When it comes to intergenerational wealth planning, generational differences and shifts in personal priorities also have to be taken into consideration.
What might have been an investment priority for your oldest clients might not be the same as the child or grandchild to whom wealth will need to be passed down.
Questions about investment sustainability and the shift towards investments with good environmental, social and governance are becoming more common among younger clients as the balance of wealth starts to shift down the generations.
So how important is ESG when it comes to intergenerational wealth planning? Gabriela Herculano is founder and chief executive of iClima, a minority, female-led green FinTech firm focused on redefining climate change investments.
She speaks to FTAdviser In Focus about the need to rethink investment sustainability, especially when it comes to younger investors.
FTAdviser: Can a 20-year old wanting to start saving for retirement afford not to invest along ESG principles?
Gabriela Herculano: A young investor will take on substantial risk if they are not investing based on the principle that the world is transitioning towards sustainability. We think the current transition is dramatic, and we refer to it as a seismic shift.
It is deep, profound and will certainly shake things up. The world in 2030 will be a very different one. If you invest in the companies that are in line with business as usual, you will be taking very serious long-term risks.
We have observed a recent rotation to value, and energy companies such as Marathon Oil are some of the best performing S&P500 stocks this year.
But they face so many risks, from carbon taxing risks to stranded assets risks. Long-term portfolio exposure to these equities could tack on significant risk.
FTA: How can advisers bring ESG to the fore for clients of all ages, not just the young?
GH: Finance is about identifying, quantifying and mitigating risk. Companies that are not sustainable or that sell products that are not innovative pose material risks to portfolios.
We think ESG is broadening. Europe has taken the lead and embraced the concept, and we believe that the US is following suit. The market will demand more differentiation, discrimination and ESG will become more transparent over time.
Good advisers can help clients look under the hood, quantify risk, build portfolios that are robust and in line with change.
FTA: How can technology help to bridge the wealth/education gap, whereby the young might be clued up on ESG but don’t have the wealth to invest, whereas the older folk have the wealth, but not perhaps the ESG knowledge?
GH: Technology allows the dissemination of information to happen at a much higher volume and at a much faster rate than ever before.