Among the more fascinating trends in the ultra-wealthy marketplace in recent years are the creative paths investors have blazed to break away from so-called “traditional” investing.
In every issue of Private Wealth, it seems, we find ourselves reading about a previously ignored industry, service or resource that has come under the gaze of product providers and been packaged as an investment for accredited investors. We’ve seen this happen with everything from art, fine wines and rare gems to film production, various categories of real estate and auto loans, with varying degrees of success.
Part of this is obviously a backlash to the still-lingering sting of the 2008 financial collapse, which has left its imprint in the form of a wariness—if not outright distrust—of the traditional markets.
But the rise of the alternative investment sector would appear to be due to more than just volatility fatigue.
What I’m talking about is the growing number of investors who see their investment dollars as a force for change. In this issue, for instance, Thomas Kostigen writes in “An Investing Cornucopia” of the tremendous investing opportunities arising from efforts by private enterprise to efficiently feed the world’s growing population. In “The 100% Club,” Leila Boulton identifies an emerging trend in which financial advisors are seeing some high-net-worth clients devote their entire portfolios to investments tied to a social or environmental cause—including “impact investments” with a focused and defined purpose.
I suppose it could be argued that socially responsible investing has been around for decades, and this is just more of the same. But the counterargument is that the changes we’re seeing in this area are becoming more pervasive, encompassing a large swath of two emerging high-net-worth demographics: young adults and women. Boulton even notes in her story that the impulse to influence world change through investing has been particularly strong in emerging markets such as China, India and Indonesia.
For financial advisors, the important things to take away from this trend may not just be the investments themselves but also the client thinking behind them. Perhaps the concept of using assets for more than just wealth generation is embraced by more than a just a niche. As more clients take the investing high road, advisors may want to consider whether investors have come to the full realization that wealth—more than just a stepping stone to more wealth—is a powerful tool for change.
