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New businesses in the UK are emerging faster than ever before — and as a result entrepreneurial wealth continues to grow.

In 2018, there were 663,272 company registrations — a record high — according to data from the Centre for Entrepreneurs1 (CfE.) That figure was up almost six percent from the previous year, with the CfE describing London as “Europe's leading startup hub." Revenue from the UK's small and medium-sized enterprises now totals £2 trillion, according to the British Federation of Small Businesses.

Some Millennial entrepreneurs have already grown their business to the point where they want to seek professional financial advice. “What I've seen so far is surprising, in that many are reaching out to traditional wealth managers," says Matthew Hunter, associate director, relationship management at RBC Wealth Management in London.

Perhaps motivated by economic uncertainty, high-net-worth individuals (HNWIs) are looking to professionals for trusted advice as they position themselves for change. Four-in-five (83 percent) of those surveyed by The Economist Intelligence Unit (EIU), commissioned by RBC Wealth Management, say it's more important than ever to future proof their nest egg.

The New wealth rising survey, which targets HNWIs, adult children of HNWIs, and high-earning professionals across the UK, U.S., Canada, China, Hong Kong, Singapore and Taiwan, looks at the shifting landscape of global wealth, what it will be invested in and who is investing.

Globally, 62 percent of investors surveyed say it's now harder to preserve or attain wealth than it was a generation ago. Additionally, 76 percent say today's market requires investors to be far more flexible and responsive in their investment strategies.

In the current economic climate, the future success of these new businesses could hinge on the strategies adopted in their early days. Business owners, in particular, present complex personal wealth challenges as much of their net worth could be tied up in their entrepreneurial endeavours.

What's your business owner personality?

These successful, new business owners broadly come in two types, says Nick Ritchie, director, wealth planning, at RBC Wealth Management in London. The first group of business owners are those who are akin to accidental entrepreneurs, Ritchie says. “They set up a business, from which they comfortably generate a lifestyle income, but ... the business suddenly grew exponentially," he says. As a result, they had an unexpected amount to invest. In this case, they're more interested in preserving their wealth and they are less likely to take another chance on a new business startup.

In addition to the accidental entrepreneurs, there are those who look to follow in the footsteps of technology giants such as Facebook and Netflix. “They've grown up seeing the startup tech companies get multi-billion-dollar valuations," says Ritchie, and they're ambitious to do the same.

This second set of entrepreneurs had a vision of becoming tech innovators. This group is more likely to launch another startup and use the money from the first success to fund it. “The challenge with these clients is offering an unbiased sounding board and explaining why they shouldn't invest every last penny into their next business venture," he says.

Set out your wealth goals

What do the fortunate people in either of these groups talk to financial professionals about? The conversations usually centre around their future and what they want out of life.

Around half (44 percent) of investors surveyed in the UK say conserving wealth is a primary investment goal.

“Where we see more engagement is when we have a goals-based conversation," says Ritchie. Those discussions revolve around likely life expectancy, future careers and the desire to leave a legacy to the next generation. Ritchie says the conversation follows a similar theme: “You've got X amount of money, you're of the generation where you are going to live to a hundred years, so let's discuss how to future proof your wealth."

The goal-setting part of the process becomes the foundation for how the money gets managed. The client's desires and needs will also inform what tax planning may be deployed, as well as, the broad structure of the wealth plan. Then, based on that information, the clients and advisers start to consider an investment strategy.

These conversations are often the start of significant changes to the asset holdings of the entrepreneur. Frequently, entrepreneurs have bet everything on their business, but now they have an influx of cash as well.

According to The EIU data, 72 percent of investors in the UK agree today's market requires flexibility and responsiveness when it comes to their investment strategies.

“Generally, they will have property, such as a house or flat, and a lot of the rest of their wealth is in the business," says Ritchie. That's different from how things were for older generations, who might have grown wealthy slowly over decades, perhaps receiving regular dividends from their business, which was then invested in stocks and bonds.

The need for a diversified portfolio

Despite many younger investors having never seen their own wealth diminish during a major market crash, they still see a need to diversify assets. “We've noticed a consideration not just for how to make even more money, but also how do I preserve what I have received and diversify prudently and plan for the future and the next generations," says Charles Lewis, head of the UK discretionary investment management business at RBC Wealth Management, based in London.

Diversification of assets is key to wealth preservation. It means holding many types of complementary assets, such as stocks, bonds, and alternative assets in a portfolio rather than having everything invested in the business.

That sentiment is reinforced by The EIU research, which found 30 percent of younger* HNW investors in the UK say they are active with hedge funds. Younger generations in the UK say they also invest in private equity funds (23 percent) and real estate (25 percent).

These entrepreneurs and business owners are keen to learn more about how investments are selected. “Younger business owners are often new to the investment process and guidance is key," says Lewis. “We see an appetite for education and engagement on the journey." He says that's a change from the past. “It isn't a question of 'I've just made ten million pounds, now what stock do I buy,'" he explains. Often, these next-generation entrepreneurs are discovering new ways of investing in financial markets.

A wealth plan brings peace of mind

When it comes to preserving wealth, entrepreneurs often crave peace of mind. They want whatever wealth they've accumulated to be of zero concern. This allows them to focus on other important things. "One of our jobs is to allow them more time to concentrate on their business affairs and families, and to make their life easier," says Lewis.


1The Centre for Entrepreneurs is the UK's leading entrepreneurship foundation, delivering research and entrepreneurial development programmes.

*Younger generations are defined as Gen Z, Millennials or Gen X (18-54 years old) and older generations are defined as Baby Boomers and those in the Silent Generation (55 years+)

This publication has been issued by Royal Bank of Canada on behalf of certain RBC ® companies that form part of the international network of RBC Wealth Management. You should carefully read any risk warnings or regulatory disclosures in this publication or in any other literature accompanying this publication or transmitted to you by Royal Bank of Canada, its affiliates or subsidiaries.

The information contained in this report has been compiled by Royal Bank of Canada and/or its affiliates from sources believed to be reliable, but no representation or warranty, express or implied is made to its accuracy, completeness or correctness. All opinions and estimates contained in this report are judgements as of the date of this report, are subject to change without notice and are provided in good faith but without legal responsibility. This report is not an offer to sell or a solicitation of an offer to buy any securities. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur. Every province in Canada, state in the U.S. and most countries throughout the world have their own laws regulating the types of securities and other investment products which may be offered to their residents, as well as the process for doing so. As a result, any securities discussed in this report may not be eligible for sale in some jurisdictions. This report is not, and under no circumstances should be construed as, a solicitation to act as a securities broker or dealer in any jurisdiction by any person or company that is not legally permitted to carry on the business of a securities broker or dealer in that jurisdiction. Nothing in this report constitutes legal, accounting or tax advice or individually tailored investment advice.

This material is prepared for general circulation to clients, including clients who are affiliates of Royal Bank of Canada, and does not have regard to the particular circumstances or needs of any specific person who may read it. The investments or services contained in this report may not be suitable for you and it is recommended that you consult an independent investment advisor if you are in doubt about the suitability of such investments or services. To the full extent permitted by law neither Royal Bank of Canada nor any of its affiliates, nor any other person, accepts any liability whatsoever for any direct or consequential loss arising from any use of this report or the information contained herein. No matter contained in this document may be reproduced or copied by any means without the prior consent of Royal Bank of Canada.

Clients of United Kingdom companies may be entitled to compensation from the UK Financial Services Compensation Scheme if any of these entities cannot meet its obligations. This depends on the type of business and the circumstances of the claim. Most types of investment business are covered for up to a total of £50,000. The Channel Island subsidiaries are not covered by the UK Financial Services Compensation Scheme; the offices of Royal Bank of Canada (Channel Islands) Limited in Guernsey and Jersey are covered by the respective compensation schemes in these jurisdictions for deposit taking business only.

This publication has been issued by Royal Bank of Canada on behalf of certain RBC ® companies that form part of the international network of RBC Wealth Management. You should carefully read any risk warnings or regulatory disclosures in this publication or in any other literature accompanying this publication or transmitted to you by Royal Bank of Canada, its affiliates or subsidiaries.

The information contained in this report has been compiled by Royal Bank of Canada and/or its affiliates from sources believed to be reliable, but no representation or warranty, express or implied is made to its accuracy, completeness or correctness. All opinions and estimates contained in this report are judgments as of the date of this report, are subject to change without notice and are provided in good faith but without legal responsibility. This report is not an offer to sell or a solicitation of an offer to buy any securities. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur. Every province in Canada, state in the U.S. and most countries throughout the world have their own laws regulating the types of securities and other investment products which may be offered to their residents, as well as the process for doing so. As a result, any securities discussed in this report may not be eligible for sale in some jurisdictions. This report is not, and under no circumstances should be construed as, a solicitation to act as a securities broker or dealer in any jurisdiction by any person or company that is not legally permitted to carry on the business of a securities broker or dealer in that jurisdiction. Nothing in this report constitutes legal, accounting or tax advice or individually tailored investment advice.

This material is prepared for general circulation to clients, including clients who are affiliates of Royal Bank of Canada, and does not have regard to the particular circumstances or needs of any specific person who may read it. The investments or services contained in this report may not be suitable for you and it is recommended that you consult an independent investment advisor if you are in doubt about the suitability of such investments or services. To the full extent permitted by law neither Royal Bank of Canada nor any of its affiliates, nor any other person, accepts any liability whatsoever for any direct or consequential loss arising from any use of this report or the information contained herein. No matter contained in this document may be reproduced or copied by any means without the prior consent of Royal Bank of Canada.

Clients of United Kingdom companies may be entitled to compensation from the UK Financial Services Compensation Scheme if any of these entities cannot meet its obligations. This depends on the type of business and the circumstances of the claim. Most types of investment business are covered for up to a total of £85,000. The Channel Island subsidiaries are not covered by the UK Financial Services Compensation Scheme; the offices of Royal Bank of Canada (Channel Islands) Limited in Guernsey and Jersey are covered by the respective compensation schemes in these jurisdictions for deposit taking business only.


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