A UK law firm with a strong focus on families and private client work delves into how dramatic current events affect HNW individuals on all sides.
The global pandemic and its associated economic impact is important for all people and will have a number of very different effects. For high net worth families, it will hit investments in some areas and create new opportunities (medical technology, treatments) in others. Families’ discussions concerning legacy, succession, asset transfer, values and goals take on an added edge in these fraught times.
This publication has already carried articles about how single family offices, for example, are affected and what sort steps they are taking. Highworth Research, with which WealthBriefing is exclusive media partner, has produced evidence about SFOs’ actions here and here. (To register for the Highworth database, look here.)
To take a look at family wealth issues from a slightly different angle is the law firm Wedlake Bell. Three of its figures have produced an article covering the terrain. The authors are Rosalyn Breedy, partner, corporate funds financial services; Matt Braithwaite, partner, private client, Rebecca Longshaw, solicitor, private client, Wedlake Bell LLP. (Breedy is a member of this news service's editorial advisory board.)
Charles Dickens' line "it was the best of times, it was the worst of times" is often quoted but it seems particularly relevant to family offices in respect of the current investment market in the wake of the COVID-19 pandemic.
What we can say is that we are no longer in "usual times" and family offices need to be taking steps to preserve family wealth and mitigate their capital risks. There is still scope for investors to make money and do good in the world, however, provided that the right investment strategy is implemented and followed.
In recent years stable equity stocks with dependable dividend yields have provided a reliable way of preserving family wealth. However, this investment strategy is only viable in a productive bull economy, and the current bearish market calls for a re-assessment of equity investments. Sadly, many companies will not have a future as we adapt to a new way of living during and after the COVID-19 pandemic. Others will make it through the crisis but will have to make significant cuts to their yields in order to do so.
Investors need to determine what the true nature of their underlying investments are and, if they are in those industries most likely to suffer (such as travel and retail), take steps to stem their potential losses. Investments in steady industries can be maintained to preserve current wealth. The knock to markets caused by COVID-19 is a prompt for investors to re-assess what constitutes a 'balanced' portfolio.