Top Trends In The World of Wealth

Words: Rebecca Evans Even ahead of the current economic crisis, we were seeing huge shifts in the wealth space. Here, we explore the transfer of wealth, the relocation of Chinese money to the UK, as well as the fact that more and more high net worth individuals want to use their finances to make a difference to the world.

First, let’s take a brief look at the broad economic picture as it stands.

To say that markets around the world are in turmoil might be somewhat of an understatement, and the reasons behind this are as vast as they are troubling. Globally, we are still reeling from Covid, as well as the protracted war in Ukraine and the ever-spiralling rate of inflation.

In the UK, Britain’s shortest-serving Prime Minister, Liz Truss ‘mini-budget’ plunged the country into a state of sheer panic, with the pound hitting an all-time low against the dollar. At the time of writing, 40% of mortgage products have been pulled by banks and building societies, and some people have reported that their initial mortgage offers of 4.5% could rise to 10.4% as a result of the mayhem that is currently unfolding. House prices are said to be flatlining, and a stronger slowdown is expected to take hold in the coming months. Jeremy Hunt, the new chancellor, is set to unveil his first Autumn Statement, he prepares to make “difficult decisions” on tax and spending to repair the country’s £50bn fiscal black hole.

As sanctioned Russian oligarchs vacate London, Chinese high net worth individuals (HNWIs) are stepping in to fill the gap. In fact, such is the scale of their investment in high-end property in London, the city has now been dubbed Beijing-on-Thames.

Research conducted by the private wealth law firm Boodle Hatfield last year found that mainland China and Hong Kong provided the two biggest cohorts of non-domiciled HNWIs relocating to the UK in the last 12 months. Recent reports have also suggested that Chinese investments in the UK now have an accumulated value of £135 billion.

Why is this the case? It’s thought that Chinese HNWIs are drawn to the UK for its high-quality private schools and universities on offer for their children, as well as its investment opportunities. And despite Brexit, Chinese investors continue to view the UK as one of the most secure jurisdictions in which to hold assets. Boodle Hatfield also says that the existing international makeup of London acts as a magnet to other mobile HNWIs. Additionally, London has built itself a reputation as Europe’s leading tech and innovation hub, providing numerous start-up opportunities that HNWIs can invest in. Knight Frank’s Wealth Report Attitudes Survey uncovered that 70% of UHNWIs under the age of 40 had different views to their parents when it comes to property. Whether it’s being considered as a home or as an investment, the economic case, for them, must stack up. They are global buyers who want to hold assets across a range of geographies, and they put emphasis on service provision, open space, amenities and room for entertaining. They are also willing to refurbish and reimagine space.

Notably, this generation are getting wealthier – this is demonstrated by the fact that in London’s super-prime (£10 million plus) market, there has been a fundamental shift towards younger buyers.

It’s believed that in the next 20-30 years, a record £5.5 trillion will transfer between generations – either as inheritance or gifts. At present, in the UK, more than 80% of household wealth is held by the over-45s, but this is set to change as an unprecedented amount is passed on from baby boomers to millennials. In fact, it’s estimated that 300,000 younger Brits will acquire £327 billion in the next decade alone.

This, however, isn’t the only shift taking place. With a third of the world’s wealth now under their control, women have become a very sizable economic force. They are increasing their wealth faster than ever before – adding $5 trillion to the pool globally every year – and outpacing the growth of the overall wealth market. We know that millennials and gen Z have significantly different expectations, aspirations, and priorities to those of their forbears.

The next gen are more global, more tech focussed, and they place greater emphasis on wellbeing – their own, that of their families and that of the environment. They are socially conscious, less risk averse than their parents and grandparents and are increasingly looking to place purpose alongside returns in their list of priorities. Their interests, meanwhile, are diverse, and include cryptocurrency, AI, and digitalisation.

They are also engaged – a notion that can be particularly applied to entrepreneurial clients (globally, it’s thoughts that 129,557 UHNWIs are self-made and under the age of 40) .

It’s not just the next gen who are increasingly concerned by the general welfare of the world and those living in it. Increasingly, post-pandemic, we’re all more acutely aware of the need to support those around us than before. Covid, for all of the havoc that it wreaked, changed our perceptions and shone a light on the strengths that can be found in a society that looks out for each other. This means that today, HNWIs tend to be less motivated by huge returns and reward, and more by improving the lives of others and addressing wealth inequality, which is now a more routine part of public discourse then it ever has been.

As a result of all of these factors, those with funds are often looking for ways that they can make a difference – with philanthropy, impact and angel investing all acting as vehicles for achieving much-needed change.

Words: Rebecca Evans

In these volatile times, it’s understandable that investors are wary of putting their money into traditional stocks, bonds and funds. So, what are the latest luxury trends for those looking to purchase highly sought-after goods that might also, over time, appreciate in value instead?

We’re all familiar with the ‘putting all your eggs in one basket’ adage, one that can be neatly tied to investing and the importance of a well-diversified portfolio. Today, however, given the current state of affairs, many people are adding to the equation with a less traditional approach to growing their wealth – one that involves spending their money on tangible and highly desirable goods such as accessories, whisky and even NFTs. These items will not only bring the buyers joy in the short term, they could also prove to be profitable as and when they are sold in the future. Here, we explore what savvy investors are buying, and why.

When it comes to recent sales, a 1995 McLaren F1 in a ‘time capsule’ state with just 390km on the clock sold for staggering $20.5 million with Gooding & Company’s Monterey auction – the highest price fetched by a car at auction in 2021. A 1955 Mercedes-Benz 300 SLR Uhlenhaut Coup, meanwhile, sold for a $142.3M USD. And according to Knight Frank’s most recent wealth report, early supercars or motorsport homologation road versions – such as the Mercedes-Benz 190 Evo II, Lamborghini Countach, Bugatti EB 110, Porsche 959, Ferrari 288 GTO and BMW E30 M3 – are the cars that the experts predicts will fare particularly well in the future.

In 2021 alone, Hermès bags increased 17% in value. And in February of this year, The Telegraph stated that the price of a Chanel 2.55 handbag has soared a remarkable 50% since 2019 – from just under £3,104 to £4,583. That’s more than houses in the Cotswolds, which rose by 23% during the same period.

This boom looks to by no means be a flash in the pan trend, either. If we look back over the last decade, some brands have experienced a valuation spike of an average of 83%. By way of a comparison, first-edition books have increased by 42% and watches by 72%. Meanwhile, a 2022 study from the Business of Fashion said that 40% of US consumers had bought or were planning to buy a luxury handbag. This will help bolster the category from a global market of $72 billion this year to a predicted $100 billion in 2026.

In terms of investments that could prove to be lucrative, as well as the aforementioned Hermès and Chanel, Balenciaga, Dior and Louis Vuitton remain the most highly sought-after handbag brands.

The past five years has also seen an explosion in the rare shoes market, which is said to already be worth $10 billion and is predicted to climb to nearly $30 billion by 2030. A pair of trainers that Kanye West wore to the Grammys in 2008 fetched an incredible $1.8 million in April last year. And in September, it was announced that the auction house Christie’s is launching a new department to capitalise on the burgeoning market for collectible sneakers, streetwear and sports history.

“Louis the game”. Beeple x Louis Vuitton

If you’ve yet to truly get your head around the Metaverse and nonfungible tokens (NFTs), now might be the time. Not only are they continuing to make headlines globally, but they are upending the art world and becoming a multibillion-dollar industry at the same time.

NFTs started as a way to legitimise digital art and allow people to buy and sell ownership of unique digital items and keep track of who owns them. Technically, they can contain anything digital – from drawings and animated GIFs to songs or even items in video games; they can either be one-of-a-kind, or one copy of many, but the blockchain technology keeps track of who possesses the file.

This is a new market that is showing no signs of abating. In fact, it’s thought that the world’s main auction houses sold an estimated $235 million of crypto art in the form of NFTs last year alone, while more than $25 billion of NFT artworks were sold in total via online platforms. That being said, given its extremely early state, both caution and expertise is recommended when dipping a toe in the NFTs water.

Wine was one of the top-billing alternative investments in 2021. In July last year, a rare bottle of 1951 Penfolds Grange sold at auction for a record-breaking $122,001 – making it the most expensive bottle of Australian wine to ever sell under the hammer. The broader market, meanwhile, rose by around 1% per month on average, with Champagne and Burgundy doing exceptionally well – increasing 31% and 25% respectively.

It’s crucial to remember that wine, unlike most other alternative asset classes, is not subject to tax. So long as you buy the wines in bond – meaning it is stored in a bonded warehouse approved by HM Customs & Excise – you don’t have to pay duty or VAT. And it isn’t currently subject to capital gains tax (CGT), either. This has in fact come under review several times in the last five years but the Revenue and the Exchequer are currently showing no interest in applying CGT to wine because it’s considered a chattel – or wasting – asset.

And although it suffered a slight dip in 2020, rare whisky has seen a 478% growth in value over the past decade. Christie’s sold a bottle for a whopping £1.2 million, setting a new world-record for a single spirit.

Unlike wine, handbags and even toys, classic cars are one of the few collectibles that can be enjoyed – at least a little – without losing value. And while the majority of everyday cars depreciate almost as soon as they leave a dealership, classic ones appreciate over time owing to factors such as rarity, performance and occasionally provenance.

According to Classic.com, since June 2021, the top ten vehicle types produced return on investments (ROIs) that ranged from a 58% to a whopping 95%. It’s thought that online auctions were the main driver behind this trend.

It’s crucial to remember that that wine, unlike most other alternative asset classes, is not subject to tax. So long as you buy the wines in bond – meaning it is stored in a bonded warehouse approved by HM Customs & Excise – you don’t have to pay duty or VAT. And it isn’t currently subject to capital gains tax (CGT), either.

Words: Ramsey Crookall & Co

Once upon a time, the list comprising the 'Seven Wonders of the World' was indisputable. For years, the Great Pyramid at Giza, the Colossus at Rhodes, the Hanging Gardens of Babylon and the rest were accepted as definitive. Then someone came up with a 'new' seven, which included the Inca site at Machu Picchu, the ancient city of Petra in Jordan and the Great Wall of China. Now anyone with internet access can compile and share their own list; one travel magazine even publishes a fresh seven wonders every year.

In what has become an increasingly crowded space; however, the world's eighth wonder is not in doubt.

Albert Einstein, perhaps the world's greatest scientist, called compounding "mankind's greatest invention," noting that 'compound interest' was the "eighth wonder of the world."

Compound interest is the return you earn on your savings (or 'principal') each year which is added to your principal. If this process is regularly repeated, the longer-term compounding effect can be stunning because the resulting balance doesn't merely grow; it grows at an increasing rate.

Benjamin Franklin, a philosopher who helped draft the United States Declaration of Independence, had his own take on compound interest, noting that: "Money makes money. And the money that money makes, makes money." In other words, as time passes, the power of compounding starts to significantly impact your savings / investments.

Moreover, the earlier you start saving, the greater compounding's longer-term effect.

To illustrate compounding's influence, let's assume you have a 20-year-old friend who saves £200 a month (£ 2,400 a year) with a flexible, easy-to-use investment platform. The platform enables them to invest in the stock market, which generates total average annual return of 7%*.

* (Source: IG.com: “FTSE 100 total returns have averaged 7.75% per year since its inception.” To err on the side of caution, we have used a slightly lower annual return of 7%.)

In the first year, your friend earns a return of £92.98, but instead of taking this money, they re-invest it, turning their original £2,400 into £2,492.98. Continuing to invest £200 a month, they also re-invest their regular compound returns.

Over the years, your friend continues to put £200 a month away until they reach the age of 60. By then, they will have invested £96,000 (£2,400 x 40 years). However, should their savings continue to grow at the same annual rate, it will be worth a staggering £ 528,024.96. In other words, they will have received a colossal £ 432,024.96 in compound interest by investing £200 a month.

Enjoying such returns from the stock market is dependent upon several things; notably, the performance of share prices and the dividends the shares generate for shareholders; the phenomenon of compounding, whereby you re-invest your returns (in this case, dividends), is pivotal to growing your wealth over the long term. Chart one shows the consequence of compounding and projected returns depending upon the age at which people start saving and the amount they can put aside each month, but not everyone can continue to save for decades. After all, life sometimes gets in the way.

Consider, for example, the experience of a 22-year-old who, after landing their first post-university job, starts saving £350 a month (£4,200 a year). At the age of 32, they marry and have children; at this point, their savings, including compound interest (b), are worth £60,933.06.

Mindful of the compounding effect on their money, they decide to leave their savings untouched. By the time they reach the age of 60, their savings are worth £ 430,127.36, meaning they earned more than a third of a million pounds (£ 369,194.30) without adding to them for 28 years. In total, therefore, they pocketed £ 388,127.36 (£ 18,933.06 + £369,194.30) in compound interest.

Chart two shows that the earlier you start saving, the greater the impact compounding has. And while you can expect stock markets to become volatile on occasion as factors including economic growth, interest rates, and inflation exert their influence, the level of compounded returns is likely to stay close to their longer-term norm.

20 £ 200 40 £ 96,000 £ 528,024.96 £ 432,024.96

30 £ 300 30 £ 108,000 £ 368,126.25 £ 260,126.25

40 £ 500 20 £ 120,000 £ 261,982.70 £ 141,982.70

Figures are for illustrative purposes only. They take no account of inflation or charges.

22

£350 10 (to age 32) £ 4,200 £ 60,933.06 £ 18,933.06

32-60 £ 0 28 (no additional savings made) £ 430,127.36 £ 369,194.30

Figures are for illustrative purposes only. They take no account of inflation or charges. Past performance is no guarantee of future performance.

Nothing contained in this article constitutes or should be construed as constituting investment, legal, tax or other advice or a recommendation to purchase or sell any investment. Ramsey Crookall & Co Limited is licensed by the Isle of Man Financial Services Authority.

Arts Aid, the Manx charity offering financial assistance for Manx students to study in the arts, has announced the appointment of Adrienne Burnett as a Trustee and Director.

Adrienne retired from her post of Head Teacher of Ballakermeen High School at the end of last month following 27 years at the school, 21 as head.

Adrienne said of her appointment: “I am so pleased to be joining the Board of Arts Aid. I have been involved in education all my professional life, so it is a natural progression to join the board of a leading Isle of Man educational charity.

“Student engagement with the arts is extremely close to my heart. Indeed, the seeds for Arts Aid were planted when I was a member of the Isle of Man Arts Council and I have watched it develop from afar over the last four years. I am looking forward to continuing to play an active role in assisting more and more of our exceptionally talented students from the Isle of Man to pursue their education and professional training in the arts.”

Lee Francis’s arrival as Chief Executive and Island Head at Standard Bank (Isle of Man) comes in the year the company is celebrating its 30thanniversary on Manx shores.

Lee’s experience has spanned Gibraltar, Cyprus, Geneva, London and South Africa over a career approaching 30 years, including eight years as Chief Operating Officer for Barclays Africa Wealth & Investment Management.

He relocates to the Isle of Man from BUPA UK where he held a senior role in IT Security.

‘I am delighted to be on the Isle of Man and, after working in the healthcare sector for the last couple of years, it’s exciting to return to financial services with a future-focussed organisation that encompasses my own values of prioritising sustainability, diversity and inclusion,’ Lee explained.

‘The opportunity to play a key role in the Isle of Man business as Chief Executive and Island Head, especially through the short-term economic headwinds and into an exciting next chapter, was a hugely attractive proposition and I am really looking forward to further the development of the bank.

Professional Chef, Robert Hunter, joins the Hospitality and Catering team as Chef Lecturer in Professional Cookery and Patisserie. Robert has worked in some worldclass restaurants in London including The Goring Hotel, The Royal Automobile Club and The Gun Restaurant - where he was awarded his first Rosette. Prior to moving to the Island in 2017, he spent time expanding his culinary horizons through travelling around the world and had the opportunity to work in restaurants in Australia and New York.

Robert completed his Advanced Food qualifications at London’s Westminster Catering College. As well as benefitting UCM’s hospitality and catering students, his extensive experience will reinvigorate the University College’s restaurant, Cristory’s, which is often open to the public.

UCM Principal (Mrs) Jesamine Kelly commented: ‘We’re delighted to welcome Robert to our team; his experience of cooking all around the world in high quality restaurants will no doubt benefit our students. At UCM we’ve delivered courses in this industry for many years and we’re always looking to develop our curriculum so it’s an exciting opportunity for us. We’re always keen to be able to react to the industry’s current needs and also look ahead to trends in the market to ensure our students have the skills they need for successful careers.’

Simon is a Fellow of The National Association of Estate Agents (FNAEA) and holds the prestigious qualifications of the NFoPP Certificate in the Sale of Residential Property and the NFoPP Technical Award in the sale of Residential Property. He is extremely experienced in the valuation of residential property having sold thousands since first joining Cowley Groves straight from University in 2011.

Since arriving back on the Island, having worked for Savills HQ in London, Orry took charge of both the Commercial and Residential Lettings Departments. Since then, Cowley Groves’ stock of managed property has increased significantly as he was also responsible for the acquisition of Lowey & Co.’s residential business book. He will now be responsible for the company’s direction including residential sales, property management and commercial agency.

Orry is a full member of the Royal Institution of Chartered Surveyors. His experience lies in valuation, development consultancy and residential agency, working with large development firms, financial institutions and high net worth individuals.