Transamerica Life Bermuda shares insights on wealth preservation for young HNWIs

It is key to focus on both wealth protection and asset growth, says Transamerica Life Bermuda’s newly appointed CEO Marc Russell Lieberman.

SBR: Asia is home to the world’s fastest-growing population of young High Net Worth Individuals (HNWIs). What are the notable trends that you see among Asia’s young HNWIs?

The demographics of the world’s HNW population are changing rapidly. In particular, Asia stands out for its growing numbers of young, extremely affluent individuals.
According to Agility Research & Strategy’s Millionaire Report 2015, the region’s HNWIs are significantly younger than their international counterparts. In China for example, 78% of its HNW population is under the age of 40, a stark contrast to HNWIs in the U.S. who are mostly past their mid-fifties. Many of Asia’s young HNWIs are business owners who inherited their fortunes from their parents. In many cases, they spend the first decades of their lives studying abroad and upon graduation, return to their homeland to inherit their family businesses.

Separately, numbers of young self-made multimillionaires and billionaires are also on the rise. Data compiled by Wealth-X by CNBC indicates that Asia’s richest entrepreneurs under 40 share a total net worth of USD19.3 billion.In the next 15 years, we expect to see sustained growth of Asia’s young HNW population as the region prepares to undergo an immense inter-generational transfer of wealth.

SBR: Why should young HNWIs start planning for the future early?

The rise in HNW wealth comes at a time of challenging economic conditions - reduced regional growth forecasts, capital flight from China and alarmingly low interest rates in countries such as Japan and Australia. 

While Asia’s young HNWIs are still largely focused on wealth accumulation, the climate of economic uncertainty has prompted a shift in focus from asset growth to wealth preservation. They are also increasingly aware that an established legacy plan provides peace of mind and minimises complications in legacy planning should any unforeseen circumstances arise. It is key that young HNWIs understand the diverse needs and priorities of their loved ones, and how they can be taken care of in the event of their passing. For example, one heir may be keen on running the family business while another may have other priorities.

SBR: What are the biggest concerns of Asia’s young HNWIs?

Much of the assets of Asia’s young HNWIs are tied up in a single business or location with limited portfolio diversification. As such, their wealth management and legacy plans may be less comprehensive and sophisticated.

Across age groups, young HNWIs express greater concern over threats to preserving their fortunes than the older generation. The Asia-Pacific Wealth Report 2015 suggests that they are concerned about the availability and rising costs of quality education, the ability of their successors to manage inherited wealth, social unrest, identity theft and financial crime, more so than their predecessors. Adding to their concerns are traditional considerations including rising healthcare costs and retirement planning. These worries, alongside volatile economic conditions, are prompting young HNWIs to reevaluate their protection needs and priorities.

SBR: How can Transamerica Life Bermuda meet the needs of young HNWIs in terms of legacy planning?

Penetration of the overall HNW life insurance market in Asia remains in the low single digits*, but we expect this figure to grow in the coming years as the demand for wealth planning among young HNWIs increases. As an effective and flexible tool in the broader wealth management toolbox, life insurance ensures that one’s loved ones will be protected and provided for. It can also be used for purposes outside of broader wealth and estate planning, such as to establish education plans for one’s children and grandchildren.

At Transamerica Life Bermuda, we have designed our products, services, and underwriting capacity around the varied and ever-changing wealth protection needs of our customers, offering them flexibility and peace of mind. It is even possible for policy owners to customise their policies within certain constraints in order to address their particular needs. Ultimately, life insurance is not about providing the highest returns but rather about offering a form of life protection that meets the particular needs of these young HNWIs and provides them with complete peace of mind.

*based on estimated new premiums in HNW insurance versus growth of HNWI wealth in 2014 (Capgemini and RBC Wealth Management Asian Pacific Wealth Report 2015).

Transamerica Life (Bermuda) Ltd. is authorised to do business in Hong Kong and Singapore