Future-proofing prosperity in a time of upheaval.
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.
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.
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).
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.
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.
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