Wealth preservation, capital growth top priorities for high net-worth Kenyans

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 percent of the survey’s respondents saying their clients are prioritizing wealth preservation, while 68 percent 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 percent of respondents in the affirmative.

These top priorities are closely followed by income return (47 percent) and risk minimization (37 percent), while protecting wealth from political interference (21 percent) 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 percent.

However, political uncertainty (63 percent) 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 percent), rising taxes (37 percent), tighter controls on movement of capital (37 percent) and rising interest rates (21 percent) as key threats. For HNWIs across Africa, political uncertainty (70 percent) 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 percent), capital growth (58 percent), portfolio diversification (47 percent), portfolio liquidity (47 percent) and ability to move wealth quickly around the world. (37 percent), are the most important factors in wealth management and investmet 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 65 percent of millennials prioritise capital growth, 65 percent on innovative investing, 40 percent on minimising tax,  40 percent on ability to move wealth quickly around the world  and 38 percent on portfolio diversification, while globally, HNW 64 percent of millennials are prioritising capital growth, 43 percent on innovative investing, 39 percent on portfolio diversification, 36 percent on income return  and 30 percent on wealth preservation.

Globally, the least important factors for HNWIs in making wealth management and investment decisions are: philanthropic outcomes (41 percent), being seen as a responsible global citizen (35 percent) succession planning (28 percent), ability to move wealth quickly around the world (24 percent) and protecting wealth from political interference (21 percent). Kenyan HNWIs follow the same view on the factors at 58 percent, 47 percent, 42 percent 21 percent and 21 percent respectively.

On education, wealth managers and advisors for Kenyan HNWIs believe that 68 percent of their clients are choosing to send their children overseas, compared to a 28 percent global average and 47 percent across Africa.

While succession planning is not much an issue of concern for Kenyan HNWIs currently, 75 percent 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 percent are worried about inheritance tax, while 42 percent feel the next generation should earn its own money.

Also, 26 percent of Kenyan HNWIs stand out in taking a more personal role in their philanthropic endeavours, 10 percent far higher than the global and Africa (15 percent) averages.

Wealth managers said 22 percent of their Kenyan HNW clients use private aviation for the majority of their business or personal travel, a higher percentage compared to the 15 percent global average and 17 percent 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 percent) is the most common mode of possession, followed by full-ownership at 2 percent, while usage of chartered jets stands at 1 percent.

Related: Smart Investments Involve Diversification and Informed Decision-Making