Wealth preservation and capital growth are the two most important factors that high-net-worth Kenyans are considering when making wealth management and investment decisions, according to the Attitudes Survey in the Knight Frank Wealth Report 2017.
The two factors are deemed most important as uncertainties linger on the global and local economies, with 74% of the survey’s respondents saying their clients are prioritising wealth preservation, while 68% stated that capital growth is the next most important consideration for Kenya’s super-rich.
The Attitudes Survey, based on responses from almost 900 of the world’s leading private bankers and wealth advisors, established that portfolio diversification, privacy, and portfolio liquidity have equal importance amongst high-net-worth individuals (HNWIs) in Kenya, with 53% of respondents in the affirmative.
These top priorities are closely followed by income return (47%) and risk minimisation (37%), while protecting wealth from political interference (21%) falls far behind as a priority for Kenyan HNWIs. The latter is a break away from the rest of Africa where protecting wealth from political interference is among the top five priorities for HNWIs at 29%.
However, political uncertainty (63%) is deemed the biggest threat to Kenyan HNWIs’ ability to create and maintain wealth over the next five years. This is followed closely by potential fall in asset values (37%), rising taxes (37%), tighter controls on movement of capital (37%) and rising interest rates (21%) as key threats. For HNWIs across Africa, political uncertainty (70%) remains the major threat to their ability to create and preserve wealth over the next five years.
According to data prepared for The Wealth Report by New World Wealth, Kenya added 900 individuals to the elite class of dollar millionaires in 2016, raising the tally of HNWIs – those worth US$1 million (Sh102 million) or more in assets excluding primary residences – to 9,400 people from 8,500 in 2015. Of these, 30 individuals joined the ranks of those worth US$10m+ (Sh1.02bn+), 10 joined the ultra-high-net-worth pool of those worth US$30m+ (Sh3.06bn+), while two individuals became centa-dollar-millionaires worth US$100m+ (Sh10.2bn+).
Andrew Shirley, Editor of The Wealth Report, said: “Kenya’s diversified economy means it is consistently one of Africa’s top performers in terms of wealth creation. According to our latest data, this trend looks set to continue over the next decade.”
For high-net-worth millennials in Kenya, innovative investing (74%), capital growth (58%), portfolio diversification (47%), portfolio liquidity (47%) and ability to move wealth quickly around the world (37%), are the most important factors in wealth management and investment decisions, according to their wealth managers and advisors.
“It seems that Kenyan millennials, in common with those in the rest of the world, have very different attitudes to wealth compared to their parents,” Shirley said.
Across Africa, HNW millennials prioritise capital growth (65%), innovative investing (65%), minimising tax (40%), ability to move wealth quickly around the world (40%) and portfolio diversification (38%), while globally, HNW millennials are prioritising capital growth (64%), innovative investing (43%), portfolio diversification (39%), income return (36%) and wealth preservation (30%) in that order.
Commenting on wealth preservation, Head of Wealth and Investment at Stanbic Bank Anjali Harkoo said: “Wealth preservation has emerged the top concern amongst HNWIs. At Stanbic Bank we seek to create value for our clients through wealth generation and preservation by providing them with best of breed investment solutions. Our Wealth Management Philosophy centres on managing, growing and protecting the generation wealth of our clients and their families. Our leadership academies are designed to equip our clients and their families on the best practice for transfer of generational wealth. The Junior Leaders (10 -12), Young Leaders (13 – 17) and Future Leaders (18- 24) and Women’s Wealth Academies are aimed at equipping families with the financial skills to ensure the successful management and transfer of wealth from generation to generation.”
Globally, the least important factors for HNWIs in making wealth management and investment decisions are: philanthropic outcomes (41%), being seen as a responsible global citizen (35%), succession planning (28%), ability to move wealth quickly around the world (24%) and protecting wealth from political interference (21%). Kenyan HNWIs follow the same view on the factors at 58%, 47%, 42%, 21% and 21% respectively.
On education, wealth managers and advisors for Kenyan HNWIs believe more of their clients are choosing to send their children overseas (68%), compared to a 28% global average and 47% across Africa.
While succession planning is not much an issue of concern for Kenyan HNWIs currently, majority (75%) are still worried over how they will divide wealth equitably among their children and that the next generation will squander or mismanage their inheritance. Only 58% are worried about inheritance tax, while 42% feel the next generation should earn its own money.
Kenyan HNWIs also stand out in taking a more personal role in their philanthropic endeavours (26%), far higher than the global (10%) and Africa (15%) averages.
Wealth managers said 22% of their Kenyan HNW clients use private aviation for the majority of their business or personal travel, a higher percentage compared to the 15% global average and 17% Africa average. However, the number of private jets in Kenya is estimated at nine, relatively unchanged over the last 10 years. Currently, fractional-ownership of private jets (at 3%) is the most common mode of possession, followed by full-ownership at 2%, while usage of chartered jets stands at 1%.
