City grandee Ken Costa
City grandee Ken Costa is one of the few prominent investment bankers to have been a Marxist.
As a student in his native South Africa, he was active in the struggle against apartheid and met Nelson Mandela a number of times. Costa says he is ‘probably the only banker’ to have joined a Black Lives Matter march.
Appropriately enough at Christmas, a time when generations gather together, he is concerned by the growing division between the old and the young.
In Costa’s view, it is one of the most urgent problems facing the western world. If the chasm between the generations widens, he believes it could ultimately ‘destroy capitalism and the market economy’.
It is estimated that in the coming years there will be a huge transfer of £55trillion of wealth in the US alone as the young inherit from their parents and grandparents. The figure for the UK will be about £5.5trillion over the next three decades.
These vast transfers, he believes, will dramatically reshape the financial system and force businesses to change their behaviour in line with the values of younger people.
He is convinced that those under the age of 45 want to see radical change. For them, he says, today’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 force change in the business world whether those in charge like it or not. He says: ‘It’s not an exaggeration to say that we are living through the clash of generations.’
The ‘greed is good’ mantra that characterised capitalism in the 1980s, has been largely extinguished in the minds of today’s younger people. Perhaps ironically, our conversation takes place in a swanky boardroom near London’s Paddington station with the City skyline in the background.
Under fire: Dove soap maker Unilever has come under attack repeatedly for prioritising certain values over making money
Costa, 74, began his banking career at London investment bank SG Warburg in the 1980s. His mentor was the legendary financier Sir Siegmund Warburg, one of the key architects of merchant banking.
This was followed by a stint at Swiss banking giant UBS where he rose to become chairman of its Europe, Middle East and Africa division. He left UBS in September 2007 – a timely exit as the global financial crisis began gathering steam – to become chairman of asset manager Lazard for four years.
He currently chairs Helios Fairfax, Africa’s largest private equity firm.
His clients have included the super-rich Wallenberg family in Sweden and South Africa’s billionaire Oppenheimer family. Big deals include the sale of iconic London department store Harrods to the Qatari royal family in 2010.
A devout Christian, his philanthropy includes the creation of the Tick Tock Club, which raised £50million for Great Ormond Street Hospital for Children in London. He was also a trustee of the Nelson Mandela Children’s Fund.
‘I think spirituality is very important,’ he says, noting that while many younger generations are ‘distrustful’ of the established church, there remain ‘enormous levels’ of people wanting a spiritual 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 identifying as a Marxist while a student, Costa says he believes capitalism is ‘the best way of securing freedom and prosperity for all’ and believes this was a factor that allowed his native country to end decades of state-sanctioned racism.
In his view, the ‘intensely personal’ views held by many young people on issues such as climate change are setting up clashes with their elders.
The young also want to see wealth managers and firms respecting the principles of social justice. ‘This is not just another fad,’ he insists. ‘It’s here to stay.’
Costa believes these issues will become more critical as wealth is passed down through the generations.
He argues that many young people are firmly convinced that Baby Boomers grew up in a period of wealth and prosperity compared with the crisis and decline that has marked most of the 21st Century.
Costa says: ‘They assume that the older generation don’t really get it.’
But he points out that he and his peers have one important advantage – hindsight.
‘My generation has been through cycles and crises,’ he says. ‘We’ve seen the oil boycotts of the 1970s. We’ve seen inflation and recession.’
By contrast, he says younger people’s power lies in them being ‘less fearful’ of change – particularly advancements in technology.
As a result of the growing monetary power of the young, Costa says firms will end up making commitments to social causes and turning them into a core part of how they conduct business. This will gather pace as today’s younger people advance up the corporate ladder.
It is a difficult time to promote such an idea. Many business leaders and investors are pushing back against the environmental, social and governance values that so many companies have adopted.
Dove soap maker Unilever has come under attack repeatedly for prioritising such credentials over making money.
Costa’s fear is that the generational divide will undermine faith in the system further, after it has already been severely damaged by a series of crises. ‘At the moment, it’s all just mudslinging and it doesn’t help,’ he says. ‘That’s what caused the capitalist system to start creaking.’
He says the aftermath of the financial crisis and, more recently, the pandemic, have accelerated the development of a ‘community spirit’.
Costa believes this spirit could be harnessed if younger generations had better access to the financial markets. But, of course, not every young person will benefit 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 buy houses or other assets. You can’t be a capitalist without any capital.’
This tension, and how to resolve it, forms the crux of his book The 100 Trillion Dollar Wealth Transfer, published earlier this year. Despite his history of working with the old guard, Costa is now fully behind the new generation and wants to do everything he can to help, seemingly to save capitalism from itself.
He believes capitalism helped in the fight against apartheid and is ‘the best way of securing freedom and prosperity for all’.
He says those of his own generation need to consider the world they will leave behind. Costa adds: ‘This massive movement of wealth is a global phenomenon. But this isn’t something that will happen in ten years’ time. It is happening 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
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