High net-worth individuals rethink wealth planning amid Covid-19

17 March 2021 Consultancy.com.au 3 min. read
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The pandemic has given wealthy segments of society much to worry about, causing many to take a closer look at their investments. A new BDO report highlights the agenda for high net worth individuals through 2021 and beyond.

BDO ran a global survey of over 350 high net-worth individuals and private wealth advisors – more than a third of whom are Australian. Results show how a crisis-stricken economy has expanded the threat profile for private wealth in several ways.

One is a cooling investment climate under recession-like conditions, which threatens to take down stock value. Even amid the vaccine-induced rally worldwide, investors need to reshuffle their portfolio in line with new market priorities. Nearly two-thirds of BDO’s respondents see this as a top concern.

Concerns for high net-worth individuals

Topping this off is a growing global expectation that the wealthy should contribute more to society and the economy. In many markets – Canada, New Zealand and the US for instance – this sentiment is manifesting in discussions of a bigger tax burden for the wealthy. Nearly 60% of respondents are preoccupied with this risk.

Other concerns include asset security, travel restrictions, supply chain disruption, economic uncertainty, and the heightened scrutiny of private wealth in the media and the public eye – all of which could be detrimental to net-worth figures.

Not surprisingly, nearly 60% of BDO’s respondents are pondering a change in their wealth planning strategies over the next 12-18 months. More than 10% of these are charting a significant rearrangement, while the rest will make considered changes to a moderate degree where necessary.

The researchers probed respondents on where these alterations can be expected. According to BDO’s Australia tax partner and leader of the firm’s global private client strategy in Asia Pacific Mark Pollock, “the findings reveal two competing strategies.”

Wealth management strategies

“On the one hand wealth owners are actively looking for the positive growth opportunities that may emerge from uncertainty, while others are choosing a more defensive strategy, focused on de-risking and diversifying to protect existing assets.”

Top priorities for private wealth planning

The optimistic approach is more dominant here. Nearly 70% of respondents are seeking new growth opportunities – driven in part by the vast pool of distressed assets emerging globally. At the other end of the spectrum, de-risking the portfolio is on the agenda for just over half the respondents.

Also on the to-do list for nearly half the wealthy ranks is succession planning. Per the report, this is likely a morbid product of increased mortality awareness amid Covid-19, and the extra time on offer to manage tedious administrative tasks around inheritance. Other key strategies include safeguarding assets against cyber and reputational threats; educating the next generation on wealth management; ensuring compliance; and a focus on philanthropy.

As noted by Pollock, “it is clear that there is no one road to follow, and individual circumstance and choice rules.” That said, a cautious and multifaceted approach is of the essence, given the broad threat landscape for wealthy individuals.

“Political and social unrest continues to develop, not least in relation to racial justice, gender equality and ethical capitalism, serving only to further heighten scrutiny of wealth holders. shifting attitudes to wealth are playing out at a global, national, local, community and family level. Private clients must respond appropriately. More than ever, careful decision-making is paramount.”