PLACE FINANCIÈRE & MARCHÉS — Wealth management

CARTE BLANCHE

Guiding HNW & UHNW clients to the “next normal”


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2021 feels like year 1 of a new era for us all. Individual priorities have shifted, societies are learning how to function again in this “new normal”, while economies continue to feel the impact. The challenge is unprecedented, with a K-shaped recovery driving disassociation between financial markets and the real economy and different sectors recovering at different rates.

The pandemic delivered a monstrous blow to country GDPs and the spending needed to keep afloat has left some alarming debt levels in its wake. Proposals abound on how to cope with this, many of which have to do with increasing rates of tax, (re)introducing wealth tax, exit tax or temporary tax, or the creation of entirely new taxes. The bill is readily waved at the wealthy, especially as the wealth gap is widening dramatically. It’s no secret that HNW and UHNW wealth was resilient in 2020, with the latter in fact growing. The pandemic and global response were reasonably kind to this segment as asset prices surged, driving the world’s UHNWI population 2.4% higher at the end of 2020 to more than 520,000 [1] .

But prospective tax change is only part of the story. Domestic government policy, geopolitics and wealth transfer to the next generation rank high, and often higher, on clients’ lists of concerns [2] and while those with financial means have ridden a very different boat through this storm no family, has been out of reach of Covid-19 or its effects. With renewed urgency, clients across the wealth spectrum are therefore reassessing their planning, whether lifestyle, investment/financial, or succession. Research shows, for example, that nearly a quarter of the UK-based wealthy (24%) are changing their personal investment or financial strategy in response to the outbreak last year [3] . What clients want most is to be able to find some certainty and opportunity in the swash as they create and mould their legacies.

What clients want most is to be able to find some certainty and opportunity in the swash as they create and mould their legacies.
Simon Gorbutt

Simon Gorbutt,  Director, Regional Head of Wealth Structuring Solutions,  Lombard International Assurance

It’s a daunting task: planning demands a degree of prediction or, at the very least, scenario planning. Covid has made this very difficult. It is the ultimate variable, leaving very few aspects of wealth management and succession untouched.

Added to these pressures on post-pandemic planning are clients’ own greater demands for service – for human interaction balanced with a reliable and seamless digital offering – and, more widely, an urgent desire for greater influence over investments coupled with a sharper focus on investment impact. Recent research found that 86% of HNWI, family offices and foundations believe that their private capital will be essential in addressing climate change [4] . Overlaid onto this are generational preferences and the value successive generations place on the same needs.

Human nature and intuition is to plan based on current knowledge, looking at the future through today’s lens. But this surprising new normal demands a different approach: we must learn from the past 18 months but, if the pandemic has taught us anything, we must also imagine the unimaginable and put in place resilient and flexible planning today rather than leave it until the next major event is upon us. VUCA; BANI; whichever trendy term one chooses to use, we live in a rather uncomfortable time and planning early is all the more important in the face of the uncertain and unknown.

The combination of so many factors has created a whole new benchmark for client experience, in record time. The gauntlet has been thrown, and the pressure is now on wealth managers, advisers and providers to match the pace of change. Over a short period, digitalisation, in an industry which relies heavily on trust and human relationships to succeed, has gone from prudent to imperative. For the Wealth Assurance sector for instance, our proprietary research [5] tells us that 75% of wealth professionals using such solutions expect a high to very high level of digitalisation when it comes to their preferred providers’ capabilities in delivering exceptional customer service.

75% of wealth professionals using such solutions expect a high to very high level of digitalisation
Simon Gorbutt

Simon Gorbutt,  Director, Regional Head of Wealth Structuring Solutions,  Lombard International Assurance

Wealth professionals must embrace the practical, commercial and regulatory changes, including rising regulation around sustainability and impact investing, turning them to their, and their clients’, advantage to address emerging trends. As the benchmark moves, they must find ways to differentiate themselves again from competitors in terms of both products and service and be the trusted adviser to clients at this critical moment of re-evaluation.

Because while the challenge is unprecedented, 87% of wealthy clients see opportunity in a post-pandemic world [6] . As more HNW clients re-evaluate their existing planning, and with more than $15 trillion in wealth set to transition globally by 2030 [7] , they will be looking for trusted advisers and managers who are future-fit, to guide them through the present and prepare them for whatever “next normal” lies ahead.

[1] Knight Frank, The Wealth Report, 2021 https://www.knightfrank.com/wealthreport

[2] Knight Frank, The Wealth Report, 2021

[3] https://savanta.com/view/how-the-wealthy-are-reacting-to-the-coronavirus-pandemic/

[4] https://privatebank.barclays.com/content/dam/privatebank-barclays-com/en-gb/private-bank/documents/campaign/ifgi/investing-for-global-impact-2021.pdf

[5] www.wealthassurancereport.com

[6] Specifically, investment opportunity. Knight Frank, The Wealth Report, 2021

[7] https://www.wealthx.com/report/wealth-transfer-report-2019/