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+)
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