After several years of strong growth, the global economy looks set for a period of recalibration. Geopolitical developments, trade tensions and the winding down of economic stimulus are creating uncertainty in every corner of the world. This makes the task of financial planning much more difficult for wealthy individuals and their families.
In times of economic and political uncertainty, effective wealth planning is all about creating stability. Wealthy individuals want stable locations for homes and assets, and reliable partners to help guide their strategies. Uncertainty doesn’t have to mean limited choices and room for manoeuvre, the right strategy can continue to promote financial security and freedom.
The consequences of uncertainty can be significant for high-net-worth individuals (HNWI). According to Capgemini, 2019 has seen a 3% global decrease in HNWI wealth, with slowing regional economies in Asia-Pacific and China accounting for 25% of global market decline. Within the general picture of wealth decline, the Middle East was the only region to see an increase of HNWI wealth. 75% of total global wealth decrease results from the ultra-HNWI population seeing a decline in wealth of around 6%.
Declines in established markets are being matched by lower growth in emerging economies. The IMF has downgraded its growth forecasts for emerging markets for 2019 from 5.1% to 4.7%. The ongoing, bubbling trade tensions between the US and China are only adding more uncertainty to the outlook for the next couple of years.
Adding to the complexity of the situation is a global trend towards increased transparency, led by the OECD. Confidentiality is becoming harder to guarantee in certain important markets. The EU and the UK, for example, are looking to introduce public registers of the beneficial ownership of companies.
The prevailing market uncertainty and movements in global wealth have been reflected in asset allocation, with cash replacing equities as the most held asset class in 2019. There has also been a slight increase in allocation towards alternative investments. This demonstrates the search for stability among the volatility. For individuals in countries like China, who have previously seen stricter capital controls as a response to economic downturns, there is an added incentive to try and keep their wealth internationally mobile. Having the flexibility to choose what life to live and how to use wealth is an important part of navigating uncertainty.
It is not all bad news however, and periods of uncertainty also create opportunities. Knight Frank point towards wealth creation remaining as a positive, with the global UHNWI population set to grow by 22% over the next five years. That is an additional 43,000 people with a worth of $30 million or more.
So, with stormy conditions set to continue for at least the short to medium term, how can HNWI and their families best protect their financial freedom and security?
As part of a group with a 160-year heritage, this is certainly not the first period of global volatility that Swiss Life Global Solutions has weathered. In times like this, it becomes more important than ever that we act as a trusted and reliable beacon of stability for our clients.
An important part of dealing with uncertainty is viewing change as a positive and necessary part of life. Wealthy people increasingly want to be mobile and agile, with digital solutions and platforms that make wealth planning something that fits in around their lives rather than using up time and resources.
Our experience and Swiss heritage give us the cool head and steady hand our clients need. By always focusing on financial security, we make sure our clients’ wealth is protected. This foundation of stability means that our wealth planning helps wealthy people continue to live their choices with confidence.