OppenheimerFunds has launched ‘The Generations Project UK’, a new research study that surveys the different investing behaviours, goals and attitudes across generations within high-net-worth (HNW) families, including their relationships with their advisers.
Art Steinmetz, OppenheimerFunds Chairman & CEO, says: “As one of the first global investment managers, we continue to underscore the importance of global thinking and diversification for our clients and look forward to sharing our research insights with a new segment of investors and advisers in the UK market.”
John McDonough, OppenheimerFunds Head of Distribution and Marketing, says: “The report makes clear the risks of home market bias and lack of asset class diversification, as investors who overwhelmingly choose domestic equities could miss out on the benefits of an increasingly global economy and innovations driving growth throughout the developed and developing world.”
In anticipation of the largest wealth transfer in UK history – an estimated 66 per cent increase to GBP115 billion by 2027, according to the Centre for Economics and Business Research – investors are poised to rewrite the rules of wealth advisory. “The Generations Project UK.” includes the opinions of 900 UK HNW investors and advisers across the younger and older Millennial, Generation X, Baby Boomer and Silent Generations.
“With rising generations of heirs continuing to become more active in the management of their family wealth, changing expectations and preferences are having a profound impact on the ability of advisers to maintain existing relationships and build new ones,” says Doug Stewart, Head of EMEA for OppenheimerFunds.
The study indicates a number of potential areas of opportunity for advisers to better engage with their clients’ families across generations. For example, while a vast majority (88 per cent) of HNW advisers typically teach investment concepts to their primary client, only 54 per cent do the same with their primary clients’ children.
Disconnects in the adviser/client relationship were also highlighted by a stark misalignment in expectations between what HNW investors seek from their advisers and what advisers think clients want.
While HNW Millennial investors rank good investment performance as the most critical aspect of their adviser relationship, advisers believe HNW Millennial clients primarily seek an adviser who has a clear understanding of their financial goals, with performance ranking eighth among advisers, along with fees and commissions.
The research also looked at the investing preferences of UK. HNW investors, and found a lack of portfolio diversification across markets and asset classes, led by evidence of a strong home market bias with UK. domestic stocks.
According to the study, 88 per cent of HNW investors own UK stocks, while only 62 per cent have international stocks in their portfolios. Ownership of European stocks (58 per cent), emerging markets stocks (44 per cent) and UK bonds (38 per cent) follow a similar pattern.
Only 54 per cent of investors surveyed currently have financial discussions with their spouse or partner, and 30 per cent have never had these conversations at all. Nearly a fifth (17 per cent) are not currently discussing their finances with anyone.
While 39 per cent of younger Millennial investors have expressed interest in ESG, only 14 per cent who are interested in the category have actually invested in it. Older investors outpace younger ones with respect to holding sustainable investments.
With just 26 per cent of Millennials, 23 per cent of Gen X and 21 per cent of Baby Boomer advisers currently providing financial education training to their clients, there is a significant opportunity for advisers to step in and cultivate the next generation of HNW family members through education.
Young advisers are not yet wise advisers in terms of client service, with Millennials trailing their older adviser peers in offering solutions tailored to different generations (just 61 per cent), compared to 77 per cent of Baby Boomer and 70 per cent of Gen X advisers. Millennial advisers also rank last in providing inheritance advice to clients for both giving (73 per cent) and receiving (68 per cent), compared to Gen X (83 per cent/85 per cent) and Baby Boomers (85 per cent/89 per cent).
“This study should be a clarion call for advisers to better communicate and engage with different family members across generations and hopefully empower younger investors to expect more from their adviser relationship going forward,” says Stewart. “By transitioning from one-to-one advising to a whole family model, advisers are better positioned to help spouses and younger family members prepare for the responsibilities of wealth while establishing a stronger practice for themselves going forward.”
This is the third annual high-net-worth study conducted by OppenheimerFunds, which commissioned CoreData Research LLC to survey wealthy US and UK investors and advisers who primarily serve high-net-worth clients to better understand investment behaviours and attitudes across all generations, the role of family dynamics and how advisers engage investors. Conducted online from December 2017 through January 2018, the study included nearly 2,000 investors and advisers.
The minimum net investable assets for investors to qualify for the study was USD500,000 (GBP250,000) for Millennial-aged investors and USD1 million (GBP500,000) for all other investors. Adviser qualifications included USD100 million in assets under management in the US and GBP25 million for the UK study with the majority of their book of business comprised of high-net-worth clients.
