City grandee Ken Costa warns of rising divide between the generations

City grandee Ken Costa is likely one of the few distinguished funding bankers to have been a Marxist. 

As a scholar in his native South Africa, he was lively within the battle in opposition to apartheid and met Nelson Mandela various instances. Costa says he’s ‘probably the only banker’ to have joined a Black Lives Matter march.

Appropriately sufficient at Christmas, a time when generations collect collectively, he’s involved by the rising division between the previous and the younger.

In Costa’s view, it is likely one of the most pressing issues dealing with the western world. If the chasm between the generations widens, he believes it might in the end ‘destroy capitalism and the market economy’.

It is estimated that within the coming years there will likely be an enormous switch of £55trillion of wealth within the US alone because the younger inherit from their dad and mom and grandparents. The determine for the UK will likely be about £5.5trillion over the following three many years.

These huge transfers, he believes, will dramatically reshape the monetary system and drive companies to vary their behaviour in step with the values of youthful folks.

He is satisfied that these beneath the age of 45 wish to see radical change. For them, he says, right now’s older ‘bankers and wealth managers in their ivory towers are like modern-day Scrooges’.

Costa’s view is that this unprecedented shift of wealth will drive change within the enterprise world whether or not these in cost prefer it or not. He says: ‘It’s not an exaggeration to say that we live via the conflict of generations.’

The ‘greed is good’ mantra that characterised capitalism within the Eighties, has been largely extinguished within the minds of right now’s youthful folks. Perhaps satirically, our dialog takes place in a swanky boardroom close to London’s Paddington station with the City skyline within the background.

Costa, 74, started his banking profession at London funding financial institution SG Warburg within the Eighties. His mentor was the legendary financier Sir Siegmund Warburg, one of many key architects of service provider banking.

This was adopted by a stint at Swiss banking big UBS the place he rose to develop into chairman of its Europe, Middle East and Africa division. He left UBS in September 2007 – a well timed exit as the worldwide monetary disaster started gathering steam – to develop into chairman of asset supervisor Lazard for 4 years.

He presently chairs Helios Fairfax, Africa’s largest personal fairness agency.

His purchasers have included the super-rich Wallenberg household in Sweden and South Africa’s billionaire Oppenheimer household. Big offers embrace the sale of iconic London division retailer Harrods to the Qatari royal household in 2010.

A religious Christian, his philanthropy consists of the creation of the Tick Tock Club, which raised £50million for Great Ormond Street Hospital for Children in London. He was additionally a trustee of the Nelson Mandela Children’s Fund.

‘I think spirituality is very important,’ he says, noting that whereas many youthful generations are ‘distrustful’ of the established church, there stay ‘enormous levels’ of individuals wanting a non secular connection. 

‘We are humans,’ he says. ‘We are made up of different parts that some want to separate, but we will always be drawn together.’

Despite figuring out as a Marxist whereas a scholar, Costa says he believes capitalism is ‘the best way of securing freedom and prosperity for all’ and believes this was an element that allowed his native nation to finish many years of state-sanctioned racism. 

In his view, the ‘intensely personal’ views held by many younger folks on points comparable to local weather change are organising clashes with their elders.

The younger additionally wish to see wealth managers and corporations respecting the ideas of social justice. ‘This is not just another fad,’ he insists. ‘It’s right here to remain.’

Costa believes these points will develop into extra essential as wealth is handed down via the generations. 

He argues that many younger individuals are firmly satisfied that Baby Boomers grew up in a interval of wealth and prosperity in contrast with the disaster and decline that has marked a lot of the twenty first Century.

Costa says: ‘They assume that the older generation don’t actually get it.’ 

But he factors out that he and his friends have one necessary benefit – hindsight.

‘My generation has been through cycles and crises,’ he says. ‘We’ve seen the oil boycotts of the Seventies. We’ve seen inflation and recession.’

By distinction, he says youthful folks’s energy lies in them being ‘less fearful’ of change – notably developments in expertise.

As a results of the rising financial energy of the younger, Costa says corporations will find yourself making commitments to social causes and turning them right into a core a part of how they conduct enterprise. This will collect tempo as right now’s youthful folks advance up the company ladder.

It is a tough time to advertise such an thought. Many enterprise leaders and traders are pushing again in opposition to the environmental, social and governance values that so many firms have adopted.

Dove cleaning soap maker Unilever has come beneath assault repeatedly for prioritising such credentials over creating wealth.

Costa’s worry is that the generational divide will undermine religion within the system additional, after it has already been severely broken by a collection of crises. ‘At the moment, it’s all simply mudslinging and it doesn’t assist,’ he says. ‘That’s what triggered the capitalist system to begin creaking.’

He says the aftermath of the monetary disaster and, extra not too long ago, the pandemic, have accelerated the event of a ‘community spirit’. 

Costa believes this spirit might be harnessed if youthful generations had higher entry to the monetary markets. But, in fact, not each younger particular person will profit from inheritances or the Bank of Mum and Dad.

‘The question is how we ensure the younger generation participates in the market,’ he says. ‘If they have no money they can’t purchase homes or different belongings. You can’t be a capitalist with none capital.’

This stress, and how one can resolve it, varieties the crux of his e-book The 100 Trillion Dollar Wealth Transfer, printed earlier this yr. Despite his historical past of working with the previous guard, Costa is now absolutely behind the brand new technology and needs to do every part he can to assist, seemingly to avoid wasting capitalism from itself.

He believes capitalism helped within the battle in opposition to apartheid and is ‘the best way of securing freedom and prosperity for all’.

He says these of his personal technology want to contemplate the world they may depart behind. Costa provides: ‘This massive movement of wealth is a global phenomenon. But this isn’t one thing that may occur in ten years’ time. It is occurring now.

‘We need to help shape our destinies collaboratively, just as Scrooge opens himself up to compassion and kindness.’

Read Ken Costa’s full op-ed on www.thisismoney.co.uk/kencosta