Michelle Owen
High net worth individuals and their families – those with a net worth of $5 million or more – are expected to transfer a combined $18.3 trillion across generations by 2030. This is a significant wealth transfer, which brings with it new responsibility and pressures for the next generation.
At HSBC Global Private Banking's recent next generation event in Singapore, we brought together over 50 Next Generation leaders and innovators to exchange ideas on building a better future. At the event, Michelle Owen, head of distribution, reflected on what wealth managers and private banks really mean by the term ‘Next Gen’.
Increasingly, ‘Next Gen’ is used as a catch-all term to describe a younger, digitally native, and more socially conscious client group. While this is undeniably the direction of travel – and wealth managers must adapt to future clients’ changing requirements – it is important to distinguish further between client types and individuals.
In many cases, the client directly in line to inherit wealth can be in their 50s, 60s or 70s. In some cases – particularly within a family business – the next-in-line generation is already learning the ropes or taking the reins. In a few cases, third generations have a voice within the family unit. This leads to a need to coordinate across multiple generations.
Fundamentally, the next generation of clients – from ‘Next Gen’ millennials to baby boomers – are all unique. What unites them is the potential to shape and forge fruitful futures – for themselves, their families, their businesses, and the world around them.
We believe this is where wealth managers can play a crucial role in helping the next generation of clients fulfil their potential and drive influence across all or any of these factors – whichever matters most to them, and whichever generation they may come from.
Shaping a family’s financial future
Shaping financial futures includes growing, but also protecting, wealth for future generations. Amid recent challenging market conditions, this is more front of mind for clients. As families live increasingly global lifestyles, their wealth and succession planning needs also become more complex.
Crucially, wealth is not limited to financial assets. Whether it is business wealth or family values, families need support ensuring their assets are passed to the next generation in a meaningful way.
Professional wealth planning plays a critical role in helping families protect their financial wealth and ensure an orderly succession of assets. Meeting the unique needs of each family means tailoring strategies that reflect their values and financial priorities.
Shaping future businesses
Business owners, including those running family businesses, have a huge role to play in delivering both financial value and wider stakeholder value. In an HSBC survey of trustee clients worldwide, we identified that 85 percent of families globally are already preparing the next generation to take over their business. Yet just 10 percent of family businesses make it to a third generation.
To shape the future of a successful family business, upskilling and engaging multiple generations with a business plan and vision is essential.
Our survey findings revealed over half of families are training their heirs in financial and business fundamentals – the top priority among all regions. Some family members may grow impatient about change and create their own side hustle. These entrepreneurs are able to shape a business from the ground-up, requiring support with funding, idea generation and commercials.
Business leaders increasingly welcome collaboration. When it comes to upskilling these future leaders, we create networks for clients to share ideas and foster international connectivity.
Shaping the future world
Our survey also found that the next-in-line from second and third generation businesses are more likely to be involved in philanthropy compared with those in first generation businesses.
It also found that 23 percent of families said the next generation is actively involved in philanthropy, which was the third most common role behind strategy and planning (44 percent) and finance (36 percent) business functions, respectively.
In tandem, Next Generation investors will often ask more questions of their wealth managers related to sustainability and are scrutinising their investments to understand how they impact society and the planet. In terms of the measurement of an investment’s environmental or social impact, they tend to seek a greater level of transparency in portfolio companies and a higher utility level from deployed capital.
Their bold thinking in adopting a total portfolio approach and seeking data-driven decisions is a positive step in shaping the future world, and ensuring private banks are challenged to respond with the best ideas.
For example, banks can take the lead in creating an open-source repository of detailed data on the impact of sustainability projects. Such an initiative could help attract greater future flows of public and private capital into themes shaping a better world.
Partnering with the next gen of clients to deliver on these imperatives
To help the next generation of clients deliver on these future imperatives and remain their long-term partner of choice, we must understand their worldview. While all clients are unique, some patterns have emerged among second and third generations within families.
We tend to support multi-generational families with international lifestyles – living abroad or with affairs and roots in multiple jurisdictions. Global connectivity, efficiency, and alignment across all family members is front of mind.
Increasingly private banks look after clients’ personal affairs, their family affairs, and the next few generations. We are uniquely placed to provide clients with this support, through a truly holistic approach.
We are attached to a global commercial bank that is looking after clients’ business needs; a retail bank that can serve their children, and their transaction and digital accounts; and a global team of wealth and investment managers to shape financial and investment plans. This continuum of support helps drive efficiencies for complex family and wealth planning matters. Everything the wider bank does supports the operations and services that the private bank provides.
We have a deep understanding of client need, to build long-lasting and meaningful relationships with entire families, and with each individual within the family. As well as delivering on their goals for their families, businesses and the world around them.
The next generation of clients come in many shapes and sizes and their nuanced needs continue to evolve. But wealth managers' role – to help them manage the wealth transfer and forge fruitful futures – remains consistent.
