City grandee Ken Costa warns of growing divide between the generations

City grandee Ken Costa is one of the few prominent investment bankers who were Marxists.

As a student in his native South Africa, he was active in the anti-apartheid struggle and met Nelson Mandela several times. Costa says he is “probably the only banker” to join the Black Lives Matter march.

It is fitting that at Christmas, a time when generations come together, he is concerned about the growing division between old and young.

According to Costa, this is one of the most pressing issues facing the Western world. If the generation gap widens, he believes it could eventually “destroy capitalism and the market economy.”

It is estimated that in the coming years there will be a huge transfer of wealth of £55 trillion in the US alone as young people inherit from their parents and grandparents. Over the next three decades this figure for the UK will be around £5.5 trillion.

In his opinion, these huge transfers will radically change the financial system and force businesses to change their behavior in accordance with the values ​​of young people.

He is convinced that people under 45 want radical change. For them, he said, today’s elderly bankers and asset managers in their ivory towers are like modern-day Scrooges.

According to Costa, this unprecedented shift in wealth will force change in the business world, whether executives like it or not. He says: “It is no exaggeration to say that we are living in a generational clash.”

The “greed is good” mantra that characterized capitalism in the 1980s has largely faded in the minds of today’s youth. Perhaps ironically, our conversation takes place in a plush boardroom near London’s Paddington Station, with the City skyline in the background.

Costa, 74, began his banking career at London investment bank SG Warburg in the 1980s. His mentor was the legendary financier Sir Sigmund Warburg, one of the key architects of merchant banking.

This was followed by a stint at Swiss banking giant UBS, where he became chairman of its Europe, Middle East and Africa division. He left UBS in September 2007 (a timely departure as the global financial crisis began to take hold) and became chairman of asset management company Lazard for four years.

He currently heads Helios Fairfax, Africa’s largest private equity firm.

His clients included the super-rich Wallenberg family in Sweden and the billionaire Oppenheimer family in South Africa. Major deals include the sale of the iconic London department store Harrods to the Qatari royal family in 2010.

A devout Christian, his philanthropic work includes creating the Tik Tok Club, which raised £50 million for Great Ormond Street Children’s Hospital 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 “don’t trust” the established church, there remains a “huge number” of people who want a spiritual connection.

“We are people,” he says. “We are made up of different parts that some want to separate, but we will always be together.”

Although he considered himself a Marxist during his studies, Costa says he believes capitalism is “the best way to ensure freedom and prosperity for all” and believes it was a factor in allowing his home country to end decades of state-sanctioned racism.

He said many young people’s “very personal” views on issues such as climate change caused conflicts with their elders.

Youth also want asset managers and firms to respect social justice principles. “This is not just another fad,” he insists. “It’s here to stay.”

Costa believes these issues will become more important as wealth is passed on from generation to generation.

He argues that many young people firmly believe that baby boomers grew up in a period of wealth and prosperity compared with the crisis and decline that has marked much of the 21st century.

Costa says: “They assume that the older generation doesn’t really understand it.”

But he notes that he and his colleagues have one important advantage – the ability to see the past.

“My generation went through cycles and crises,” he says. “We saw the oil boycotts of the 1970s. We’ve seen inflation and recession.”

Instead, he says the strength of young people is that they are “less afraid” of change, especially advances in technology.

As a result of the growing monetary power of youth, Costa says companies will eventually commit to social causes and make them a core part of their business. This will accelerate as today’s young people move up the corporate ladder.

Now is a difficult time to promote such an idea. Many business leaders and investors are opposed to the environmental, social and governance values ​​that many companies have adopted.

Dove soap maker Unilever has repeatedly come under attack for prioritizing such powers over making money.

Costa fears the generation gap will further undermine faith in the system after it has already been hit hard by a series of crises. “At the moment it’s just mud-slinging and it’s not helping,” he says. “That’s what made the capitalist system start to creak.”

He says the effects of the financial crisis and, more recently, the pandemic have accelerated the development of “community spirit.”

Costa believes this spirit could be harnessed if younger generations had better access to financial markets. But, of course, not every young person will benefit from an inheritance or the Bank of Mum and Dad.

“The question is how do we ensure that the younger generation participates in the market,” he says. “If they don’t have money, they won’t be able to buy houses or other properties. It is impossible to be a capitalist without capital.”

This controversy, and how to resolve it, is the crux of his book, The $100 Trillion 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 whatever he can to help seemingly save capitalism from itself.

He believes capitalism helped end apartheid and is “the best way to ensure freedom and prosperity for all.”

He says his generation needs to think about the world they will leave behind. Costa adds: “This massive transfer of wealth is a global phenomenon. But this is not what will happen in ten years. This is happening now.

“We need to shape our destinies together, just as Scrooge opens up to compassion and kindness.”

Read Ken Costa’s full article at www.thisismoney.co.uk/kencosta.