The next generation of high net worth individuals (HNWI) and wealthy investors is set to continue the trend of globalisation amid an increasingly interconnected world, Sarasin & Partners has stated.

This shifting landscape could present challenges and opportunities for wealth managers as investors are diversifying strategically across global markets as they seek to tap into growth opportunities across equities, bonds, and alternative strategies.

Sarasin & Partners senior investment manager, Harveer Mata, noted that the global mindset of the next generation of potential investors was underpinned by an “increasingly dynamic” education system.

“In the UK, the academic year of 2021/2022 recorded roughly 680,000 foreign students studying at UK higher education institutions, equivalent to 24 per cent of all higher education students in the UK,” Mata said.

The next generation of HNWIs and entrepreneurs will “inevitably” have even more of a global outlook, Mata added, warning that while a manager’s primary objective was to structure a portfolio to meet clients’ changing investment requirements, they must also be mindful of inadvertent tax pitfalls affecting clients across the globe.

“More so than ever, investors are diversifying strategically across global markets with the aim of tapping into growth opportunities across equities, bonds, and alternative strategies,” he continued.

“Encouraging investors to look beyond traditional geographical boundaries enables them to benefit from the potential returns generated by long-term thematic trends in the global economy.”

Mata also highlighted that evolving attitudes to responsible investing presented opportunities and, despite recent short-term challenges, long-term capital invested by individuals and families increasingly prioritised responsible investment goals alongside performance objectives.

“Families and their advisers are having increasingly open discussions to understand and respect varying views,” he stated.

“This can involve finding common ground and creating diversified portfolios that reflect the collective values and goals of the family, while also educating family members on the potential risks and rewards associated with investing from a responsible standpoint.

“In certain cases, the flexibility to address specific ethical considerations in a bespoke investment strategy can unlock an opportunity to engage with the next generation of family members.”

Additionally, philanthropy was becoming more prevalent in the UK, with family foundations and donor-advised funds (DAF) being popular vehicles to facilitate philanthropic giving.

Mata noted that while family foundations offer control over the distribution of funds and the ability to create a legacy, they come with administrative responsibilities and regulatory requirements that “can be onerous”.

“DAFs, on the other hand, provide a more straightforward approach with lower costs, while still offering tax advantages. They allow donors to recommend grants to their preferred charities, while the sponsoring organisation handles the administrative tasks,” he said.

“Investment managers and their tax advisers can work closely with different generations of a family to determine the most suitable philanthropic structure. This involves assessing charitable and investment goals, levels of retained control, and associated costs.

“Inheritance and professional success will drive an unprecedented amount of wealth to a new generation. Investment attitudes are evolving and in general, this generation appears passionate about how their investments are managed, and often looks through a different lens.

“However, much of the research published about the great wealth transfer points to the concern that families are not having the right conversations at the right time.”

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