Staying informed isn’t a choice, but a strategic option when it comes to investment management. The financial sector is dynamic and heavily relies on other factors, majorly economic indicators and political events. The success of your investments hinges on your ability to navigate these factors.
Generally, investors should be knowledgeable, adaptable, and proactive. As such, staying informed remains the cornerstone of successful investment management. It empowers you to make informed decisions and seize available opportunities. Below are a few tried and tested tips for managing your investments.
#1 - Seek Professional Advice
Not seeking professional advice is a common mistake made by even successful investors. Unknown to them, professional advisors provide great insights, especially for those who are uncertain about their investment strategies. You should also consult experts like Avidian Wealth Solutions if you don’t have time to manage your investments effectively.
Financial advisors are beneficial in many ways. For starters, they bring forth expertise and knowledge in this field. Investment professionals deeply understand all investment facets, be it investment management, estate planning, or retirement planning. You can rely on their guidance on all your financial issues and goals.
That aside, you can be sure of personalized recommendations. These experts offer personalized recommendations that fit your unique objectives. They assess your financial goals and other factors to create a personalized investment strategy.
You will also benefit from behavioural coaching offered by financial advisors. While other factors come into play, most businesses fail due to emotional biases from entrepreneurs. Greed and overconfidence often lead to irrational decisions that can hurt your business. Professionals offer guidance on how to remain objective to achieve your goals.
You should also seek their advice on goal setting. These experts can help you set clear financial goals. Whether you want to fund your education or have a retirement plan, they will give you a perfect strategy for attaining them.
#2 - Rebalance your Investments
Rebalancing your portfolio is also crucial to investment management. This essentially involves adjusting your asset allocation to maintain a balanced risk-return level. Unfortunately, rebalancing a portfolio is easier said than done, and most entrepreneurs can’t hack it successfully.
Here, you should begin by settling rebalancing thresholds. Identify triggers that indicate the right time to rebalance your portfolio. You should have a clear guide to avoid making unnecessary adjustments.
Rebalancing your portfolio should also be dependent on the market conditions. Always assess the prevailing market conditions and economic factors before making adjustments. Interest rates, inflation, and other financial factors should be your key rebalancing principles. You should rebalance when the market is undergoing extreme volatility.
While at it, you should consider the tax consequences of rebalancing your investment portfolio. This is especially important if you have taxable investment accounts. Your financial advisor can recommend using strategies that minimize the impact of your actions on your taxes.
Lastly, document all your rebalancing decisions. Having a record of all the changes and adjustments you’ve made over time and the outcomes makes it easier to track progress. You also get to evaluate the effectiveness of this strategy.
#3 - Review Fees and Expenses
Reviewing operational fees and expenses of running your investments is also important, especially if you want to maximize returns within a given period. However, understanding fees and expenses comprehensively isn’t easy. For starters, you should understand the fee structures. Investments have varying fee arrangements. For instance, how much you incur for your mutual funds won’t be the same as managed accounts or exchange-traded funds.
You should understand the common and unique fees of every investment. Review the total costs of running your investments before making any adjustments. This should include all the fees and other associated costs for every investment. You should then compare the costs of various investment products.
Doing this will help you know if you are getting value for your money. Finding low-cost investment options compared to their alternatives is prudent. For instance, you can opt for index funds instead of managed funds.
Some investment options allow for the negotiation of applicable fees. You should do so where possible. You can negotiate the fees with investment providers. Check out and take advantage of fee discounts and waivers available. However, ensure that you remain updated about recent regulatory changes on applicable fees.
Endnote
Managing your investments incorrectly requires that you adopt a multi-faceted approach. Besides monitoring them regularly, you should rebalance strategically, diversify, and review operating costs. Seeking professional advice is also important, especially if you aren’t an expert in investment management.
In the last Quarter of 2023, it was confirmed that the UK had fallen into recession. The picture of the UK over the last decade has been one of stagnation or decline. Productivity has grown by just 0.9% per year since 2008, and as per the Centre for Macroeconomics May 2022 Survey, it is believed that the UK will continue to suffer from low growth in the upcoming decade. This was considered to be a result of UK-specific structural issues, one of which being the UK's tax system, which has been described as “complicated, inefficient and beset with perverse incentives that do little to raise revenue” (Tetlow and Marshall 2019).
For some time now, there has been discussion about tax reform in the UK, whether they truly maximise the revenue the Government could bring in, and whether they are still fit for purpose, with some taxes not seeing true reform in decades. With an election looming, both parties looking to win will require additional revenue in order to enact their policies. With growth in the UK stagnant, it's likely that either party would currently have to rely on either borrowing money or cutting spending. Herein lies the argument for reforming the taxes we currently have in order to increase the revenues the government can earn whilst simultaneously making them less complicated.
Taxing Capital vs Taxing Labour
One of the key battlefields is where the balance of taxation falls in the UK. It can be argued that in the UK, labour is taxed far more aggressively than wealth. This can be best seen by the current Prime Minister Rishi Sunak. Mr Sunak recently published his tax returns in which we learned that he paid £508,308 in the financial year 2022-23 on overall earnings and gains of £2.23m. This is an effective rate of tax of 23%, which is far lower than the top rate of income tax, which is 45%. This is largely due to his earnings in the US being taxed at source, and capital gains tax is much lower at 20%.
Capital Gains Tax
This raises a good question, why is a millionaire able to pay less in tax than for example, a Doctor? The answer is that capital gains tax is very favourable to those with wealth. The capital gains tax is targeted at realised capital gains. Realised capital gains are the amount of profit made after selling an asset, usually real estate or stock investments. The ‘gain’ is the amount earned by the sale minus the original amount. A capital gains tax will then tax the seller on the profit made from the sale.
For some time now, capital gains tax has been lower than income tax. This has resulted in those who earn in excess of the highest tax bands to re-characterise their income. As capital gains are taxed lower than income tax, a lot of business owners now take small salaries or in some cases no salaries and instead take money out of their company in the form of capital gains.
So, how can we reform this tax to make it more suitable? In 2023 the Economy 2030 Inquiry by the Resolution Foundation released a report suggesting the following reforms:
"The report proposes aligning the tax treatment of these different income sources by increasing tax rates on self-employment and rental income, enabling the rate of employer NICs to be cut by one per cent. Moving towards equal treatment would also mean increases in the rates of Capital Gains Tax, such as from 28 per cent to a top rate of 53 per cent for second homes, and a top rate of 37 per cent for shares. Crucially though, the report argues that this would be combined with a major tax cut, with no tax paid on gains that are merely in line with inflation. The result would be a net Capital Gains Tax cut for many, with anyone seeing an annual capital gain for shares of 8 per cent or less facing a lower net tax rate than the 28 per cent rate that George Osborne oversaw between 2010 and 2016."
National Insurance & Income Taxes
Another area for reform is income taxes. Both National Insurance contributions (NIC) & Income taxes are overly complicated. Both have a series of rules and exemptions that make it difficult to calculate. For example, Resolution Foundation's 2023 report provides the following example:
"A common example of this complexity is the ‘hidden’ 60% effective marginal tax rate that people must pay if their annual income falls between £100,000 and £125,140 due to the loss of personal allowance, despite a statutory income tax of 40%. Similarly, employees face different effective marginal tax rates depending on how their income is structured. For instance, the effective marginal tax rates for employees in the top income bracket (earning more than £125,140) can vary significantly, peaking at 53.4% when employer NICs are included or 54.5% paid on income from dividends, falling to 47% paid on self-employment income, 45% on rental income, 28% on gains from property, and as little as 0% if an employee keeps their income in a company and then emigrates".
In order to uncomplicate this tax, one solution is provided by Broome et al. (2023), who suggest equalising tax rates on different kinds of income and removing very high marginal rates, through higher dividend and capital gains taxes and higher top National Insurance rates for the self-employed, offset by indexing capital gains to inflation, a cut in employer National Insurance, reinstating the personal allowance above £100,000, and abolishing the High Income Child Benefit Charge.
Property Taxes
When we examine property taxes, we see further examples of poorly designed taxes that need updating or reform. Council tax, stamp duty, and business rates which bring in near 9% (£90 Billion) of the UK's tax revenues are all flawed in their own ways.
Council tax is a levy on properties, but it is based on house prices in 1991. In an article in the New Statesman entitled "Britain's Great Tax Con" Harry Lambert wrote:
"If you live in Burnley, where homes are cheaper than many other parts of the UK, you will on average pay 1.1 per cent of the value of your home in council tax every year. If you live in a typical property in Kensington and Chelsea, where council tax has scarcely risen but homes have rocketed in value since QE – leaping from 24 times earnings in 2010 to 38 times earnings in 2022 – you will pay 0.1 per cent. The burden of council tax is ten times as great in Britain’s poorest areas."
A fairer way to tax property would be to replace the tax with an annual proportional property value tax based on up-to-date house valuations. Harry Lambert noted that by setting a flat 0.5% tax on house valuations you would raise the same revenue whilst cutting taxes for 3 out of 4 people and eradicating the need for Stamp Duty Tax. So, whilst it would not increase tax revenue, it would simplify the property tax as well as reduce the increasing economic equality in the UK as well.
In Summary
In Summary, we've outlined several reasons why the UK needs tax reform. Currently, the inequality in wealth is part of the reason that growth and GDP are struggling. By using these tax reforms, the government could free up finances to invest in public services as well as reduce the load on those who rely on those services the most.
Who needs help with wealth planning?
In my view, everyone should look for advice on wealth management or succession planning. Each individual case is different and understanding your options early on will help match your ambitions and aspirations with actions.
Today, it is very common to get consultant services for financial investments either through a financial adviser, reviewing prestigious publications or listening to experts. This has become a mundane practice as it is tangible and it yields short- term gains that make it even more attractive. On the other hand, long-term wealth management is perceived as something in the distant future that is often not that optimistic and appealing to individuals.
Let me share an example that helps illustrate the different options and recommendations that adapt to different circumstances. If we have a person who is a US citizen, lives in the US and is married once with two kids. This is quite a different profile that might not need the same level of depth as a person who isn’t a US passport holder, lives in a different country, is divorced and has children from different marriages, as well as a family-run business with siblings. Both individuals will benefit from wealth management. However, the tools and services offered to each will be different.The core target audience for wealth management is residents in countries that are going through political and/or economic turmoil. It is a common practice for these individuals to invest their wealth in a different country than the one of their origin to ensure they can protect their wealth. They do so to ensure that their wealth will be managed according to their wants and needs and will be protected from local contexts.
Unfortunately, in my experience, most people do not realise the importance of wealth management until they are more mature in life or retired. It is never late, but at this stage of life, it is usually late to maximise the benefits, flexibility and outcome that can be managed with a long-term outlook. The pandemic has helped many of us realise how vulnerable we are and how quickly our lives can change. I hope that as we go back to a new normal, people keep this top of mind and reflect on planning their future to ensure it is aligned with their expectations and aspirations.
What are the key mistakes people make?
From my perspective, there are three common mistakes. The first and most common is that people think that there is a “one size fits all” solution. Word of mouth is usually a great way to spread information but when it comes to wealth planning, some people want to replicate what they have heard from families, partners, friends or neighbours. The reality is that usually each individual’s situation, wants and needs are different and therefore the “best” outcome of the planning can be quite different from case to case.
A second common mistake is to think that once the planning is done, it is done for good and it should not be revisited. This is not accurate as our personal context, the economic environment, and the laws and regulations can change, and we might need to adapt to meet the trustees’ goals.
Finally, sometimes and even without bad intentions, some local advisers or accounting advisers that are close to the individual can begin to provide advice based on what they have heard. However, in many instances, this may not be their camp of expertise and they can provide misleading information or generate false perceptions of what would or wouldn’t work for the individual.
When working with a wealth management specialist, you will be guaranteed that you’re looking beyond the context of today. An experienced professional will recommend solutions that make sense for the future while minimising any associated risks. They’ll look for alternatives that result in saving money and avoiding future bureaucracy and unnecessary costs.
An international wealth planner is a qualified professional that not only has the precise knowledge of local regulations for each individual but also those of third countries where investments usually take place.
As an example, for us in Miura, the word “client” does not exist. Our philosophy is to offer truly personalised service and therefore refer to people as our “guests” and “partners”. It can seem like semantics but it fully reflects our mindset on service. Once we define a structure, we are committed to working together in evaluating alternatives, making decisions, and pivoting if the needs or environment changes.
What are the key differences between global and boutique firms?
The first and most important difference is that a global firm has thousands of clients from across the globe and within their peer group, they “fight” with other similar companies for clients. Their business model is similar to a wholesaler and the clients are numbers that help drive efficiencies in resources. Regardless of the individuals’ characteristics, they focus on a short-term gain for each customer as they are aware that there will be high turnover as individuals also move from one firm to another looking for better fees. The revenue stream is mostly driven by new structures or dissolved structures that generate fees from the individuals.
On the contrary, a boutique firm is looking for a win-win relationship focused on long-term retention as opposed to short-term gain. The firm focuses on the “partner” or “guest” satisfaction that will generate added business. This means that the focus is more on the quality relationship than the quantity. The offering becomes personalised and strives to avoid over costs generated by a mass approach.
Another key difference is that often global firms “recommend” solutions that are first and foremost beneficial to the firm. The approach is more about “trends” or “internal interest” than the clients’ benefit. Those firms function under the assumption that clients will leave them sooner or later – they are like “constructors” who build what others recommend in a moment with the materials they have in stock.
A boutique firm has different objectives and key performance indicators. Here, the main objective is to drive excellence in the design of the structure and strive to leverage the most sophisticated tools and materials to find an ideal solution for each ‘partner” or “guest”. The adviser acts like an architect during the design of the process but then also finds ways to improve and optimise everything once the structure is implemented. The key performance indicator for a boutique firm is the excellence and satisfaction of their partners.
Is there a global solution for wealth management?
There isn’t. There can’t be one wealth management solution that will fit every person’s goals and objectives. Each individual is unique and therefore, each solution should be personalised.
Some larger organisations try to standardise their solutions and offer global products that drive internal efficiencies, but this does not translate into benefits for the individuals.
Do you think that the pandemic, the political turmoil, and the ongoing war in Ukraine make wealth management more urgent?
It’s not so much about urgency as it is about starting now. A good analogy for this is the case for health insurance. When we are healthy, we never think about it but when we need it, we feel extremely grateful that we have it.
When we think about wealth management, some people believe it is still “early” in their lives to discuss it, but the reality is that the sooner we plan for it, the better.
What advice would you give to anyone who reads this and is not sure whether they should look for a wealth management adviser?
Everyone needs to start thinking about their wealth as early as possible, especially in the current uncertain environment. Timing is critical so book an appointment with a wealth management adviser now!
Disclaimer:
Nothing in this article should be construed as advice of any kind or solicitation to work and/or invest with the author or Finance Monthly. These are the thoughts and beliefs of the author based on his personal experience and knowledge. Readers should always consult their own advisers on their wealth-related decisions.
How has the wealth management world developed recently and what has influenced this?
The epidemic and the escalation of the Russian-Ukrainian war were the key variables impacting the wealth management business in the last 2 years. However, these events have mainly influenced the assets themselves rather than how money and other assets are managed.
The movement of the Standard and Poors 500 clearly illustrates these tendencies. This index monitors the weighted average of the share prices of 500 big businesses listed on US stock exchanges.
How has the pandemic affected the wealth management landscape?
During the pandemic
Financial market developments in the first half of the reporting period were heavily biased toward equity markets and, in particular, riskier assets. Overall, this had a twofold effect: on the one hand, wealth management firms and their customers who switched in good times were able to expect up to triple-digit returns; on the other hand, the resulting flood of money led to a significant increase in the real estate sector and other markets.
In this situation, not only were those with substantial savings able to increase their wealth, but also many new people joined the club. They typically came from the following industries:
- Disruptive start-ups, including video chat apps or work from home, and blockchain solution developers
- Cryptocurrency and NFT traders
- Executives from home delivery companies
- Executives from transportation and logistics companies
- Companies dealing in biotech and healthcare, especially solutions against COVID-19
Of course, there were some short-term losers in this situation, including real estate developers, restaurant operators, and some players in the construction industry.
After a pandemic, in a war
The weakening of the virus and the gradual increase in general immunity made it seem for a short time that economic life would remain stagnant at this high level for some time. But experts had already sounded the alarm: we are facing a global crisis and associated inflation due to the labour shortages caused by the pandemic and the massive problems in the supply chain. Moreover, inflation has been further exacerbated by the escalation of the conflict between Russia and Ukraine in February 2022, skyrocketing oil and energy prices worldwide. And a major attack on the crypto market has also had a serious negative impact on financial markets already in a downtrend (especially the riskiest cryptocurrencies).
Those who did not act in time were either stuck in their positions on the stock market and the crypto market for an unpredictable period or suffered significant losses.
While 2020 and 2021 may have been a time for wealth accumulation, today's focus is on wealth preservation.
What are the most common misconceptions that wealth owners have about wealth management?
High net worth individuals and the market need fewer asset management experts
Research shows that high net worth individuals think about services quite differently than one might initially assume. For example, common sense and market logic would dictate that the number of wealth management professionals should decline during a crisis. A lower number of wealth management professionals are needed when overall wealth drops. On the contrary, research shows that demand tends to move toward asset management firms precisely because a more crisis-resistant portfolio needs to be built. Only assets managed by several firms with different strategies can be more crisis-resilient than a diversified portfolio.
Investing in Fortune 500 firms equals a balanced portfolio
Over the last ten years, many investors have depended only on the trendiest stock exchange companies. However, this strategy is only viable until there is a bull market (trending upward). Those who have followed this strategy may now realise that it makes sense to diversify much more broadly because the negative trend affects not just one sector but the entire stock market, almost without exception.
Instead of focusing on high-profile growth businesses, you may diversify your portfolio by investing in value stocks and stocks with varying market capitalisation to gain exposure to many industries. Furthermore, investing in an exchange-traded fund allows you to diversify and actively manage your assets without having to hire a financial manager.
Wealth management services that are prohibitively pricey
Many consumers misperception that this service is pricey due mainly to comparisons with typical bank costs. Private banking, asset management, and fiduciary services are more expensive than standard bank rates. However, they also offer considerably more significant potential for value generation. A professionally managed portfolio has a markedly better chance of generating significant returns in the short and long term.
Larger service providers offer better solutions in wealth management
Although many people believe that larger companies provide a higher level of service, and it may be true, this is an issue that should be considered from the perspective of individual preferences.
While small boutique agencies probably serve fewer clients than the market-leading large firms, they are also likely to devote more attention to individual clients. And it's not difficult to bring in additional staff to assist when needed.
With a larger asset management firm, the benefits of decades of experience, a high-quality track record, or standardised processes are more likely to be reasons to choose. In addition, larger institutions may not cater to customers with less than £5 million in investable assets or may only give restricted services to such clients.
What are the best practices in auditing a client’s needs?
In this rapidly changing environment, wealth management firms are doing everything they can to understand the needs of their clients comprehensively and to maintain and increase the assets under management.
To do this, they apply the following best practices:
- Close personal contact: Although research shows that the quality of the personal relationship is no longer the main criterion for all clients when choosing a wealth management firm, the quality of the service is significantly improved by building a close relationship. During difficult times, the contact person can stay in touch with the client through different channels (face-to-face meetings, phone calls, and digital channels). In such cases, it is essential to address risk tolerance, future plans, and liquidity needs.
- Digital reporting: While a few years ago, it was not uncommon for clients to not be able to receive information immediately in all cases, in 2022, it is a legitimate expectation that they will be able to know the status of their portfolio instantly through a cloud-based tool or mobile application.
- Demand continuous feedback: It can also be helpful to review customer needs for specific messages and transactions. This can be done through newsletters and various digital feedback tools.
How to design a successful wealth management plan? What would be the first course of action?
When creating a wealth management plan, professional service providers typically begin with an inventory of existing assets. Assets of five million pounds can be considered a diversified portfolio that includes several types of assets. These may include:
- Cash
- Foreign currency
- Equity investments in companies
- Gold
- Shares
- Bonds
- Other money market instruments
- Real estate
- Movable assets (e.g. motor vehicles or high-quality furniture, antiques)
- Works of art acquired specifically to increase wealth.
Asset management firms evaluate this framework and learn about the client's thoughts as a first step. While some people do not care about the details, others are concerned with minor details.
Therefore, it is vital to assess the current situation and determine where the client wants to go in the short, medium, and long term. An overview of the structure is also important because an easily liquidated asset consisting solely of listed assets requires the management of artefacts and real estate.
As a result of the discussion, the trustee develops an overall picture based on which they create an asset management plan. This may include the creation of an appropriate legal form, such as the establishment of a trust for the proper management and simple inheritance of real estate and business assets.
Are any significant changes expected in wealth management in the UK in the upcoming years?
One of the most significant global trends for the future may be a considerable increase in the number of high-net-worth individuals. Of course, this process has not just started in recent years. However, start-ups and cryptocurrencies have contributed significantly to democratising the path to wealth, making it accessible to an ever-increasing number of people.
The digitisation of the field and the use of artificial intelligence, neural networks, and learning algorithms are constantly improving the quality of services and the customer experience in countries around the world. Likely future trends include the proliferation of chatbots, which make contact even easier, and the further personalisation of portfolio management.
While the number of Russian oligarchs residing in the UK is not publicly available, at the time of writing, a significant number of them seem to have been restricted in connection with the war between Russia and Ukraine. This restriction primarily includes a complete freeze on assets managed here, including trusts belonging to them that have been uncovered to date - more than £10 billion in total. How the war will end, no one knows at this point. However, there is a good chance of long-term asset freezes that will negatively impact the value of all assets managed by the UK wealth management sector.
Other expected trends affecting the future of the industry:
- Technology is lowering barriers to access, making some of the services offered by the industry accessible to the less affluent.
- Start-ups from the technology sector will occupy part of the market.
- In addition to local structures, the role of global legal solutions will likely be strengthened.
- In addition to personal recommendations, online ratings and feedback, I believe, will become increasingly crucial in choosing wealth management providers.
What are the top tips for wealth preservation in 2022?
2022 - Inflation, economic downturn, stock market highs and lows, cryptocurrency crash. Even with the benefit of hindsight, it will not be easy to review this year's events, even now that we are in it! However, chances are, this year will be more about wealth preservation than significant gains. So let us consider some tips on how to preserve the value of your portfolio:
- Always pay attention to your portfolio! If you manage your portfolio yourself or have entrusted it to a professional service provider, make sure you know its current status. Many online solutions and your portfolio manager can help you with this.
- If possible, you should consult a professional wealth management adviser. When you bring in a financial adviser, you have a wealth of knowledge, experience, and a solid safety net to protect the value of your assets.
- Choose less risky investments! Suppose you are thinking about restructuring your wealth. In that case, it's a good time to choose safer but lower-risk investments for the long term - such as a stock index, a government bond, but even more so real estate or a unique piece of art.
- Diversify your portfolio! Unfortunately, most often than not, this is only possible, say, when the bear market has bottomed out. However, the trends are pointing downwards for now. In such a situation, it makes sense to minimise risky assets and instead choose a variety of assets so that the rest of your portfolio can offset any downside.
2022 is the third successive year that confirms we live in very exciting and eventful times. It is truly a historical time - with all its pros and cons. However, the economy is becoming more and more unpredictable, so you may want to consider wealth management and protection as an integral part of wealth creation.
About Ramesan Doraisami
Ramesan Doraisami is an entrepreneur, investor, business adviser and international professional Speaker.
For more than 20 years, he has been investing, training entrepreneurs and working with other investors in entrepreneurship and business. During this time, he created several businesses, both as his ventures and on behalf of global clients.
In 2013 he founded Azalea Ventures Limited as his investment firm and a global consulting firm, LCL Group, based in London. For the last nine years, he has worked with start-ups and small business owners as an investor, mentor, and adviser to help entrepreneurs generate personal wealth through their businesses.
Recently Ramesan launched the Entrepreneur Success Foundry, dedicated to providing much-needed training and education to both current and would-be entrepreneurs, significantly improving their success potential. Ramesan intends to share his knowledge and extensive experience with a more significant number of entrepreneurs through the Entrepreneur Success Foundry.
Sources: https://www.google.com/finance/quote/.INX:INDEXSP?sa=X&ved=2ahUKEwillYrutfb3AhXjMewKHe3uCqQQ3ecFegQIGBAg https://www.investopedia.com/terms/w/wealthmanagement.asp https://www.capgemini.com/wp-content/uploads/2022/03/Top-Trends-in-Wealth-Management-2022-2.pdf https://www.wealthspire.com/blog/5-myths-financial-planning/ https://www.nerdwallet.com/article/investing/what-is-a-financial-plan https://www.gov.uk/government/news/uk-hits-key-russian-oligarchs-with-sanctions-worth-up-to-10bn https://www.wiseradvisor.com/blog/financial-planning/wealth-preservation-strategies/
What are the current trends shaping wealth management in the high-net-worth space?
One trend we’re seeing is the push-pull relationship whereby clients have cash on hand and want to deploy it but they have a mental block that is preventing them from deploying large lump sums of their capital. There is a reservation that real estate is potentially overvalued. There is also a reservation about geopolitical issues that affect the stock market or may affect the market in the future. We also see a lot of fortune-telling syndrome happening.
51% of Canadians still don’t have a will and money is starting to move from one generation to the other. I’ve spent 17 years in the business and now more than ever, money is intentionally being given to adult children. “Do something responsible with this X dollars” say the parents.
We work with people who are about to sell their company or are thinking about doing it and yet they have no idea what they spend each month. The second part of this situation is a spouse who has not worked for many years, who really has never been part of the finances so getting them to look at how much is being spent can be a challenge. We walk clients through an exercise called BAM. BAM stands for Bare Ass Minimum, referring to monthly expenses that exist regardless of your lifestyle spending. The baseline bills. This is the starting point for someone who is considering retiring and it is useful for clients to accumulate and wonder how much they need to build up before selling. They can accumulate a mix of cash, stocks, real estate and business equity to make a total pot, and then use the BAM to figure out how long the money will last spending X per month with 0 return. That is a starting point.
Over the near two decades in the business, I have used permanent insurance where appropriate and some years have not implemented a single policy. In other years I have encountered many clients who have effectively used the permanent insurance solution. Currently in the market with the continuous tax reforms in Canada in the government and limitations being implemented, permanent insurance seems to be more of interest to some clients now. From an estate planning tax standpoint one of the last standing advantages is the Capital Dividend Account. Life insurance death benefit is one of a few items that create a capital dividend account (CDA) which can flow money out of a company tax-free.
With the recent real estate values growing at a fast pace and the continuous business sale activity many clients are utilising reorganisations of the corporate structure. For wealthy families, they likely know they will never run out of money or assets, but if they can organise their companies in a certain fashion and it enhances their tax efficiency or enables a more seamless estate transition while they are alive or dead, this can be effective planning. We are working closely with estate lawyers and accountants to set up structures. Having investment accounts in corporations that have large corp loss carryforwards or shareholder owing allows for effective planning.
Blended families is a real thing. Wealth and blended families can be a challenge but when you have blood children involved in the family business (or family farm) and new spouses (recent or long time). Ensuring there is estate equalisation is key. More time and communication should be spent by adviser teams to get deep into the motivators of founders and also the family members involved. Dr Tom Dean’s book, Every Family’s Business, is a must-read for all family-run businesses.
At Serviss Wealth, we help clients with creating a one-page road map by using a software called Asset Map to provide a visual experience that displays all of a household’s members, entities, financial assets, liabilities, cash flows, and insurance policies.
They need to consider our help with this because being successful and running a profitable business has many dynamics to it. Over the years, successful families accumulate a number of financial buckets, property buckets and insurance buckets. Keeping track can be done by some but many of our clients come to us handing us the keys and delegating, so they can live a certain lifestyle, under a certain premise of comfort knowing their wealth, health and dreams are being constantly checking in on.
The best wealth preservation advice I can offer is to stay broad in your assets.
What are your top financial tips during uncertainty?
- Invest something regularly if you are unsure there is a correction.
- For strategic investors, one idea is to hold some money in a high-interest account and earmark it that if the market goes down more than X% in a month, you invest it.
- Consider your “Wealth Edge” or figure out what your wealth edge is. For some, it is generating a large cash flow in their career. A handyman can add more value to a reno house that they flip or accumulate rental houses. Realtors watch the hot sheets for good buys. If you are a manufacturer, consider owning the property where you operate your business.
- Buy permanent life insurance if you have a life insurance need. Consider having the insurance forever and then plan to spend and give away your wealth in your lifetime (way more fun than leaving all your buildings and stocks to your kids who likely will be 60+ when you die).
- If unsure, pay down debt. Although interest rates are low, debt is debt. When you don’t have any debt, you are free.
- Debt can be used very effectively to magnify wealth but if not deployed correctly it can limit lifestyle and attainment of goals if markets are correcting while you hold the debt. Be cautious here with this one.
The best wealth preservation advice I can offer is to stay broad in your assets. There is so much conspiracy talk out there that XYZ will happen and if this happens, then that will happen so you should own all ABC assets if you want to be protected. Realty is no one knows what will happen and if you look back at history, some assets perform better than others. Some assets benefit from world events and others don’t. Having investment vehicles that are positively affected by inflation that have been around for decades and navigated through trying times has worked out fairly well in the past. Having some cash in high-interest accounts, doing some research on Bitcoin and Ethereum might be worth looking at for a host of reasons. Physical gold and a small amount of physical cash others say is prudent. Lending money to a quality source provides a different exposure and one asset class often overlooked and considered by some as risky is the Small Cap space. And looking at your own business, practice, real estate holdings, invest in yourself. Invest in what you can control. Have you cleaned up your own kitchen as best you can before exploring investments outside of your own world?
Liquidity is a concern or an area that I think many business owners are vulnerable in. A large part of their net worth is tied up in the value of their operating business. We help people find ways to extract the value out of their business but still keep the business a solid going concern for decades to come. And we help them to engage the management team in the process.
Some of the key lessons the past year has taught me is time goes by very fast. Returns for equity in 2021 for the most part were very good depending on your exposure. In late 2020 the world was unsure if it was opening up or closing down. Then 2021 was full of lockdowns, variants, some friends getting ill but not dying. And if a person watched the news, it was very bad. It was negative, scary, anxiety-ridden and not centred around wellness by any means. Yet the market roared double digits plus percent up. So, one may conclude if you are only watching the market you could have made a lot of money, but if you were watching the news you stayed out of the market.
Some of the key lessons the past year has taught me is time goes by very fast.
This is a key lesson that I learned over the last year - the good news is hard to find. If you set goals that need positivity then be aware of your news sources and the amount of time you consume. Think: Does what I am doing right now serve me and my goals?
Case Study
Business partners expanding their business, initiating a succession plan, and taking on debt for the right reasons. A reference to how Dustin facilitates family meetings to bring clarity to wealth transitions be it a business, a cottage, cash or investments.
The common scenario we help our clients with is simple risk management when it comes to partnerships. The file fact pattern is this – two business partners own a manufacturing business. Partner one, John, owns 75% and partner Bill owns 25%. John is older and eventually wants to retire so he is selling 24% more to Bill. To purchase the 24%, Bill needs to come up with $3,000,000 which he does not have in cash. John has no other buyers so he needs to work with Bill and knows the company is more valuable with Bill since he has worked there for 20 years. The operating company is currently debt-free and worth about $12,000,000. This is oversimplified for this case study purpose, but financing was put in place inside the operating company and the $3,000,000 was given from the operating company to John’s holding company. Now the operating company is holding new debt and the share split is 51% John and 49% Bill. So where is the risk in this situation as it applies to if one partner dies? Well, the company now has debt, it would also lose a key contributor to the business which likely would affect the company value, which affects the families of both the deceased partner and surviving partner (who by the way now needs to pick up the slack of the partner who died). Since the goal is to sell this business to a third party within 10 years, the simple solution was to take out 10-year-term life insurance on both partners for the amount of their respective share ownership. In this case $6,000,000 each.
The question really was: John or Bob, if you died, would you want to be partners now with the deceased partner’s wife? Both answered no, so the question was how do we buy out the surviving partner’s wife as quick and easy as possible and know there is near sufficient cash to do so. Taking on large or more debt in the near future was not desired by either partner.
We then discussed if they would like to extinguish the debt at the same time if a partner died. They felt this extra $3,000,000 each was not needed since they usually carry around $2,000,000 in the bank account as afloat. We also discussed having a policy slightly above the value now to account for growth. They felt that if the company grew in 5 years, the debt would likely be a lot less and they would use new financing at that time to solve any shortfall the insurance didn’t provide. The shareholder agreement was also adjusted, and the life insurance was noted in the agreement.
For more information, visit https://servisswealth.com/
After initially building a solid practice at Investors Group, Joseph realised that as the business and the industry was evolving, they needed a change. His company joined Richardson Wealth six years ago, which has opened the door to a wider universe of alternative assets that can add value and enhance portfolio diversification – from private equity and real estate to private debt. According to Joseph, clients have responded well to the unbiased access to investment solutions, which has led to a growing referral base and the expansion into their third client segment of high-net-worth investors. Bakish Wealth’s book boasts $200 million in assets under management (AUM) across 490 households, as well as a “large insurance component.”
We speak with Mr Bakish below about the pandemic’s impact on wealth management and his advice on how to best plan for the future.
How has the COVID-19 pandemic affected the wealth management industry and your firm?
The COVID-19 pandemic made 2020 a challenging year for our clients, particularly the
physicians. For them, we took special care to focus on the basics. Conducting meetings virtually instead of at hospitals allowed doctors to fit me into their schedules. It was me reaching out to say: “I’ve got this under control. While you guys handle the health crisis, I’m handling the wealth crisis.” I explained that the steps we put in place before were designed to deal with a large, exogenous shock, like a pandemic. Clients were receptive. They all take the mantra of ‘Think long-term and ignore the dips. Luckily, we didn’t get many panicked calls.
As far as how our team handled the transition to working completely remotely, they were flexible and enthusiastic. Most were dealing with young children and partners wedged up right beside them, and they handled it in stride. I’m very proud of the dedication & adaptability of our team.
What are some of the key lessons this past year has taught you?
Remaining flexible and planning for the unforeseen is essential. Moving an entire business from in-person contacts to online was a challenge so having the fewest distractions going into it was essentially in securing a seamless transition. In portfolio construction, having a holding that can adjust its equity exposure automatically really helps to improve reactivity when “black swan” events occur.
Most importantly, allowing team members to adapt on their own time and in their own way makes a great team even better.
Keep a long-term horizon and ignore short-term noise.
What are the things in your approach that set Bakish Wealth from your competitors?
A quarter of our business comes from managing what we call “unique opportunities” on a deal-by-deal basis for accredited investors and ultra-high-net-worth clients — alternative investments (a.k.a. alts) such as private equity, real estate, venture capital and private debt.
One alternative structure we use is feeder funds, which have become more accessible and reasonably priced thanks to financial innovation.
What are your top wealth management tips during times of uncertainty?
Remain invested for the long term. Keep a long-term horizon and ignore short-term noise.
Focus on client emotions in times of uncertainty and let the portfolio do its job. We have found that touchpoints in chaotic times are far more memorable than in good times and resonate better when doing annual reviews once the storm has passed. Remain confident as you are more valuable and able to influence a client’s behaviour than any media available to the public.
A time-tested asset
Historically, gold has maintained its value over time and built its reputation as a “recession-proof” asset class—largely uncorrelated with traditional market movements and economic fluctuations.
Despite this, in the current period of pandemic, panicked investors are placing bets on cash—the US cash market funds experienced $87.6 billion of inflows in seven days while the Bank of America reported that investors plowed a total of $136.9 billion into cash. It has gotten to the point where some banks were cleaned out of $100 bills as consumers took out large amounts of cash in a bid to protect them from the ongoing stock market crash.
While some believe that “cash is king” during a recession, over a longer period of time the nature of gold is more stable than cash. As banks are now slashing interest rates to encourage spending and boost the economy, so-called ‘idle cash’—is earning less interest. In addition, with inflation, idle cashwill not generate as much return in the long run as its purchasing power may depreciate over time.
This does not apply to physical commodities like gold as it cannot be printed like money and its value is not impacted by a government’s decision to change interest rates or to increase the circulation of a particular currency—making gold a more enticing choice for investors during times of volatility.
Even prior to the COVID-19 pandemic, gold performed exceptionally in economic volatility with an approximate 20% increase in 2019 alone. This is attributed to decreased investor confidence in traditional markets, stretching from stocks and equities right through to government bonds and investments which mere months ago appeared “safe”. This uncertainty is the result of a series of economic and political volatility which unfolded last year—from Hong Kong’s political situation, confusion around Britain's future within the European Union and Brexit, as well as unsettled US-Sinotrade ties, and deteriorating relations between Japan and South Korea.
Historically, gold has maintained its value over time and built its reputation as a “recession-proof” asset class—largely uncorrelated with traditional market movements and economic fluctuations.
Looking beyond 2019, historical data has also shown a similar pattern during the 2008 financial crisis where gold had a small slip during the initial market turmoil but rebounded and outperformed other assets in the following months. We could very well see the same pattern in 2020 as gold prices are now stabilising and rising after the Federal Reserve System (FED) introducing new liquidity injection facilities and the recent drop in interest rates.
Surging demand
Betting on gold’s performance as a safe-haven asset, panicked investors around the world are rushing to purchase this shiny metal, causing gold dealers to suffer shortages as a result of the surging demand and supply disruptions. Three of the world’s largest gold refineries – who together produce one-third of the world’s gold supply – have recently reopened and will continue to operate at 50% reduced capacity after being suspended for two weeks. It means that the supply for gold is now lower than before – making it more difficult for investors to access this precious metal.
Even before the pandemic, the process of purchasing and owning gold traditionally has proven prohibitive for some individual investors. Gold has traditionally been a negative-yielding instrument where investors have to pay to store, insure, and secure the asset, meaning that the purchasing and holding gold has historically been in the exclusive domain of traditional financial institutions and high-net-worth individuals (HNWIs) who can afford to pay for custodianship.
While there is now an increased demand for gold worldwide, the challenges to acquire this shiny metal have also increased.
Putting gold in the digital realm - a new, better form of gold
With the surging demand for this precious metal, the gold industry has evolved alongside technological advancements and the mass digitisation of the financial sector. The emergence of digital assets has given gold a new channel to shine in this digital space and has presented investors of every kind with a new way to purchase gold. One way is through “digital gold” - a digital token that is backed by actual gold bullions.
In light of the ongoing outbreak measures, the issues of physical gold are becoming apparent and extending beyond a lack of supply to deeper logistical nightmares - with gold dealers being unable to move gold across borders - or even out of the vault - as gold doesn’t come under essential items, causing delivery delays and gold funds to come to a complete halt. Mobility limitations can be solved by placing gold on the digital realm - allowing anyone with an internet connection to trade gold online without the inconvenience associated with storing, carrying, and moving gold. Digital gold enables gold to be transferred across international borders as easily as sending an online payment or a bank transfer - opening up the gold markets to globalisation and providing investors with greater utility and liquidity by reducing the barriers of entry to the gold market, allowing anyone to trade, spend, hold, and microinvest their savings into the world’s most time-tested asset class.
Even prior to the COVID-19 pandemic, gold performed exceptionally in economic volatility with an approximate 20% increase in 2019 alone.
However, anything placed in the digital realm opens itself to hacks, and the number of cyber threats has risen by 37% in March 2020 - with the average daily number of hacking and phishing attempts increasing by up to six times than the period before the pandemic. Trust, security, and data management remain a huge concern as there is a chance that sensitive data stored in centralised servers may be altered, misused, or stolen by malicious parties.
One way to combat cyberattacks is through blockchain, as the decentralised and immutable nature of the technology ensures that data remains unalterable and tamper-proof. A decentralised ledger system allows information to remain transparent while also maintaining a high level of data integrity. In essence, the distributed nature of blockchain provides no “hackable” entrance or point of failure that detrimentally exposes entire datasets. By applying this to digital gold, asset holders can maintain full visibility over their assets, transaction history, and even track inventory records while this data remains unalterable and tamper-proof through blockchain technology.
As COVID-19 exposes issues of mobility, convenience and accessibility in the traditional gold market, it opens an opportunity for the market to reinvent and future proof itself for the years to come. Although digital gold remains a new concept for many, it has the potential to not only help the gold industry evolve but also open up new possibilities across the financial ecosystem in a “post-COVID-19 world”.
Shaun Djie, COO & Co-Founder of Digix
Shaun Djie is the Co-founder of DigixGlobal and the Founder of the Ethereum Singapore meetup group. Shaun is currently a Technical Committee Board Member at the IT Standards Committee, organised by IMDA and Enterprise Singapore for Blockchain and Distributed Ledger Technologies, ISO/TC 307. Shaun is also a Regional Partner at Kenetic Capital, an institutional platform for blockchain advisory, technology and investment. He’s the co-author of Cryptocurrency Wizards (2018), a first of its kind book that covers the testimonials of movers and shakers in the Asian cryptocurrency ecosystem.
It means having enough money to secure your financial future. The wealthy invest in the long term, and the short tumbles and turns of the market do not deter them. When you are wealthy, you do not have to worry about working because your assets will be working for you.
You can start investing now, regardless of how much you earn. Be disciplined enough with what you earn to set aside money to invest. Remember, it is not how much you make that matters, but how much you save. If you want to secure your financial future, you need to implement some concrete money management tips that will enable you to set aside money to invest in various assets like stocks, mutual funds, and real estate, among others. Everyone has the desire to grow their money and accumulate wealth. But the question is, how do you make your money grow?
Avoid consumer debt
Most people do not live within their means. They take loans to pay previous debts, and this sink them deeper into financial troubles. It is advisable to create a habit of avoiding consumer debt. Debt is a significant barrier that hinders most people from getting rich.
If you have an interest in investing, let these three things be your priority.
- Clear all your high-interest debt.
- Develop a habit of not taking debt unless it is way necessary.
- Create a budget to ensure your expenses are lower than your income.
Start investing after you have cleared all your debts. Once you have no debts, start accumulating an emergency fund that is equal to six or more months of living expenses. It will be easier for you to grow your money with no consumer debt.
When you are wealthy, you do not have to worry about working because your assets will be working for you.
Be consistent
There is nothing like over or under-investment. As humans, we tend to begin something aggressively and quit after a few months, be it learning a foreign language, working out, or investing. Unfortunately, in investment, this habit leads to loss of money directly. Avoid such practices if you wish to grow your wealth. The primary reason money grows after being consistently invested is an effect called "rupee cost averaging." It is the averaging of the short-term ups and downs of the market in an extended period. If you are a stead investor, you can enjoy reasonable returns because of rupee cost averaging.
Invest in different plans
Do not be too religious to a specific investment. Be open to various investment plans at the same time. Diversification involves investing money across diverse options like bonds, real estate, stocks, and commodities. It is an excellent way to grow your money by limiting the chances of losing it since if a specific investment does not do well, you can count on the others.
[ymal]
Invest smartly
Do not get carried away by investment advertisements. Use your discretion and insight before you decide where to invest.
- Invest in things you like
- Do not put your money in investments you do not understand
- Do not invest more than you are willing to put at stake
If you would not want the stock market fluctuations affect your savings, look for a conservative kind of investment. However, if you know the lows and highs of the stock market, then you can comfortably invest in it.
Get advice from experts
If you are unsure about your financial priorities and goals, it is wise to seek professional help or consult with someone who has accumulated wealth after investing wisely. Allow a financial advisor to look into your finances and recommend the right investments that suit your preferences and needs. That can help you come up with a solid investment strategy that will grow your money.
Remember, to make your money grow, the first thing you should do is to clear all your high-interest debts and develop a habit of not taking any debt unless it is necessary. Once you learn to discipline yourself, you may start investing in stocks, mutual funds, and other assets. However, you need to be consistent in your investments, and do not put all your money into one asset. If the need arises, seek help from professional financial advisors and let them recommend the best investments for your needs.
The quality and efficiency of financial management services have improved by leaps and bounds after the industry finally decided to embrace the Internet of Things. But as impressive as the changes are, there’s still a lot more to do to meet the expectations of a more demanding client-base. Thus, it doesn’t take much to figure out that future innovations need to focus on more inclusive and interactive models that make the most of available technology.
It’s too early to tell what the future holds for the industry. However, these trends give us a glimpse of how wealth management could look like in the years to come.
A More Digital Industry
Looking back at how “traditional” things used to be for the wealth management industry merely a decade ago, the rapid and strategic digitalization of most firms and companies is nothing short of amazing.
As big and small companies alike prepare for an influx of younger and hipper clients, automation and digital integration become even more essential aspects of their marketing efforts. In fact, industry leaders are already carrying out groundbreaking centralized digital marketing strategies that are pushing the rest to follow their lead.
To thrive, organizations have to rethink and reshape their approaches and decipher how they can use technology to their advantage.
Robo Advisors at Your Service
Witnessing how successful chatbots are at offering 24/7 customer support for many companies around the globe, the financial services industry strives to do the same – if not better – with robo-advisors.
While this can be a huge hit-or-miss situation, it’s a risk worth taking for many asset management firms. Aside from software-based solutions being more cost-effective than traditional investment management, this development has the potential to catch the fancy of millennials who are almost always fascinated with what technology can do.
You can’t deny that digital assistants enhance and empower customer experience. Be that as it may, it's too soon to tell for sure if robo-advisors will ever become competent replacements for human advisors, especially in offering customized and long term investments proposals.
Sustainable Investing Becomes an Even Bigger Hit
The growing interest in sustainable investing is expected to swell in the coming years as more people are encouraged to take socially and environmentally-conscious investments.
Millennials have been leading the awareness campaign towards sustainable investing and its principles; and the overall response has been positive, to say the least.
At the rate things are going, wealth managers will have to pay more attention to impact investments and find a way to incorporate the ESG philosophy into their management approaches, should they wish to attract the millennial market.
The Age of Better-informed Investors
There was very little interest in wealth management pursuits in the past few decades because the majority of the population basically had no idea what it’s all about. Thankfully, things have changed, and they continue to change for the better.
As information and resources on asset management and financial services become easier to access, people from all walks of life are opening up to the concept of investing and becoming more conscious of the state of their financial health.
The future shines bright for the wealth management industry.
For a newbie, the wealth management industry is a lot to take in; but that should not stop you from dabbling in investments and asset management. All you need is a wealth management firm that you can count on to put together a sound financial plan for you!
Take note of these important factors when looking for a wealth management firm:
Expertise and Experience
It’s no secret that the world of investment and financial management is a complicated one. That said, you’ll need a firm with the expertise to handle complexities and deliver the sophistication that unique situations require.
Don't fall too quickly for advisors who claim they've handled plenty of clients like yourself. Keep in mind that people's financial circumstances are rarely alike, and this is probably just a tactic to lure you in. Instead, why don’t you ask the financial advisors about specific clients with financial situations quite similar to yours? How were they able to help them grow and manage their money?
A good and reliable wealth management firm should have advisors who can make you understand their insights and ideas even if you're new to the whole thing.
Continuit
Here, consistency is key. In 10 or 20 years, you'll want to retire and enjoy the fruit of your hard work and investments. However, you definitely do not want your wealth management firm to do the same!
One important thing to consider when selecting asset and investment management firms is longevity. But the number of years in business alone won't suffice -- it is crucial to go for those with a dependable succession plan in place. Think of it as an assurance that they can continue taking care of your wealth management needs well into the foreseeable future.
Access to Resources
For your investment to grow, choose a firm that has access to a wide variety of products, services, and financial management options. While it’s true that most firms offer flexibility in terms of investment opportunities, some may have limited access to certain investment vehicles due to the size of the assets that they manage.
Thus, large scale investment firms may be more capable of leveraging their assets to address certain issues, negotiate fees, and formulate more sophisticated solutions to your investment needs.
Performance and Reputation
In the end, it all boils down to one thing – results. This is, perhaps, the most crucial box you'll have to tick. Before making your final decision, find out as much as you can and assess if the firm you’re about to choose has consistently delivered commendable results over time.
Spare some time and energy for research and get to know the firm a little beyond the surface level. You can ask your friends and colleagues for opinion or consult the internet for reviews and recommendations. Remember: your money and the future of your finances are at stake here.
Lastly, look for wealth managers you can work closely and comfortably with – someone you won’t hesitate to approach for inquiries or when you want things to be handled differently.
More often than not, people choose a wealth management firm on the basis of price. But you know what? Cheaper isn’t always better. What you need to look for is value.
While many traditional methods and procedures are still in play, firms are adopting modern and innovative strategies to draw in a hipper and younger, yet more demanding, clientele.
From new technologies to fresher approaches to client service, here are the top trends that are sweeping and changing wealth management today.
A Digital Industry
2018 witnessed a firm-wide and strategic digitalization of wealth management companies. The trend continues to this day as big and small firms reshape the different aspects of their business to embody the change.
As the industry prepares for a generation of younger and tech-savvy clientele, integrating digital strategies to their marketing efforts and creating more efficient client-advisor interaction channels become essential.
Firms that have already taken the lead in implementing a centralized digital management strategy are raising the bar and driving competitors to do the same.
In the words of FinTech Advisor and ASEAN/India Retail Banking and Wealth Management Expert, Arvind Sankaran, “We are witnessing the creative destruction of financial services, rearranging itself around the consumer. Who does this in the most relevant, exciting way using data and digital, wins!”
Sustainable Investing Is Here To Stay
The Institute for Sustainable Investing’s 2017 “Sustainable Signals" report showed that there is a growing interest in sustainable investing and the adoption of its principles among investors. What's even more interesting is that millennials are taking charge.
Millennials take sustainable to the center stage as they search for more socially and environmentally conscious investment opportunities.
This increasing demand for sustainable ventures will continue to push wealth managers to take impact investing more seriously. Thus, the next years may see financial advisors incorporating the environmental, social, and government (ESG) philosophy into their services and financial planning approaches.
The Rise of AI and Robo-Advisors
Taking into account the millennials’ fascination with anything technologically-inclined, it’s not at all surprising that the idea of Robo-Advisors resonated and connected with young investors quite well.
In a statement, the automated investment service firm, Wealthfront, commended the ability of software-based solutions in delivering investment management services at a “much lower cost than traditional investment management services.”
While it can be argued that Robo-advisors can never replace competent human financial advisors in terms of creating customized long term investments or tax and retirements plans, the competition between automated and human advisors have benefited the clientele. For one, it drove the costs asset management down. More importantly, it forced financial planners to step up their game and prove their worth.
Basing on current trends, digital assistants (Robo-advisors, chatbots, and other forms of AI interactions) will continue to play a significant role in empowering client-advisor experience. We might be looking at a future where AI becomes a fundamental element in crafting large-scale hybrid advice offerings.
A Focus on Customer Experience
2018’s World Wealth Report identified that many clients think the relationship they have with their financial advisors and wealth managers falls short of their expectations and can use some improvement.
This is clearly a heads up for advisors and managers out there. In the wealth management industry, customer experience holds great weight for clients. For most investors, client-advisor relationships are critical because they believe in their in-depth implications on the realization of financial and life goals.
These days, investors are gradually witnessing moves towards better customer satisfaction as wealth management companies embrace automation and hybrid models of financial management, and re-engineer their strategies to satisfy demands and ensure that customers have the best possible experience during interactions.
With the new breed of investors putting a prime on user experience and opening themselves to the possibility of switching to other wealth management providers if their expectations aren’t met, the best way forward is to innovate and shift to strategies that put the client and their needs at the core.
According to Bloomberg's Billionaires Index, in 2018, Jeff Bezos, Founder and CEO of Amazon, took up the throne as richest man alive, having crossed the $150 billion mark and replacing Bill Gates, Co-Founder or Microsoft, who held the position for several years, and whose all-time high net worth was valued at just above $100 billion in 1999.
However, throughout history, there have been richer men. Yet sadly, no richer women. Taking into account inflation and the value of wealth held, Jeff Bezos actually sits much further down in the richest people ever list, with the likes of Genghis Khan and John D. Rockefeller taking precedence.
But who is truly the richest person that ever lived?
At an estimated value of $400 billion, Mansa Musa I of Mali is the richest person who ever lived. Born in 1280, Mansa Musa was ruler of the Malian empire, and acquired the most part of his wealth from the production and trade of salt and gold; more than half of the world’s supply at the time in fact.
You’ve likely never heard of this ruler, unless of course you live in a country that was heavily influenced by his rule, which would be several African countries with Muslim heritage. Still today there are mosques standing that were built on the back of Musa’s immense wealth.
Dying in 1337, Musa left his huge amount of money to his heirs, who not only squandered the best part, but failed to protect the family worth just two generations down the line, when the empire was overturned in civil war and conquered by invading foreign nations. Musa was the tenth Mansa of the Malian empire and ruled over the better part of what was previously the Ghana empire, today known as Mauritania and Mali.
His titles, surprisingly unrelated to his stacks of cash, include among others: "Emir of Melle," "Lord of the Mines of Wangara," and "Conqueror of Ghanata." According to David C. Conrad's "Empires of Medieval West Africa: Ghana, Mali, and Songhay," during his rule, Musa conquered 24 cities and their surrounding districts, amassing wealth left, right and centre. On top of this, he was the world’s biggest gold producer and distributor, as gold was a highly sought commodity at the time, and an important indication of status and affluence.
TED Ed reports that in order to fulfill one of the five pillars of Islam, Mansa Musa made a 4,000 mile pilgrimage to Mecca, and spent silly amounts of cash in doing so, as of course a Mansa as such had to travel in both style and luxury. TED Ed writer Jessica Smith says: "Not one to travel on a budget, he brought a caravan stretching as far as the eye could see.” The 60,000 strong caravan was rumoured to have included 1,000 helpers, 100 gold-packed camels, endless musicians the Mansa enjoyed, and 500 or more slaves with golden staffs.
Alongside his heritage Musa’s assets are estimated to be worth an inconceivable amount, and although historians and economists have rounded said value to around $400 billion, according to Time magazine: "There's really no way to put an accurate number on his wealth." In fact, some believe that Mansa Musa’s incredible fortune may have been slightly exaggerated by his contemporaries, and that the Rothschild Family, the most successful banking family in history, may be in fact the front runner for the richest person/persons who ever lived.
"There's really no way to put an accurate number on his wealth."
- Time Magazine
Nonetheless, this legendary ruler stands among the richest of the rich, and while today’s generations may have forgotten him, time remembers him through the many monuments, mosques and madrasas that he had built and still stand in Gao and Timbuktu, but more notably, the Sankoré University, which today is a fully staffed university with over 25,000 students and one of the largest libraries in the world at roughly 1,000,000 historical manuscripts.
Bill Gates and Jeff Bezos are names we hear daily nowadays, and names we most associate with real billionaires, but these guys aren’t much in comparison to Mansa Musa, the richest person who ever lived.
Sources: http://time.com/money/3977798/the-10-richest-people-of-all-time-2/ https://en.wikipedia.org/wiki/List_of_wealthiest_historical_figures https://www.celebritynetworth.com/articles/entertainment-articles/25-richest-people-lived-inflation-adjusted/ https://worldpolicy.org/2012/04/10/lessons-from-timbuktu-what-malis-manuscripts-teach-about-peace/ https://ed.ted.com/lessons/mansa-musa-one-of-the-wealthiest-people-who-ever-lived-jessica-smith#watch https://www.amazon.com/dp/B00BT68Q2I/ref=dp-kindle-redirect?_encoding=UTF8&btkr=1&tag=bisafetynet2-20 https://www.bloomberg.com/billionaires/
