Notes from Citywealth Editor Karen Jones

Date: 22 Nov 2023

Karen Jones

Citywealth CEO and Editor Karen Jones provides her summary of top-of-mind trends, themes and concerns seen in the wealth management industry today. She highlights ESG wins and woes, UK and US election unrest, succession politics, and more.

Climate change shows itself with storm Ciaran

Climate was very much in evidence in private wealth recently with storm Ciaran making itself known across the Channel Islands. Jersey and Guernsey were top news on the BBC after receiving a battering from the storm. The sombre effect could also be said to be permeating the ESG investment industry which is experiencing the doldrums after weak returns and not being invested in, high performing commodities like oil.

Faults in thousands of turbines

Wind farm collapses and distress have not helped the situation and Bloomberg reported that “a fault in thousands of wind turbines has left Siemens Energy AG, spun out of the mothership in 2020, on the hook for a repair bill of at least €1.6 billion ($1.7 billion) alongside an expected €4.5 billion net loss for the year.”

Sweden has gone full throttle into ESG/Sustainability now allocating their $90billion pension pot to compliant managers

However, it is not universally depressing, and a member of the Citywealth Editorial board said it is hard to give broad statements because it is different by geography. For instance, Sweden has gone full throttle into ESG now and are not allocating their $90billion pension pot to funds who do not incorporate ESG. Another development from a Citywealth industry commentator said that one family bought up several bankrupt wind farms, consolidated and repackaged them for sale.

Solar cheapest form of energy

Solar is seeing some sunshine and is doing well because pricing is low. The Eco experts said “solar was crowned as the cheapest source of energy in history in 2021 after it became more affordable than gas. This is a dramatic improvement compared to the cost of solar energy a decade ago.”

Greenwashing debate and underperformance

But UHNWs have lost money in this sector particularly with reductions in subsidies and state policies. One of our US based industry commentators said: “People had their arms twisted to go into ESG funds and they have now underperformed. It’s difficult to know if there will be litigation or a changing of managers.” It also seems the ESG/ sustainabilit marketing questions are still circulating about greenwashing and whether funds are really ESG or re-labelled.  Litigation is also said to be on the rise in Jersey & Guernsey and some is attributed to disgruntled beneficiaries questioning ESG.

Elections are top of mind

Elections are top of mind in the USA and the UK and plans to leave are being looked at by UHNW’s. The top places being requested according to one commentator are Greece and Italy. Malta is also a possibility.

Inflation is coming down everywhere and this is seen as a positive sign for unrest and for election sentiment. But a US commentator said that the pro-Israel stance from Biden is proving unpopular in Michigan which has a large Arab population. Michigan is one of the big 5 states that swings elections. The other states are Arizona, Georgia, Wisconsin and Pennsylvania.

Scaremongering from advisors is being seen in the USA to get people to give their money away because of potential tax changes predicted for 2026. This was seen as not positive as people may need their cash in the current economic environment.

On the plus side a US commentator said social security is solvent for the first time in the US. There is also an uptick in money going to Swiss banks from the USA.

Restructuring and succession planning for the elder generation

Restructuring and succession planning for the elder generation who no longer want to stay in their businesses for such a long time is also a trend. It means the sector is working on shareholder agreements which was not the case before covid.

The difficulty of succession is known but there is also professional succession which is facing jeopardy when patriarchs/matriarchs die because no-one has been brought in at a younger level of advisor to take over from the next gen. The reason one commentator said could be attributed to a “Panama papers generation,” which is clients who may have got assets or structuring that the younger generation would not want to know about. It was a topic we touched on in our Citywealth Forum last year with David Kilshaw at Rothschild & Co rounding up the day saying a much bigger effort must be made in the industry to include the professional advisor at the next gen level. However, he did say this wasn’t always an easy gig as it depended very much on the client you were dealing with. Some were easier than others.

In the Channel Islands, the collapse of Credit Suisse has inevitably created ripples having long been a well-known presence in Guernsey now it seems more likely to migrate in the medium to long term as UBS in Jersey.