Even ahead of the current economic crisis, we were seeing huge shifts in the wealth space. Here, we explore the transfer of wealth, the relocation of Chinese money to the UK, as well as the fact that more and more high net worth individuals want to use their finances to make a difference to the world.
The state of affairs today
First, let’s take a brief look at the broad economic picture as it stands.
To say that markets around the world are in turmoil might be somewhat of an understatement, and the reasons behind this are as vast as they are troubling. Globally, we are still reeling from Covid, as well as the protracted war in Ukraine and the ever-spiralling rate of inflation. But in the UK, Liz Truss and Kwasi Kwarteng’s ‘mini-budget’ – which most notably saw tax cuts for the highest earners, with their rate dropping from 45% to 40% – has plunged the country into a state of sheer panic, with the pound hitting an all-time low against the dollar. At the time of writing, 40% of mortgage products have been pulled by banks and building societies, and some people have reported that their initial mortgage offers of 4.5% could rise to 10.4% as a result of the mayhem that is currently unfolding. House prices are said to be flatlining, and a stronger slowdown is expected to take hold in the coming months.
Eastern wealth heads west
As sanctioned Russian oligarchs vacate London, Chinese high net worth individuals (HNWIs) are stepping in to fill the gap. In fact, such is the scale of their investment in high-end property in London, the city has now been dubbed Beijing-on-Thames.
Research conducted by the private wealth law firm Boodle Hatfield last year found that mainland China and Hong Kong provided the two biggest cohorts of non-domiciled HNWIs relocating to the UK in the last 12 months. Recent reports have also suggested that Chinese investments in the UK now have an accumulated value of £135 billion.
Why is this the case? It’s thought that Chinese HNWIs are drawn to the UK for its high-quality private schools and universities on offer for their children, as well as its investment opportunities. And despite Brexit, Chinese investors continue to view the UK as one of the most secure jurisdictions in which to hold assets. Boodle Hatfield also says that the existing international make-up of London acts as a magnet to other mobile HNWIs. Additionally, London has built itself a reputation as Europe’s leading tech and innovation hub, providing numerous start-up opportunities that HNWIs can invest in.
The impending great wealth transfer
It’s believed that in the next 20-30 years, a record £5.5 trillion will transfer between generations – either as inheritance or gifts. At present, in the UK, more than 80% of household wealth is held by the over-45s, but this is set to change as an unprecedented amount is passed on from baby boomers to millennials. In fact, it’s estimated that 300,000 younger Brits will acquire £327 billion in the next decade alone.
This, however, isn’t the only shift taking place. With a third of the world’s wealth now under their control, women have become a very sizable economic force. They are increasing their wealth faster than ever before – adding $5 trillion to the pool globally every year – and outpacing the growth of the overall wealth market.
The next gen and their attitudes
We know that millennials and gen Z have significantly different expectations, aspirations, and priorities to those of their forbears.
The next gen are more global, more tech focussed, and they place greater emphasis on wellbeing – their own, that of their families and that of the environment. They are socially conscious, less risk averse than their parents and grandparents and are increasingly looking to place purpose alongside returns in their list of priorities. Their interests, meanwhile, are diverse, and include cryptocurrency, AI, and digitalisation.
They are also engaged – a notion that can be particularly applied to entrepreneurial clients (globally, it’s thoughts that 129,557 UHNWIs are self-made and under the age of 40) .
Knight Frank’s Wealth Report Attitudes Survey uncovered that 70% of UHNWIs under the age of 40 had different views to their parents when it comes to property. Whether it’s being considered as a home or as an investment, the economic case, for them, must stack up. They are global buyers who want to hold assets across a range of geographies, and they put emphasis on service provision, open space, amenities and room for entertaining. They are also willing to refurbish and reimagine space.
Notably, this generation are getting wealthier – this is demonstrated by the fact that in London’s super-prime (£10 million plus) market, there has been a fundamental shift towards younger buyers.
A general desire to do good
It’s not just the next gen who are increasingly concerned by the general welfare of the world and those living in it. Increasingly, post-pandemic, we’re all more acutely aware of the need to support those around us than before. Covid, for all of the havoc that it wreaked, changed our perceptions and shone a light on the strengths that can be found in a society that looks out for each other. This means that today, HNWIs tend to be less motivated by huge returns and reward, and more by improving the lives of others and addressing wealth inequality, which is now a more routine part of public discourse then it ever has been.
As a result of all of these factors, those with funds are often looking for ways that they can make a difference – with philanthropy, impact and angel investing all acting as vehicles for achieving much-needed change.