The 100 Trillion Dollar Wealth Transfer – A Conversation with Ken Costa, Philanthropist, Thought Leader & Investment Banker.

The 100 Trillion Dollar Wealth Transfer – A Conversation with Ken Costa, Philanthropist, Thought Leader & Investment Banker.

Ken Costa is a seasoned investor and author. Born in South Africa, he was active in the anti-apartheid movement as a student leader in Johannesburg and went on to study law at Queens’ College, University of Cambridge, thereafter becoming Chair of UBS Investment Bank (EMEA) and Lazard International. He is currently chairman of Helios Fairfax, the largest private equity group in Africa. As a supporter of investment in the next generation he chairs Glorify, a meditation app. Alongside his finance career, Ken has been heavily involved in various not-for-profit organisations including the Advisory Board of the London Symphony Orchestra and Trustee of the Nelson Mandela’s Children’s Fund (UK). In 2023, he was awarded the Canterbury Cross by the Archbishop of Canterbury for outstanding contributions to the Church of England. He created the highly successful Tick Tock Club for Great Ormond Street Hospital which has raised £50m for the hospital. He is Emeritus Professor of Commerce at Gresham College and was coordinator of the City’s response to the Make Poverty History Campaign.

Ken Costa is one of the most astute minds in the global financial world and has identified that, in the next ten years, there will be an unprecedented wealth transfer- over 100 trillion dollars- from the so-called ‘baby boomer’ generation to the young. Never before has so much money – in housing, land, stocks and cash – been shifted so suddenly from one generation to the next, and never before does the next generation inheritng wealth feel so differently about the future of the planet and of capitalism. In this interview, I talk to Ken Costa about, “The 100 Trillion Dollar Wealth Transfer 

Q: What is the magnitude of the transfer of wealth between generations? 

[Ken Costa]: The magnitude of the wealth transfer is immense. Firstly, the estimation of a hundred trillion might actually be on the conservative side. Just considering the US, the figure stands at 84 trillion. So, one can only imagine the global scale. What’s intriguing about this transfer is twofold. Firstly, it’s not a future event we’re merely speculating about; it’s unfolding right now. In the UK, for instance, the ‘bank of mum & dad’ is already assisting the next generation with deposits and rent payments. We’re in motion, but we must recognize the profound social, political, and economic implications this brings. 

Q: How did the incumbent generation accumulate so much wealth to transfer? 

[Ken Costa]: The core reason is the remarkable surge in asset inflation, coupled with low interest rates and QE, which has entirely disrupted a decade’s financial landscape. This is truly unparalleled. Directly following the global financial crisis, we observed a persistent shift favoring those with assets. Their assets appreciated, often at the detriment of the upcoming generation. This dynamic is at the heart of the crisis. 

Q: How does the intersection of differences in attitudes to wealth and power play-out in wealth transfer? 

[Ken Costa]: It’s more than just the movement of capital. The defining feature of our era is that the next generation are bona fide digital natives. They’ve been raised in a digital world, so concepts like artificial intelligence or quantum computing don’t faze them. They’re backed by technology, making them tech-empowered. This is the first aspect. They’re equipped both to decide how capital is utilized and to research if it aligns with their values. The second point is their unprecedented influence. Thanks to social media, they can sway vast audiences in mere moments, and there are key influencers who can pivot a conversation. Lastly, they possess a crystal-clear agenda. They’re passionate about topics like the environment, justice, equality, and beyond just financial markets, they’re reshaping social and political narratives. These three facets fuel the empowerment of this generation, which, now armed with financial means, is making waves in a manner never before seen in human history. 

Q: Do you think differences in attitudes will also change the paradigm of wealth management? 

[Ken Costa]: I once advised my daughter, as I handed her some money, to consult our family’s wealth manager. I suggested she inform the fund managers of her preferences, knowing she might not want to invest in sectors like alcohol or tobacco, as we traditionally did. But she corrected me, saying, “Dad, it’s not just about avoiding the negative; I want my investments to contribute positively.” That was an eye-opener for me. The rise of impact investing is undeniable. Wealth managers will increasingly cater to this new generation’s ethos. Gone are the days of passive investment advice like “buy BP, sell Shell.” This generation seeks a hands-on approach to their wealth deployment. They’re astute enough to demand both positive societal impact and good returns. Every fund manager will soon navigate this thrilling terrain, collaborating with this demographic to influence not just the financial world but society at large. Indeed, monumental shifts are on the horizon. Boardrooms everywhere will grapple with how to engage this increasingly influential and resolute segment of society. 

Q: What are some of the key trends you are seeing in how wealth is managed due to this transition? 

[Ken Costa]: Let me highlight three, perhaps four, key trends I’ve observed. First, there’s a distinct shift from the West to the East. This coincides with the ‘youthening’ of regions like India and Indonesia. So, we’re witnessing both capital and investment flowing towards areas teeming with the younger generation. Second, there’s a transition from brown industries to green initiatives. This generation has been instrumental in driving this change, and they’re not about to relent, regardless of governmental stances. Third, we’re seeing the ‘feminisation of finance’. Women are progressively taking the reins of vast asset pools, influencing wealth allocation. This shift from a predominantly male-dominated sphere introduces a fresh and potent perspective. It’s enriching to have diverse voices, especially as data suggests women often resonate with the values the next generation champions. All these trends unfold against the backdrop of a massive wealth transfer currently underway. 

[Vikas: How are cultural differences in areas that are becoming wealthier playing out in how money Is deployed and managed?] 

[Ken Costa]: Certainly, the way you’ve framed it suggests a shifting meridian in capitalism. However, there’s a distinct advantage in regions like India, Singapore, and Hong Kong. Here, intergenerational collaboration is already ingrained; it’s not a contentious issue. Unlike the divisive silos we’ve constructed, as depicted in the book, where one generation accuses the other — the older labeling the younger as lazy and the younger dismissing the older as out-of-touch or rigid. This dynamic needs transformation. In the East, such intergenerational conflicts are largely resolved, making their societal fabric stronger. The impending wealth transfer in these regions will be facilitated by a next generation that’s incredibly astute. Educated at institutions like Harvard, Stanford, Cambridge, and Imperial, they’re well-versed in global trends and deeply influenced by the digital age, social media, and pressing issues like climate change. While the transfer of values will persist, the foundational structure of the family, the entrepreneur, and the founder will likely evolve seamlessly and expand rapidly in these areas. 

Q: How can, and should, government play a role in generational wealth transfer? 

[Ken Costa]: You’ve touched on a pivotal point: the necessity for generations to collaborate. Moving forward, it’s imperative that both boomers and zoomers work in tandem. The Sunday Telegraph recently highlighted this in a feature, emphasizing that while the next generation will inherit capital, the boomers remain integral to the narrative. I see it as a blend of the boomers’ hindsight, having navigated economic cycles like inflation and recessions, with the zoomers’ insight into an ever-evolving world. Together, they forge the foresight essential for future capital deployment. Governments must acknowledge this synergy. The onus is on the boomers to assert that expansive government and heightened taxation aren’t the solutions to achieving desired outcomes in areas like sustainability and the environment. This perspective isn’t being championed robustly enough, leading to the looming threat of expanding governmental roles and tax hikes. We must remain vigilant against this trajectory, as it risks ushering in a well-intentioned yet ultimately detrimental form of socialism. This could stifle the very incentives for value creation that underpin our discussions. 

Q: Can you talk through the notion of co-curation? 

[Ken Costa]: Here’s the crux of the matter: I view this as a visionary generation. They’re charting the course for the future. We’re already witnessing glimpses of it in concepts like coworking, co-living, and co-investment. The philosophical shift is evident. While some criticize them as being overly individualistic, I believe there’s a subtle yet undeniable transition from the “me” mindset to a collective “we” approach. The profound “co” concept I foresee is what I term “co-destiny,” rooted in socially energized capital. The emphasis here is on “energized.” This upcoming generation brims with vigor, innovation, and a drive to instigate change, fortifying the essence of capital. Yet, they’re keen on infusing a social dimension to it. It’s essential to remember that socially energized capitalism remains capitalism at its core, encompassing incentives, value creation, rewards, risks, and more. Collaborating on this front promises a brighter future. Failing to do so risks deepening divides, potentially spiraling into a full-blown socialist debacle or causing significant generational rifts. The importance of intergenerational harmony cannot be overstated. The potential generational conflict might even overshadow broader societal clashes. Embracing the “co” philosophy is our best bet to avert such confrontations. 

Q: Do you think the generation receiving wealth transfers are also managing that wealth with a difference attitude to risk? 

[Ken Costa]: The perception of risk varies significantly based on one’s time horizon. Boomers, given their stage in life, might have a shorter outlook and thus a different risk appetite. In contrast, zoomers, with a longer lifespan ahead, are likely more open to higher risk levels, banking on ample time for situations to evolve. However, tension might arise if zoomers perceive the boomer generation as obstructing progress towards sustainability. This could amplify intergenerational friction. Questions might emerge, such as, “Why should we support a generation that prospered in an inflationary era, while many of us struggle to afford a home or even rent?” 

Q: What do you hope your legacy will be? 

[Ken Costa]: When I contemplate legacy, I envision a harmonious blend of various elements. In one facet of my life, I navigate the crossroads of spreadsheets and spirituality. My hope is for an upcoming generation that’s not only fortified by financial prowess and influence but also recognizes the value beyond materialism. I yearn for them to embrace a “co-spirituality,” understanding that the tangible world isn’t the sole solution, as believed by the post-war generation, to today’s societal challenges. If I were to wish for a legacy, it would be this: a future generation seamlessly integrating the pursuits of prosperity, benevolence, and a fulfilling spirituality that ties everything together.

Thought Economics

About the Author

Vikas Shah MBE DL is an entrepreneur, investor & philanthropist. He is CEO of Swiscot Group alongside being a venture-investor in a number of businesses internationally. He is a Non-Executive Board Member of the UK Government’s Department for Business, Energy & Industrial Strategy and a Non-Executive Director of the Solicitors Regulation Authority. Vikas was awarded an MBE for Services to Business and the Economy in Her Majesty the Queen’s 2018 New Year’s Honours List and in 2021 became a Deputy Lieutenant of the Greater Manchester Lieutenancy. He is an Honorary Professor of Business at The Alliance Business School, University of Manchester and Visiting Professors at the MIT Sloan Lisbon MBA.