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How are wealthy individual private investors and the private banks that serve them adapting to the myriad ways in which the world is changing?
In the opening panel at Euromoney’s global private banking and wealth management virtual event our expert panellists explored the many issues facing them. A key question we sought to ask was: for bankers and their clients, is it business as usual out there – or are they having to resort to a ‘plan B’?
Our more sophisticated clients didn’t panic [over the Covid crisis] – they sat tight
We began by exploring how investors reacted to the early days of the pandemic – and how Covid still influences thinking now.
Wealthy families, helped by expert financial advice, largely kept cool under pressure. “Our more sophisticated clients didn’t panic – they sat tight,” said Beatrice Puoti, a partner at UK law firm Burges Salmon.
Greg Limb, a partner at KPMG, noted the absence of the kind of panic that permeated markets in the financial crash of 2008.
Of course, that didn’t mean the volatility wasn’t – and isn’t – there.
“We are going to continue to see large amounts of volatility through this market,” said Andrew Cohen, executive chairman at JPMorgan Private Bank.
This wasn’t one of those moments when all investors sensed an opportunity and went for it.
Nigel Green, CEO of international financial advisory firm deVere Group, said: “I've never seen such a split of investors, where there’s strong opinions in one direction and equally heartfelt opinions in a completely different direction.”
By and large, canny investors opted to juggle and reallocate portfolios. Asset diversification and an ability to think quick about the changing market were key drivers of decision-making in 2020.
The need for clients to have a diversified portfolio... has never been more apparent
“If you're not invested [in the market], you've missed out on all those re-gains from the lows,” said Cohen. “The need for clients to have a diversified portfolio, including rotating through asset classes in these unprecedented times, has never been more apparent to us as the best advice possible.”
This has been a trying time for everyone. Humanity was tested. Sometimes it was found wanting.
DeVere Group’s Green said: “We have gained faith in humanity but lost faith in governance. Governments in general handled [Covid] badly.”
On the other hand, our ability to adapt and to come to the aid of one other, particularly in the pandemic’s early days, augured well.
“The willingness of families to pivot and do things of enormous value to communities during the pandemic was just extraordinary,” said Cohen. “I think of factory lines being changed to produce medical devices or [hand] sanitiser.”
I didn't have extra time in lockdown. I was actually busier – much busier
What also emerged is a reflection of the old saying that the more things change, the more they stay the same.
Daily life has been transformed, probably in some ways for ever, for clients and their relationship managers.
For now, at least, most travel is not an option. That is a radical shift in the lifestyle of many bankers and high net-worth individuals.
“I was doing 120 flights a year, minimum, for 20 years,” noted DeVere Group’s Green.
But if anything, that lack of physical mobility led to greater intellectual endeavour. Clients, stuck at home, were online at all hours of the day, keen to absorb research and debate investment opportunities with their main financial advisers.
“I didn't have extra time in lockdown,” added Green. “It was the opposite. Everybody wanted to talk to me via Zoom and WhatsApp. I was actually busier – much busier – than ever before.”
We are seeing a lot of people looking at Britain as a place to come and live. Despite Brexit
That required new forms of technology to be up to the task – and in the main it was. Zoom and Microsoft Teams, among other services, proved to be “a great way of getting some of our specialists onto calls and enabling them to give our clients greater access to advice”, noted KPMG’s Limb.
Volatility and uncertainty didn’t entirely upset the apple cart. True, the West is wedged in a period of political uncertainty. And yes, some governments didn’t cover themselves in glory this year. But HNW families are far from ready to abandon the markets they’ve known and trusted for years.
Quite the opposite.
“There has certainly been a very strong drive for very wealthy families to choose a jurisdiction and be loyal to it,” noted Michel Longhini, CEO private banking at Edmond de Rothschild. “Places like Switzerland offer real safety and offer a combination of a good investment climate and a good education and health system.”
Nor, it seems, has the fumbling over Brexit at a political level altered how many global HNW families view the UK.
Cohen at JPMorgan Private Bank noted that: “While Brexit appears as a major issue for European onshore clients, it remains a low consideration for those outside the EU. London, irrespective of what happens with Brexit, is still a key destination for education, finance and healthcare.”
Alternative or tangible assets is where you will find the real long-term yield
KPMG’s Limb noted that, despite the uncertainty over the nature of a UK-EU trade deal, “we are seeing a lot of people looking at Britain as a place to come and live. Despite Brexit, despite everything that’s going on, you know you have access to the capital markets, a stable environment and world-leading legal system.”
There is also a sense that wealthy private investors are starting to look beyond Covid, even though some lockdowns are still in place and any vaccine is a work in progress.
“What we are now starting to see is clients emerging out of this and looking for opportunity,” said Limb. “I think a lot of those opportunities will come outside of the conventional capital markets in areas like private investments.”
Edmond de Rothschild’s Longhini said: “Alternative or tangible assets is where you will find the real long-term yield”.
For Puoti at Burges Salmon, private equity is “definitely something that more clients are looking at”.
