Wealthy Asian families are sending their children abroad to be educated in greater numbers than ever. Oliver Williams asks what are their motives? And what does this HNWI education mean for wealth managers?
Wealth managers in Asia have a new problem: Their younger clients are becoming financially savvier than their forebears. That is making them more discerning in choosing their advisors.
According to WealthInsight data, an estimated 59% of HNWIs in the region have a degree and 21% a post-graduate degree. Those figures are likely to increase as larger numbers of Asia’s next generation are sent abroad for their education.
A report in November from the Institute of International Education (IIE), an education non-profit, found that 363,000 Chinese students enrolled in American universities during the 2017/18 year, more than any other foreign nation.
Quality and prestige are key to HNWI education
Another report out this month found that ‘quality of education’ and ‘prestige of school/university name’ are the biggest reasons for wealthy families sending their children abroad to be educated. The report, co-authored by private tuition firm Keystone Tutors and recruiter Wild Search, interviewed 150 teachers and education professionals.
‘Quality of education’ is also the most important reason Chinese HNWIs consider moving abroad according to findings from the Hurun Report: 83% of interviewees mentioned it as a reason for immigration. Another Hurun Report stated 80% of Chinese HNWIs plan to educate their child outside of China, the US being the most popular choice.
‘Prestige’ was mentioned by several Asian HNWIs PBI interviewed for this article. “There is a prestige tied to travelling to US/Europe for holidays”, said one Singaporean graduate of a UK university. “[There is] definitely a preference to experience study abroad amongst students. Many Singaporeans take a year/ semester abroad.”
Other recent graduates PBI spoke to said they view overseas education as a path to more international careers. Of the 400 advisors Knight Frank interviewed for its Wealth Report, 80% said their clients are more likely to send their children to a different country to be educated. Most of them would do so to ‘broaden their perspectives’.
The Crazy Rich Asians effect
This year’s blockbuster ‘Crazy Rich Asians’ will only heighten the popularity of American universities among Asian students. The central character, Rachel Chu, is an economics professor at New York University, the same city where she dates the scion of a wealthy Singaporean family.
While some foreign students may return with a partner in tow, most will come home (it is hoped) with a degree or two from one of Europe or America’s most prestigious centres of learning. But such savviness will weigh heavily on anybody managing their wealth.
What wealth managers should note
Various studies have highlighted the readiness with which the next generation will change advisor upon inheriting. A study by InvestmentNews Data found 66% of successors ready to fire their parents’ advisor.
Though any inheritor will consider a number of factors when selecting a wealth manager, the knowledge of advisors will be key. Younger HNWIs prefer talking to somebody with a similar worldly outlook as theirs. A western education is seen favourably.
Maybank believes that sending relationship managers to study on carefully designed courses is one way to ensure they are sufficiently clued up when meeting clients (see insert).
The Singaporean graduate interviewed for this article summed up her search for a wealth manager: “I would ask around my close circle of family friends and closely evaluate the options. I’d look for meticulousness, reliability and a wealth manager with a vast portfolio of high net worth clients both locally and abroad.”