City mogul Ken Costa warns of a growing gap between generations

City mogul Ken Costa is one of the few prominent investment bankers who has 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” who has joined a Black Lives Matter march.

Appropriately enough, at Christmas, a time when generations come together, he worries about the growing division between old and young.

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

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

He believes these massive transfers will dramatically reshape the financial system and force companies to change their behavior in line with the values ​​of young people.

He is convinced that young people under the age of 45 want to see radical changes. To them, he says, today's older “bankers and asset managers in their ivory towers are like modern-day Scrooges.”

Costa believes that this unprecedented shift in wealth will force changes in the business world, whether executives like it or not. He says: 'It is no exaggeration to say that we are experiencing a clash of generations.'

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

Under fire: Dove soap maker Unilever has been repeatedly attacked for prioritizing certain values ​​over making money

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

This was followed by a stint at Swiss banking giant UBS, where he rose to become chairman of the Europe, Middle East and Africa division. He left UBS in September 2007 – a timely exit as the global financial crisis gathered steam – to become chairman of asset manager Lazard for four years.

He is currently Chairman of Helios Fairfax, Africa's largest private equity firm.

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

He is a devout Christian and his philanthropy includes founding the Tick Tock Club, which raised £50 million for the 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 “huge levels” of people who want a spiritual connection.

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

Despite identifying as a Marxist during his student years, Costa says he believes capitalism is “the best way to secure freedom and prosperity for all” and believes this was a factor that allowed his native country to end decades of state-sanctioned racism.

According to him, the “intensely personal” views of many young people on issues such as climate change cause clashes with their elders.

The young people also want asset managers and companies to respect the principles of social justice. “This is not just a fad,” he emphasizes. “It's here to stay.”

Costa believes these issues will become increasingly important as wealth is passed down 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 to the crisis and decline that has characterized most of the 21st century.

Costa says, “They assume that the older generation doesn't really get it.”

But he points out that he and his colleagues have one important advantage: hindsight.

“My generation has lived through cycles and crises,” he says. 'We have seen the oil boycotts of the 1970s. We have seen inflation and recession.”

In contrast, he says the strength of young people lies in the fact that they are “less afraid” of change, especially technological advances.

As a result of the growing monetary power of young people, Costa believes companies will eventually make commitments to social causes and make them a core part of the way they do business. This will continue to accelerate as today's younger people move up the corporate ladder.

It's a difficult time to promote such an idea. Many business leaders and investors are resisting the environmental, social and governance values ​​that so many companies have adopted.

Dove soap maker Unilever has been repeatedly attacked for prioritizing such qualifications over making money.

Costa fears the generation gap will further undermine confidence in the system, after it has already been seriously damaged by a series of crises. “Right now it's all just mudslinging and it's not helping,” he says. “That's why the capitalist system started to crack.”

He says the aftermath of the financial crisis and, more recently, the pandemic, have accelerated the development of a “sense of community.”

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 inheritances or the Bank of Mom and Dad.

“The question is how we ensure that the younger generation participates in the market,” he says. 'If they don't have money, they can't buy houses or other assets. Without capital you cannot be a capitalist.'

This tension, and how to resolve it, is at the heart of his book The 100 Trillion Dollar Wealth Transfer, published earlier this year. Despite having worked with the old guard in the past, Costa is now fully behind the new generation and wants to do whatever he can to help, seemingly to save capitalism from itself.

He believes that capitalism helped in the fight against apartheid and is “the best way to secure freedom and prosperity for all.”

He says those of his own generation need to think about the world they will leave behind. Costa added: “This massive movement of wealth is a global phenomenon. But this is not something that will happen in ten years. It's happening now.

“We must shape our destiny together, just as Scrooge opens himself to compassion and kindness.”

Read Ken Costa's full opinion piece at www.thisismoney.co.uk/kencosta

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