The world of wealth is witnessing a historic transformation. By 2030 the share of global wealth held by Baby Boomers will be surpassed by Gen X and Millennials1—cohorts brought up in a far more interconnected, technologically savvy and globalised age. In some instances the impact of this shift will be shaped by local factors, such as demographic changes. In other instances this shift will reflect shared characteristics, as demonstrated by the greater popularity of overseas investing among younger high-net-worth individuals (HNWIs2) brought up in an era of globalisation.3 Whatever the drivers, the landscape of wealth is changing—from local to global, and from one focused on returns to one founded on personal values.
A more globalised investor emerges
Despite rising economic concerns and a tradition of investor home bias 4 in large parts of the world, the new landscape of wealth appears less interested in borders. According to a survey commissioned by RBC Wealth Management5 and conducted by The Economist Intelligence Unit (EIU), younger HNWIs are substantially more enthusiastic about foreign investing.6 The U.S. is a particularly high-profile example of a country where a long-standing preference for investments in local markets appears set to be transformed.7
Although part of this focus on global investment opportunities can be attributed to the natural preference among younger investors for growth, it is noticeable that their enthusiasm is backed by their business peers. Business owners and entrepreneurs (BOEs) across all ages surveyed skewed in favour of foreign investments (a trait they also share with ultra-high-net-worth individuals8). Similarly, younger investors see globalisation as providing more opportunities to generate wealth than in the past—again, a trend shared with BOEs.
FIGURE 1: Beyond borders
Percentage of survey respondents choosing more foreign investment as a preferred position.
Mind the generation gaps
While the new contours of the wealth map are increasingly global, this emerging population of younger investors is still choosing to invest in areas that have a social dimension. Notably, younger investors are almost twice as likely to adopt an ethical approach to investing as older investors,9 with Asia the most enthusiastic (perhaps reflecting awareness of the rapid increase in inequality that has accompanied the region’s economic success10). This passion for ethical investment is echoed in their views of investing according to environmental, social and governance (ESG) criteria, with more than four fifths of younger investors viewing it as increasingly important. Alongside this interest in impact investment, there is a simultaneous willingness to experiment. Over the next five years, Millennials and Gen X investors are more keen to explore alternatives, including hedge funds and private equity, and newer asset classes like cryptocurrencies, compared with Baby Boomers.11
Older investors may be more likely to adopt a less risky investment strategy than their younger peers, which could be part and parcel of the older cohort’s common focus on locking in a legacy or inheritance for their children.12 Yet exploring the differences between older and younger investors can lead to some unexpected conclusions; for example, there exists a widespread perception that Millennials and Gen Z value unique experiences such as travel and sports more than material goods,13 but our survey found this to be equally true of older investors.14
Also of note, older HNWIs’ investments are not necessarily as conservative as one might assume. For example, when it comes to their preferences over the next five years, older investors (particularly men) choose the technology sector more often than younger investors. They are also increasingly exploring newer investment vehicles, such as exchange traded funds (ETFs), with a quarter of the older cohort saying ETFs align with their investment preferences (compared with 17 percent of those in the 18–54 age range).
FIGURE 2: Exploring options
Which of the following asset classes, if any, most aligns with your investment preferences? (Percentage of respondents)
Wary but confident
All investors, regardless of age, express some jitters about the state of the global and domestic economy, although these worries run particularly deep among the younger cohort. Almost 60 percent of younger investors report they are concerned about ensuring their financial well-being, about twice the level of Baby Boomers and members of the Silent Generation. Their unease primarily centres on domestic issues, such as the rising cost of living and changing employment opportunities. Older and wealthier investors, on the other hand, are more likely to cite global economic uncertainty and tariff barriers as their key issues.
FIGURE 3: Fear factors
Which of the following external factors most concern you about your ability to create, preserve or manage your wealth? (Percentage of respondents selecting each option)
Yet this uncertainty has not bred pessimism; four fifths of younger investors say they are confident they will reach their financial goals for creating, preserving and managing their wealth. Admittedly, they acknowledge getting there will not be easy—more than three quarters of respondents agree that today’s market requires investors to be far more flexible and responsive in their investment strategies, as well as more attentive to their portfolio. Nonetheless, despite the backdrop of macroeconomic and geopolitical concerns, the new holders of wealth appear confident and ready to not only face the future, but reshape it.
- Gen X is defined as people born between 1965 and 1980; Millennials are defined as those born between 1981 and 1996; Baby Boomers are defined as those born between 1946 and 1964; see Cale Tilford, “The millennial moment — in charts”, Financial Times, 5 June 2018, https://www.ft.com/content/f81ac17a-68ae-11e8-b6eb-4acfcfb08c11
- For the purposes of this study, HNWIs are defined as having more than US$1MM in investable assets.
- Younger HNWIs are defined as people born between 1965 and 1997 (Gen Z, Millennials, and Gen X). Older HNWIs are defined as people born in 1964 or earlier (Baby Boomer or Silent Generation).
- The survey covered seven countries: the UK, U.S., Canada, Hong Kong (SAR), Mainland China, Taiwan and Singapore.
- 72 percent of younger HNWIs have foreign investments, compared with only about half of their older counterparts.
- In the U.S. almost two-thirds of older respondents prefer domestic investments, compared with just 39 percent of younger investors.
- Those with investable assets of more than US$5MM.
- Over the next five years 12.9 percent of younger investors plan to invest more ethically, compared with 6.6 percent of their older counterparts.
- When asked how they anticipate adjusting their investment strategy over the next five years, 23 percent of Millennials and 18 percent of Gen Xers choose investing in more alternatives, compared with 12 percent of Baby Boomers.
- When asked to list their three most important investment goals, 28.5 percent of older investors choose leaving an inheritance, compared with 13 percent of younger investors.
- When asked whether they prefer to spend their wealth on experiences rather than material goods, 74 percent of older investors agree, compared with 70 percent of their younger counterparts.
- The term “investor” includes HNWIs, grown children of HNWIs, and those with high incomes but who do not qualify as HNWIs.
© The Economist Intelligence Unit Limited 2019. All rights reserved.
Royal Bank of Canada, The Economist Intelligence Unit, and their respective marks and logos used herein, are trademarks or registered trademarks of their respective companies. No part of this document may be reproduced or copied in any form or by any means without written permission from The Economist Intelligence Unit.
The material herein is for informational purposes only and is not directed at, nor intended for distribution to or use by, any person or entity in any country where such distribution or use would be contrary to law or regulation or which would subject Royal Bank of Canada or its subsidiaries or constituent business units (including RBC Wealth Management) to any licensing or registration requirement within such country.
This is not intended to be either a specific offer by any Royal Bank of Canada entity to sell or provide, or a specific invitation to apply for, any particular financial account, product or service. Royal Bank of Canada does not offer accounts, products or services in jurisdictions where it is not permitted to do so, and therefore the RBC Wealth Management business is not available in all countries or markets.
The information contained herein is general in nature and is not intended, and should not be construed, as professional advice or opinion provided to the user, nor as a recommendation of any particular approach. Nothing in this material constitutes legal, accounting or tax advice and you are advised to seek independent legal, tax and accounting advice prior to acting upon anything contained in this material. Interest rates, market conditions, tax and legal rules and other important factors which will be pertinent to your circumstances are subject to change. This material does not purport to be a complete statement of the approaches or steps that may be appropriate for the user, does not take into account the user’s specific investment objectives or risk tolerance and is not intended to be an invitation to effect a securities transaction or to otherwise participate in any investment service.
Royal Bank of Canada disclaims any and all warranties of any kind concerning any information provided in this report.
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.