A generation and gender shift in private wealth ownership is combining with closer regulatory focus on firms’ culture to alter the City’s approach to risk management, a finance industry conference was told today.
‘We are seeing a multi-trillion [dollar] transfer of wealth’ to a younger generation with different priorities, Eva Lindolm, group managing director and head of wealth management for UBS UK and Jersey told the sevent Annual Culture and Conduct Forum. This has meant a ‘shift from “greed is good”,’ to conversations with clients ‘that go to purpose, not just risk/return’, and which address the question, ‘What kind of footprint do you want to leave on the planet?’
UBS, which has $2.6 trillion under management, has estimated that, by 2025, 35% of investable wealth will be held by women, changing the character of the asset management sector.
Eyeing such investment power, City specialist professor Julia Black added, meant that many companies were seeking to become more ‘purpose led’. Addressing the tension this creates for a board’s requirement to add shareholder value, she said: ‘Lawyers are saying fiduary duties can [be drafted to reflect] purposeful [behaviour].’
City regulators, Latham & Watkins partner David Berman told the conference, have developed a significantly closer interest in ‘the cultural drivers of problems’. ‘We know that regulators are looking at firms’ responses to [environmental, social and governance] as a cultural indicator,’ he said.
Where a firm and its senior management is failing to ‘walk the walk’ on such policies, a regulator like the Financial Conduct Authority may conclude that the ‘root cause’ of a notified breach has not been addressed.
Asset managers, Berman added, now include detailed questions on ‘corporate culture’ as a key part of the due diligence process for investments.