A prediction by its nature is set to be challenge or proven wrong by time, but it doesn’t make it any less interesting to read. So, we wondered what leading lights in the industry were thinking, what does 2020 have in store for the wealth management industry? A selection of wealth management and private client professionals share their predictions with Citywealth’s April French Furnell.
Time to leave work (or school): protesting becomes official
2019 was the year sustainability hit the mainstream and protests were categorized into English as ‘Climate strike’ which is “a protest that requires the protestors to leave work or school”. Collins Dictionary even made it their ‘word of the year’ as millions joined climate change protests around the world. Artur Baluszynski, Director, Head of Research at Henderson Rowe in our article ‘ESG sustainability and the Greta effect’ confirms the climate movement, which may have seemed like a fad has changed into a trend: “The younger generation has demanded greater social and environmental consciousness from the manufacturers of their goods and they are often willing to pay more for a product that aligns with their values. As they get wealthier, we will see that, they are also going to demand ESG awareness in the companies they invest in.”
Globalization of tax
Joshua Rubenstein, partner and national chair of the Private Wealth practice at Katten Muchin Rosenman in New York shared his prediction: “In 2020, I think we will see financial market turbulence, political turmoil, concerns for personal safety and data privacy, and economic pressures that could cause significant increases in taxes in future years, thus potentially creating a domino effect. It could lead to clients looking to move countries and to give up citizenship depending upon the tax changes in their countries. This would likely cause a large number of changes to existing estate plans”. Furthermore, he expects to see a trend towards globalisation of tax systems, resulting in less chance for tax arbitrage but better protections for privacy. What does this mean for estate planning lawyers? “There will be a need for cross-border integration of estate planning.”
Wealth managers get NextGen proof
During the next decade, Generation Y (better known as millennials) will become the largest adult segment and client group ever, according to Francesca Boschini, Director, Wealth Planning at Deutsche Bank Trust Company Americas. She explains, “This generation has not only started already to build its own wealth, but it is also about to inherit a tremendous amount of wealth from their baby boomer parents and they are aware of this. Family governance and wealth planning education becomes therefore extremely useful and strategic for families and their aware and empowered millennials. With this awareness a shift in consumer preference has also arrived, toward impact investing and sustainable ESG product offerings and services and this will certainly become a durable growth opportunity for the new decade, for wealth managers.”
Alternative investments to rise in prominence
Despite “uncertainty caused by factors such as Brexit, upset in the Middle East and fraught US/China relations potentially creating an uneven growth patten, the overall trajectory for the industry is likely to be upwards”, said Elias Neocleous, managing partner of Elias Neocleous & Co in Cyprus. He explained that negative interest rates could see depositors more receptive to alternative investment schemes and coupled with the banks risk averse approach to new lending, we will see “the potential for significant growth of the sector and, for its involvement in major investment projects”.
Tech continues to dominate with UHNW clients and corporates
For UHNW clients, investment into technology remain a key part of their strategy. Top of the list are medtech and biotech, "anything that makes life better, simpler, smoother”, classified Richard Joynt, head of the family office division at Ocorian in our ‘Deep diving on tech’ article. But technology investment is not only important for UHNWs, it’s also a priority for their advisors. Karen O’Hanlon, Senior Director of Private Client Services at JTC Group explains: “FinTech will continue to have to have a major part to play for all wealth management providers to give an enhanced and more responsive customer experience, reduced costs and granular data. Similarly, the regulators will turn to FinTech to for reporting and analytics infrastructures. Cyber-crime is also at the top of the list - businesses are constantly investing to ensure they are one step ahead of cyber criminals and keeping data secure.”
More UK government laws to navigate
Governments worldwide continue to work towards a commitment to transparency. Yousafa Hazara, an associate at Irwin Mitchell, highlights The Registration of Overseas Entities Bill which is scheduled to come into force in 2021, with the aim to improve transparency regarding the ownership of land in the UK. The Bill seeks to create a publicly accessible register of beneficial ownership of all overseas entities that own land or are purchasing land in the UK. Details of who owns and controls overseas companies and other legal entities that own UK land will be kept at Companies House. “The government’s objective is to show the world that the UK is not a place for dirty money and money launderers”, said Yousafa. Other tools the government has already put in place to meet this end include Unexplained Wealth Orders. The consequences of the Bill are that “it will ultimately increase the administrative costs of buying and holding investment property in the UK to the purchaser and supporting services. For those using offshore companies for the security and privacy of themselves and their families, the register is likely to remove this need”.
UHNW clients, tackle family issues with a 360 approach
In the trust market, Ian Rumens, global head of private wealth at Intertrust has observed changing client behaviour over the last 12 months as a result of regulatory change, government scrutiny of the offshore environment and global geopolitical turbulence. As a result, he says, “Clients are casting off the more traditional structuring, for instance coming to us with one concern and embracing multi-discipline structures that include many headline topics like succession planning, governance and asset protection.”
Family offices rise again
There are now a record-number of family offices powered by Asia-Pacific and North American families, as the number of family offices hit 7,300 worldwide, up 38 per cent form 2017, according to Campden Research. With the increase in numbers, says KPMG’s Greg Limb, Head of Family Office & Private Client and Andra Ilie, Senior Manager, we will see a focus on creating individual cultures. “It will help in attracting talent to Family Offices, where it will be used as a unique selling point. However, they will also need to hire strong internal ambassadors to create the necessary touchpoints. Family Offices will always want to use close contacts and referrals, however the growth in this sector means they are likely to need external recruitment expertise.”
What does the next decade have in store for you? Let us know via email firstname.lastname@example.org
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