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NextGen; health, wealth or taxes?
Sponsored Content by Julia Warrander and Russell Waite, of Affinity Private Wealth, reply:
AS wealth managers, we are constantly looking to make investments based on a probability of returns which we see as stacked in our favour.
In other words, we seek certainty in delivering a positive investment outcome for our clients. We recognise, of course, that this is wishful thinking. The famous quote from Benjamin Franklin constantly reminds us that ‘there are only two certainties in life – death and taxes’.
There is, however, one (near) certainty we can use to guide long-term investment decisions: demographics.
This is the statistical study of human populations, the trends of which create some of the strongest forces in economics, impacting global prosperity and the value of assets.
What trends are certain through the lens of demographics?
Declines in fertility rates leading to a shrinking natural population in the US, fewer than one baby born per woman in South Korea and deep concerns about fertility across Europe will make sustained rapid economic growth ever harder to achieve.
These will increase the burden of high levels of public- and private-sector debt for potentially shrinking populations and put pressure on governments to raise taxes to pay for the greater income, health and care needs of the elderly. (Note that Benjamin Franklin’s certainties emerge from this sentence too.)
These trends create numerous challenges for politicians but the generational changes inferred also create opportunities for investors.
According to research from Bank of America, we are going to see a great transfer of wealth and consumption power move from Baby Boomers to Gen Z, passing over Gen X and millennials. Gen Z, born from 1996 to 2016, makes up about 32% of the world’s population. By the end of this decade, Gen Z will earn more than millennials.
What will they do with this money? For a start, this NextGen does not use credit cards or cash but prefers payment apps.
Moreover, they are conservative in terms of credit, so take out fewer mortgages and student loans.
This is a generation that does not want to cap its experience of life by taking out loans, and does not see the value of a bigger house and owning more ‘stuff’.
Its members do, however, prioritise their health and wellbeing, gadgets and tech and all things sustainable.
Investors, take note.
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