Swiss schools step up efforts to educate next generation of wealthy individuals

Swiss boarding schools for ultra-high net worth families are helping the next generation learn how to manage investment portfolios, as are leading private banks.

Swiss banks and boarding schools are paving the way in educating the next generation of ultra-high net worth individuals (UHNWI).

These institutions are increasingly helping youngsters learn to manage portfolios, which has become part of the curriculum in many Swiss boarding schools.

In addition, the next generation is dissecting topics such as inflation, interest rates and equity markets.

“In our experience, next generation clients need to be included as early as possible in crucial conversations with their parents and other older family members about their expectations surrounding wealth transition and legacy,” says Viola Werner, head of global next generation solutions at UBS Global Wealth Management (GWM).

“We are seeing an increasing financial confidence, driven in part by the willingness of the ‘NextGen’ to learn from each other, often by sharing their experiences of the first investments they made, first mistakes and common pitfalls,” she adds.

UBS says it runs several educational programmes and offers access to the next generation. Since 2014, the Swiss bank has organised investment games, simulations of market developments, and psychology of money sessions to allow the next generation to share their experiences talking about money in their family homes.

In addition, UBS sets up one-to-one sessions with the next generation before any major programme.

“These platforms which provide benchmarks and shared learning experiences are an opportunity to test and learn outside the family environment,” says Miss Werner.

“UHNWI NextGens are much more sophisticated and educated earlier in their lives,” says Ms Wener when discussing their experiences in the last 20 years. “In 2010, for example, a general UHNWI NextGen participant would have basic financial knowledge, and nowadays, most have their own portfolio already set up and their own views on what impact they want to generate,” she explains.

This new cohort of next gen prefers “practical insights” and “personalised content”, as well as a “collaborative” approach to learning rather than a standard lecture format.

“Today, there’s also a high demand for reflecting psychological aspects of dealing with money, wealth, family dynamics, and individual NextGen personal development,” states Ms Werner.

Back to school

Swiss boarding schools for UHNW families are also playing their part.

“Education is failing all students,” says Bernhard Gademann, president of the board of the elite Swiss boarding school Institut auf dem Rosenberg, which caters to the world's wealthiest families and has tuition fees of more than $160,000 a year. “Finance is not a topic in schools, nobody actually talks about finance, nobody talks about investment, and nobody talks about the very basic principles,” he stresses.

At Rosenberg, learning finance starts at the age of 12. Mr Gademann says his school aims to touch on the basics, from what stockmarkets are to why people invest. Eventually, students go on to much more complex topics like exchange traded funds.

Mr Gademann’s students manage hypothetical $1m portfolios. This virtual portfolio introduces students to different asset classes. They also have the option to add a position to this portfolio and analyse the performance of each asset class.

“Sometimes there's no movement, but there can be interesting events, and then we discuss those selections in the group as well, so students can reflect on their decisions and can also reflect on the feedback of their peers,” says Mr Gademann. “Very often the students who know least about finance tend to perform very well. Why? They're more passive in their investment,” he claims.

For Mr Gademann’s students, topical investments, such as healthcare, water and sustainability are at the forefront. Cryptocurrency is an asset class that tends to be popular.

Other schools in the region also claim that cryptocurrencies are a hot topic among the younger generations.

Parents, too, are involved in the composition of the curriculum. “We see them as our best sounding boards to pick up new ideas,” says Mr Gademann. “In conversations with parents, they point out challenges they see at the moment or things that are missing in education,” he adds.

One of Mr Gademann’s aims as a headmaster is for the younger generation to “gain enough knowledge” to “enter a conversation with their parents”. He believes that learning from your parents can be very profitable.

While he believes it does not hinder his students, Mr Gademann stresses the threat of financial influencers on the younger generation. “It should be an area of concern because it's simply a vacuum that is being filled by the lack of education or by the lack of understanding of what you can reasonably expect,” he says. “If you watch social media and you are under the impression that 20 or 30 per cent return year on year is a normal thing and just keeps happening, and anybody who doesn't achieve that is a loser, then you're lacking information,” he adds.

A FINRA study revealed that more than 60 per cent of US investors under the age of 35 rely on social media for investment information, while 57 per cent turn to financial professionals.

“There's lots of wealth to be created without going down the slippery slopes of people that promise all kinds of things on social media,” he says.

Next Gen's concerns

A study conducted by Swiss bank Lombard Odier and Capstone Millennials identified five key topics that the younger generation is concerned about. Those topics are sustainability, involvement in their investments and challenging the financial analysis presented to them, better communication, network and knowledge.

When discussing the knowledge concern, Duncan MacIntyre, global UK region head at Lombard Odier, says: “The next generation wants to understand investment opportunities and appreciate an educational angle.”

He also adds the next generation wants to invest “in line with their values”, particularly when it comes to sustainability. They like to “measure” and “understand” the impact of their investments.

Technology is also a key focus, and Lombard Odier’s study revealed that the next generation sets great store by a bank's online image, its e-reputation, and the ease of contacting the bank via digital channels. “This means our digital presence must be state-of-the-art and competitive.

“The next generation do not seek an exclusively digital relationship with their bankers, but appreciate human contact for matters that require careful thought and discussion,” he says.

The Swiss bank holds a bi-annual “flagship event” known as the LO Generations Summit. It claims this is a central element in its offering for the next generation. “During the multi-day event, we invite our Next Gen clients from around the world to engage with innovative entrepreneurs and global thought leaders, creating networks among their peers,” says Mr MacIntyre.

The bank says the event allows clients to share their experiences and generate ideas.

In the interim years, the bank holds a series of local events as part of their LO Generations programme, which Mr MacIntyre says aims to bring “the next generation together in an engaging context”.