On Wednesday next week the Social Stock Exchange is hosting a Family Offices conference, with a specific emphasis on ‘values-based investments’. It’s an invitation-only event – so if you haven’t got your invite yet, get on the blower to the Exchange and demand one. It’s likely to be standing room only, such is the wealth of interest surrounding the topic.
A Family Office (FO) is, at its simplest, a private office that handles the finances of a family possessing significant wealth. That ‘significant’ covers a multitude of possibilities, as does ‘handles’ – some FOs are managing a few millions, others deal in billions. Some see their role as purely advisory on financial matters; others extend their service to cover many other matters. The number of FOs has boomed in the past quarter century – in line with more or less continuous economic growth, making the post-1945 generation of ‘Baby Boomers’ probably the richest generation ever.
The Baby Boomers get a lot of stick these days. According to author Bruce Gibney, in his A Generation of Sociopaths, Boomers are guilty of “acting without empathy, prudence, or respect for facts – acting, in other words, as sociopaths.” Mind you, of the 91 reviews of the book on Amazon, 33% give it just 1 star; make of that what you will. But Boomers are about to hand the Millennials $30 trillion. That ought to please them. That’s the sum which many experts in this area believe is shortly about to be transferred from the Baby Boomer generation (aged 53-71 and now coming to its three-score-years-and-ten) to the younger Millennials – born, roughly, since the early 1980s.
And maybe – just maybe – that tremendous wealth will be put to better use than has been the case with the ‘sociopaths’. According to a 2016 report by UBS and Campden Wealth, 61% of family offices “are now active or expect to be active in impact investing in the foreseeable future. Millennials are a key catalyst for this change, with two-thirds of participants agreeing that families with children born after 1980 will see an increase in requests to participate in impact investing.” This report was based on a survey of 242 FOs, with an average $759 million of assets under management.
No-one has any idea whether or not this potential massive intergenerational transfer of wealth will actually filter through to ‘values-based investments’. But perhaps there is an interesting coalescence of forces driving Millennials to make very different investment choices from their parents. The increasing awareness of the part played by burning fossil fuels in altering the global climate; the failure, more or less everywhere, of government tax revenues to keep pace with social pressure to provide sufficient welfare to the ‘have-nots’ of our societies; the rapidly altering nature of work and employment; and the collapse of the rampant individualism of the 1980s, brought down by the 2008 financial crisis; all of these are creating a diffuse, somewhat inchoate sense of greater responsibility, coupled with a widespread determination not to repeat past mistakes. Millennials really are different.
There are straws in the wind to support this assertion. One was published in 2015 by the global data-cruncher Neilsen. Its Global Corporate Sustainability Report, based on a poll of 30,000 consumers in 60 countries, concluded that “despite the fact that Millennials are coming of age in one of the most difficult economic climates in the past 100 years, they continue to be most willing to pay extra for sustainable offerings – almost three-out-of-four respondents (73%) in the latest findings, up from approximately half in 2014. The rise in the percentage of respondents under 20, also known as Generation Z, who are willing to pay more was equally strong – from 55% of total respondents in 2014 to 72% in 2015.” According to Neilsen, “brands that establish a reputation for social responsibility and environmental stewardship among today’s youngest consumers have an opportunity to not only grow market share but build loyalty among the power-spending Millennials of tomorrow.”
One swallow does not make a summer – but if this type of attitude persists among the post-Boomer generation, and ripples outwards into related areas, then it will have profound and lasting consequences for the direction of investment, not least among FOs. To put it bluntly, the new young rich, much more conscious of living in an inter-connected world than their parents, are flexing their financial muscles. To understand why, how, and what, you’d do well to come along to the Social Stock Exchange’s FO conference to listen to experts dealing with this silent revolution.
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