Over the next two to three decades, an estimated US$11 trillion in private wealth will change hands across Asia-Pacific – one of the largest intergenerational wealth transfers in modern history, according to Swiss Bank UBS.
The region’s next-generation family members perceive this shift very differently from their counterparts in Europe and North America. In Asia-Pacific, inheritors are more likely to associate a family milestone with the passing of a family member. By contrast, in Europe and North America, inheritance is more strongly tied to a shift in responsibility.
They are the inheriting generation, stepping into responsibility within their families. UBS also observed that successors were getting involved in family wealth at younger ages in Asia, especially in China.
“Families worry about wealth not passing through three generations,” said Amy Lo Choi-wan, chairman of UBS Global Wealth Management Asia and CEO of UBS Hong Kong. “They want to plan much earlier.”
These findings come from a UBS survey of next-generation individuals ranging in age from below 21 to above 45, with the majority between 26 and 40. They represent the inheriting generation – those stepping into responsibilities within their families.
While the Swiss bank defined the next generation of leaders as aged between 18 and 60, 65 per cent were already engaged in managing family wealth as young adults from 20 to 35 years old.
As families deepen across generations, perceptions evolve. About 40 per cent of second- and third-generation family members associate wealth transfer with a responsibility shift. That figure rises to 50 per cent among fourth- and fifth-generation members.
The next generation of business owners is more open to alternative investments and technology, said Jamee Wong, head of private client in Greater China of UBS Global Wealth Management.
UBS found 22 per cent of their investment portfolio was in private markets, with 16 per cent in direct investments, mainly to diversify their portfolio and gain non-public exposure, especially to sectors like artificial intelligence and robotics, Wong said.
But traditional assets remained the backbone of next-generation portfolios, with 79 per cent invested primarily in stocks and bonds.
Notably, only 11 per cent of wealth successors invested in cryptocurrencies. An example mentioned in the report was from a second-generation entrepreneur who recalled early enthusiasm for a specific cryptocurrency, only to lose the entire investment overnight.
“I never truly understood my father’s scepticism towards this asset class, until I saw my portfolio plummet,” said the surveyed heir. Over 70 per cent of the next generations in Asia-Pacific preferred professional guidance from wealth managers and family offices, while over one-third in Europe and Latin America leaned towards peer advice.
Lo forecast the outlook for wealth management would remain “significant” in Asia despite an industry-wide slowdown, as wealth created in the region in the last few years was still high.
Separately, Lo said demand from Greater China for wealth management was surging, with UBS seeing an 80 per cent growth of new accounts in the region over the past 18 months being opened with next-generation and new-investor assets aged 50 or below.
Alongside the ongoing wealth transfer, demand for diversification amid geopolitical tensions has also helped boost growth.
“What they want is global network,” said Lo of UBS. “Because in the geopolitical situation, they all want to divest their business there and also to do the diversification.”
And Hong Kong’s wealth management business was estimated to benefit from the geopolitical risks, as many Middle Eastern clients were inquiring about the city, which had become a “safe haven”, Wong added. -- SOUTH CHINA MORNING POST
