As European HNW populations age, asset and wealth managers need to adapt their strategies to this growing clientele. This article takes a broad overview.

The ageing of European populations – to give a broad generalisation – is a well-trodden path of conversation and debate. What the implications are for ultra-HNW individuals and families isn’t, however, always so well understood. To try to make more sense of the picture, we publish this guest article from Julia Khandoshko, CEO at Mind Money, a European investment technology and financial engineering hub. Khandoshko is a finance industry professional with 10 years of experience in technology and capital markets. The editors are pleased to share these insights and are grateful for this contribution to debate. The usual editorial disclaimers apply. To respond, email tom.burroughes@wealthbriefing.com

Growing old is a privilege that not everyone is able to experience, and it’s not simply a philosophical statement. The ageing population has become a distinctive characteristic of developed economies. While globally, only 10 per cent of people are 65 or older, developed countries, in particular, exhibit a higher proportion, with around 20 per cent falling into this age group.

Europe reflects this trend perfectly. In 2022, 75 per cent of the top countries with the highest percentage of people aged 65 and older were, in fact, European. Italy, Finland, and Portugal led the European “oldest population” ranking. This demographic shift implies that asset and wealth managers must adapt their strategies to this growing target clientele. The ultra-wealthy individuals or investors also generally fall under the 50 to 70 age bracket, making it crucial to understand what approaches prove to be valuable when working with the European “ageing” investor population.

How investing differs across generations
If we examine investor preferences across generations, we will observe distinct economic landscapes – from Boomers born in the mid-1940s to mid-1960s to Millennials and “Zoomers” born in the early 1980s and later. The economy tailored for generations Z and Millennials thrives on digital assets. Notably, 77 per cent of investors under 40 prefer bitcoin over traditional assets such as gold as a part of their investment mix.

Younger investors seek simplified financial services, emphasising one-click functionality and individual control over the investment process. Conversely, older generations adopt a more conservative portfolio approach. This conservatism, traditionally associated with a higher bond ratio, has evolved, particularly in the post-Covid era. Today, the stability of stocks has challenged the historical notion, reshaping the landscape of conservative investment portfolios.

Moreover, this conservatism isn't rooted in resistance to modern technologies or the crypto market; rather, it hinges on the desire for classic financial service and approach as the investor's age increases. If the digital assets' market demonstrated greater institutional adoption and stability, optimism among the ultra-rich older generation would likely follow. 

The utopian notion of the crypto market existing independently from traditional financial systems remains unfulfilled, thus high net worth (HNW) individuals seek a more classic approach to their portfolio management. 

An “extra” value in investors’ preferences
The target demographic of wealthy European older investors stands out for its preference for a highly customised approach to service, distinct from younger investors. While younger generations favour smartphone-centric services, affluent HNW individuals in Europe seek the utmost personalised human-centric service from asset and wealth managers, which sets them apart.

It seems that once this target audience of HNW individuals reaches a certain earnings' plateau, it shifts its focus from mere revenue to prioritisation of the concept of "extra" value. Beyond material goals and passive income, ultra-rich investors are keen on associating with impactful projects, often incorporating ESG factors in their portfolios. 

Keeping that in mind, wealth managers must adapt to delivering a highly personalised approach while offering financial services with a progressive edge, showcasing a visionary strategy for these investors. The long-term impact becomes a priority, and demonstrating a cutting-edge approach to high net worth clients is vital, signalling a commitment to being on the frontline of innovation. 

Trends and strategies to watch 
In effectively catering to ultra-rich investors, a notable shift in strategies is underway, moving away from diversification towards regular fixed income. Unlike two decades ago, when investing in numerous startups and expecting success was a trend, today's investors seek a more balanced portfolio with more fixed-income options; the prominence of fixed income ETFs perfectly reflects this preference.

However, given the absence of fixed options in the modern financial landscape, it is crucial for brokers and asset managers to step away from outdated tools that may have worked a decade ago and explore new solutions. We are in a transition phase within the market – a juncture where old methods are ineffective while new methods and tools are still undergoing testing and development.

We can expect a rise in predictive solutions based on advanced technologies. The market will likewise become more personalised to cater for the preferences of high net worth investors, emphasising human interaction with financial services professionals over robo-advisors. Additionally, brokers will concentrate on delivering stable, predictable income to surpass inflation and fulfil client needs. Asset managers, armed with an understanding of different markets and robust mathematical models, can effectively serve this client group, making this progressive and highly customised approach a trend in the coming years.