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Sun 17 Feb 2019 11:33 AM

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Opinion: How Middle East millennials will manage their wealth

Digitally savvy and globally aware, are millennials' financial needs also different from older generations, asks Remy A. Bersier, head of Emerging Markets at Julius Baer

Opinion: How Middle East millennials will manage their wealth
High net worth in Saudi Arabia alone, the demi-billionaire population – those with $500m or more in net assets – is expected to rise 17 percent by 2022

Over the coming decades, a private wealth worth $30 trillion will be transferred between baby boomers and the current generation of millennials.

According to the Boston Consulting Group (BCG), millennials, who are born between 1981 and 1996, already control nearly $17trn, or 10 percent of the world’s wealth, which is expected to rise to $35.3trn, or 16 percent, by 2020.

While wealth transfer is not a new topic, this wave is attracting more interest because the next generation of wealthy individuals showcases marked differences from their predecessors. As such, understanding the millennial mindset is key to capturing the economic potential of the world’s largest and most able-to-spend generation.

Optimism for the next generation

Growing up, millennials in the Middle East have observed global, disruptive events that affected their counterparts in the US and Western countries, as well as the rest of the Middle East region. Political instability and macroeconomic uncertainty have shaped their view of the world.

This power generation certainly appreciates hard work and does not take success for granted. In this region, millennials are considered amongst the top entrepreneurs amongst their peers globally. At the same time, they feel like they do not enjoy the same economic prosperity or security as past generations, thus making them less optimistic and more risk-averse in their investment choices.

In the GCC, there is more optimism amongst millennials as they enjoy a bigger share of accumulated family wealth.

Despite this difference, their investment profile remains on par with other millennials globally, with focus on basic savings products, equities, and property, and less interest in more complex asset classes.

Millennials are on a constant quest for purpose and appreciate socially-responsible and value-impact investments. For them, investing is more about making a positive contribution to society and the environment rather than mere financial gains. As such, wealth managers are expected to support them managing their money in a more sustainable way – through actively investing and creating carefully filtered portfolios according to ESG (environmental, social, governance) criteria and a well-defined set of interests and values.

The rapid pace of digital transformation has enabled this generation of tech natives to get answers at their fingertips and connect with anyone, from anywhere, at any time.

As such, leveraging fintech solutions and robo-advisors may feel convenient for this generation. However, it is important to remember that there is more information than there is knowledge and it can be challenging to find valuable content that can inform their investment decisions by relying on technology alone. During times of uncertainty, millennials will struggle to trust their algorithms and risk taking counterproductive decisions based on emotions – just like generations before them.

Evolving financial needs

This is an exciting time for wealthy millennial individuals in the Middle East, given the success stories we have seen to date and more reforms underway. For example, we are seeing women taking on more leadership roles and driving change across various sectors. Of course, the one thing that investors of all generations should remember is that the future is unknown, and in an increasingly challenging financial environment, having access to trustworthy advice that has proven effective across generations is now arguably more important than ever.

For the private banking industry, it is crucial to develop a good level of awareness – and understanding – about millennials’ evolving needs. We argue, however, that these do not actually differ from those required by previous generations.

Our industry should maintain focus on meeting client needs, maintaining good communication and providing sound advice - only then we can meet millennials’ expectations and be true partners in their success and aspirations of shaping the future.

At Julius Baer, we believe personal interactions are indispensable and as such, we work closely with clients to understand their needs and create bespoke solutions to grow and preserve their wealth.

Given the importance of the millennial generation, we have launched the Young Partners programme to provide young UHNWIs with knowledge and first-hand experience on the concepts of portfolio and finance management. By doing so, we aim to help the next generation of clients navigate this complex environment, a first step in our long-term partnership.

Rémy A. Bersier, Head of Emerging Markets at Julius Baer

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