With the start of a new decade, 2020 brought with it new complexities and global challenges. With borders closed and travel restricted, how can investors stay the course amid market turbulence and uncertainty? Does this mean it's time to rewrite future plans?
A 2019 survey of of high-net-worth individuals (HNWIs) in Asia found 56 percent are concerned about political economy and global stability when it comes to being able to create, preserve and maintain their wealth. The New wealth rising survey, conducted by The Economist Intelligence Unit (EIU) and commissioned by RBC Wealth Management, also found 43 percent of older* generations in Asia say geopolitical uncertainty is a concern.
One unique quality of wealth creators is their determination and resilience. They likely took advantage of uncertain and unfavourable economic climates as a way to build their wealth in the first place, says Iggy Chong, head of Private Wealth, Greater China at RBC Wealth Management.
The drive which got them started can certainly help guide them through the coming decades, no matter which way the global economy sways. Reframing these uncertain times should be viewed as a new opportunity, rather than a restart.
You don't need to live in the same jurisdiction as your investments
The cohort of Asia's global families, who had perhaps once studied in Canada or have children living abroad, can still control the asset classes they invest in and how they run and grow their business.
Dominic Lane, executive director of Asia's Global Families for RBC Wealth Management in Singapore, says Asia's global citizens are looking for stable locations to live that provide the legal protections and infrastructure for a safe and prosperous life. "Think about what you can control and take stock of where there's the least amount of disruption, relative to your needs," says Lane.
This is different for everyone, depending on their current stage in life and goals for the future. Chong says that while Asian families like to send their kids to Canada or the United Kingdom for education, some are taking part in the anti-globalization trend because "they realize that there's a brighter future for them in Asia."
While business advantages and family concerns may be the main reasons they repatriate, it doesn't mean investments should follow. In a more global world, investments do not need to reside in the same place and time-zone you call home.
Global investments need global advice
Investors generally stick with the tried-and-true because it works. That's a good path to follow but not necessarily the one that provides the best outcome. Relationship managers draw from diverse client experiences and global expertise to help clients get the best results from their investments.
One example of that global expertise is a client who wants to buy a second property abroad. They now have a tangible asset, but no longer have access to the cash. A relationship manager can help in this situation with credit access. "They may think they have to sell it in order to realize the money, but actually they can apply for a line of credit against it and use that to invest," says Chong, who is based in Hong Kong.
By taking a line of credit on the property, the client has now doubled their opportunity potential: they have a property to live in or rent out, and can use the cash from the line of credit to invest in other assets, like stocks and bonds.
A relationship manager can also help you avoid mistakes and suffering negative consequences. "An example of this is someone giving up an investment opportunity overseas when they didn't need to," says Chong.
When it comes to cross-border taxes, it's often not widely known that there's a tax treaty between Hong Kong and Canada. “Families need to work with their tax advisor and relationship manager to realize both their opportunities and responsibilities," says Chong.
Location-specific knowledge is key
Being connected with advisors who have both location-specific knowledge and years of experience is imperative. Lane says RBC has been in Asia since 1969 and carries out a management philosophy that aligns with many global families.
"Our clients want to work with financial managers who are experts within Asia but also able to connect them to professionals who can help with real estate sourcing, property financing and tax planning," says Lane.
Lane and his team work to make sure their clients get the best advice in all aspects of their wealth management, even in areas they do not serve. Chong adds, "A good private banker should help with all of the processes related to wealth management; it's a red flag if they don't."
"People's views and opinions change and they need to be ready to adapt their plans," says Chong. Individuals may not always feel capable and confident, but that's changing with the generations.
High-net-worth Millennials don't have the years of experience their parents and grandparents have when it comes to weathering challenging times, but they're willing to take risks and are more flexible and attentive to investment portfolios, Lane says. An ability to be both proactive in their planning and responsive in decision making will help Millennial HNWIs succeed even when uncertainty looms. "In times of uncertainty, people have to respond faster," says Lane.
Chong says that while political and economic uncertainty "gives families pause for thought, they're still determined to grow their assets and enjoy the best of both worlds."
In the coming years and decades, there is no doubt that future plans will shift. But with a positive outlook, adaptability and determination, there's no reason to rewrite them completely.
Older generations include those in the Baby Boomer and Silent Generation cohorts, born in 1964 or earlier.