider range of investment options. “They search the internet and speak to their friends and ask each other what they are doing,” says Boes. “They look for education and expertise—they want to learn.”
Says Edwin Pun, who is the director of Keystone Properties, a property development company with projects in Hong Kong and Mainland China, and the youngest son of Benson Pun, the chairman of the company: “There’s copious information on many investment platforms, so you can do a lot of research on your own before you approach a wealth manager to assist you. Finding someone who has the ability to distill the plethora of data, and at the same time understands your needs and can personalise it to your need, would be critical.”
Edwin also points out that the younger generation are more eager to think out of the box and make their own mark: “While preserving wealth and generating returns are important, these aspects are no longer enough to get our attention; I am always looking for information about things that interest me and I am passionate about. For example, I am running my family business but at the same time I would also have to develop a subsidiary business on my own. Therefore how wealth management can enable to us to explore new areas instead of creating boundaries that hold us back would be something I am concerned about.”
Many younger clients are excited by ideas they can directly relate to, especially from peers in their age group. To help put their aspirations into practice, earlier this year UBS launched its Young Successors Community. “The Community brings together the next generation to discuss the topics that matter most to them, shedding light on best practices and industry know-how that would support them as they look ahead to the future,” says Boes. A prime example is environmental, social and governance (ESG),
“Wealth, to this younger generation, is often viewed as a means to an end, but not an end in itself ”
sustainable and impact investing, where next-gen HNWIS have become the driving force.
While a lot is written about nextgen HNWIS’ enthusiasm for such investing, Boes stresses that these types of investment require the same intensity of rigorous research as any other, adding that this type of research requires a lot of expertise. With a track record of over 25 years in sustainable investing, in September of this year UBS made it the preferred option for HNW clients globally. “A sustainable portfolio can deliver similar or potentially higher returns compared to traditional investment portfolios and, at the same time, offer strong diversification,” explains Boes.
According to Morningstar, a company that compiles and analyses market data, 2020 is proving to be the landmark year for sustainable investments, which have been outshining conventional peers, displaying resilience at the height of the Covid-19 global market rout and the subsequent market rebound.
The Credit Suisse Next
Generation Report 2019 also highlights the differences in the younger generation—in their geographical footprint, upbringing, passions and investment focus. “When it comes to investing, the next generation are interested in managing their family’s wealth and want to be involved in managing their family’s investments; they seek investment advice but want to make the final decisions themselves,” says François Monet, head of private banking North Asia and chief executive of the Hong Kong branch
for Credit Suisse. “It is no surprise that they are interested in impact investing. They expect their wealth managers to go beyond having pure financial know-how and to also play a broader ‘network orchestrator’ role across all their life stages.”
AWARENESS AND PURPOSE
Lois Tien—whose father is Michael Tien, the founder and chairman of the G2000 Group—recently left a position in her family’s business to pursue a career based on her personal values in sustainability. She says that while she is fortunate to be able to self-fund, she is now taking greater risks, and that has led her to think more about wealth management.
“The older I get and the more time I spend in the workforce, the more I realise how hard-earned that money was and how grateful I am to my parents to have sacrificed so much to get our family to where we are today,” says Lois, adding that while wealth is something to be protected and preserved, it is not the focal point of her life. “Wealth is a gift from the hard work of parents and the generations before,” she says. “It provides the motivation to protect it, preserve it and do something great with it.”
For Lois, this means that managing wealth extends beyond the monetary to the experiential. “It is very important to me how
I can build a more sustainable lifestyle for me and my family, where I can essentially do more with less wealth,” she says.
Putting her philosophy into practice, as a creative entrepreneur, Lois recently launched SOL, a sustainable loungewear line focused on “Selfwear”, a new category of apparel that is meant to put self-care and the wearer at the forefront. SOL combines direct financial philanthropy, giving back to the environmental and charitable causes she believes in, with hands-on involvement in attempts to fix the apparel industry’s problem of waste from overconsumption. “The ethos behind the brand is to bring awareness and action to the environmental crisis the apparel industry is contributing to, and to encourage people to consume smartly and invest in themselves,” says Lois.
COMMON INTERESTS
While there are discernible differences between generations of HNWIS, they also have a lot in common when it comes to their investment approach, says Money K, global head of next generation, global client service—asia Pacific at Citi Private Bank. “Both generations are strategic and long-term in their investment approach,” he says.
While they might also differ in their face-to-face and digital preferences when engaging with their wealth managers, Money says that both generations expect the highest level of professionalism and accountability.
Take Lois, for example. “I expect my relationship managers to have my best interests at heart, to keep me updated on current affairs that may have a direct effect on my investments, and to be transparent in their advice and recommendations,” she says.
Digital channels are the preferred mode of communication of a generation who are more online than offline, which need not take anything away from the overall experience, says Lois. “Trust and good communication can be achieved with or without a face-to-face meeting as long as the foundation is solid.”
Wealth managers like Citi Private Bank have not been oblivious to the digital evolution and have responded by developing online service offerings. Pointing out that next-gen HNWIS are not a single homogenous segment, Money says there is a growing preference to engage with wealth managers in a “3D way”—digital, datadriven and democratic. “While they are independent thinkers, next-gen expect self-service digital platforms, research and data to support ideas,” says Money.
At Citi Private Bank, says Money, a team of experts have formed an Investment Lab to conduct scenario testing of portfolios and develop investment themes and strategies that appeal to clients’ needs and aspirations, such as the heightened interest in impact investing.
With a family’s legacy more than just its wealth, Money is observing next-gen and their parents increasingly working together to recalibrate their philanthropic strategies, especially in light of the Covid-19 pandemic. “The younger generation is focused on more purposeful philanthropy, which the parent generation is willing to embrace,” he notes. “It’s not just cheque-book philanthropy any more; it’s a hands-on, immersive approach.”
Credit Suisse has also noticed a move among its clients to make philanthropy more of a family affair, as a way to involve the next generation in the family’s financial planning.
Says Monet, “We have been seeing a trend where parents in their late 40s or 50s are involving their next generation in their giving. We see some donors initiate grants based on their children’s area of passion, which may be a completely different sector of focus from their own, but they do so to encourage their next generation to be involved and to play an active role in implementing and monitoring the grant.”
“It’s not just chequebook philanthropy any more; it’s a hands-on, immersive approach”