By Chris Maule, CEO of UK Bond Network
In the past, high net worth (HNW) investors have been stereotyped as older, male, British and well-educated, who have often inherited their wealth. But this has now changed. The ranks of affluent individuals in London interested in growing their wealth are becoming increasingly diverse and we’re seeing the emergence of distinctive sub-cultures, each with particular attributes and attitudes to investment. Here, we explore these new investment ‘tribes’ and how they’re impacting the capital’s financial landscape.
Females with a fortune
Research from International Women’s Day suggests that the number of UK female millionaires is increasing by 11% per year. Women investors are an increasingly important tribe in London.
From our own analysis, we know that women typically prefer to invest or save for a specific long-term purpose – to achieve a life goal such as getting on the property ladder. This is in contrast to men, who are less risk averse and more likely to focus on investments that result in immediate returns.
Independently successful, financially savvy and discerning, this group is likely to look for diversification across their investment portfolio – diluting the risk of investing wholly in one sector or region. They will also favour investment in businesses with a proven track record and solid business plan; those that offer secure, longer term gain rather than a quick return. They tend to be careful with investments and rigorously research opportunities to ensure they’re worthy of their support, opting against the more quirky crowdfunding options, which other groups might prefer.
Tech savvy youngsters
The digital age has democratised wealth so that dot com billionaires now sit beside royalty and oil dynasties on The Sunday Times and Forbes rich lists.
Young tech millionaires tend to be more hands-on and analytical when it comes to assessing their financial options. Typically they appreciate data and charts to support investment decisions, but will not put all their eggs in one basket – looking instead to create a diverse investment portfolio. This is likely to include a mix of riskier but high return options, such as hedge funds, private companies and tech start-ups, alongside more secure, income generating assets like bonds.
These entrepreneurs and ‘freshly minted millionaires’ are likely to keep 10 -15% of their assets free to invest in their own ventures and friends’ businesses. With their wealth originating in the tech sector, they are extremely comfortable using online alternative finance platforms, which enable them to take a passive approach to investment while concentrating their time on their own companies. The newly launched Tendr app, a peer to peer aggregator which has been referred to the ‘Tinder of Equity Crowdfunding’, would certainly appeal to this community.
Millennials’ preference for technology and alternative investment options also stems from their experience of stock market crashes and the recent recession, which have left them disillusioned with the traditional system and more willing to look for other unconventional vehicles.
The movement of wealthy Russian, Chinese and European nationals to the UK has been widely reported in recent years, with their ranks now being swelled by Nigerians, Ghanaians and Senegalese. These driven, international businesspeople often opt for lucrative perceived ‘safe haven’ markets such as high-end London property. According to estate agents Knight Frank, Chinese buyers accounted for 11% of all property transactions above £1 million pounds in London last year, up from 4% in 2012.
With many families coming to the UK on investment visas, where a £1 million investment in the country will purchase up to five years residency for a Chinese national, their financial support can be a given. Indeed compared to other countries, there is less red tape for foreign direct investment in the UK, which makes it a safe haven for investment. Nevertheless moving to Britain is an expensive business, so receiving a high but relatively secure return on their investment can be a priority for some in this investment community.
Economic, social and demographic changes have created these distinct new investment tribes which are disrupting London’s investment community. These investors seem less nomadic and more like they’re here to stay and given this, it presents a big opportunity for the UK’s financial services companies to learn about these groups, discover what appeals to them and understand why they choose to invest to add significant scale to their businesses.