Protecting Your Investments in Times of Uncertainty
Since the outbreak of COVID-19 around the world earlier this year, the word “unprecedented” gets thrown around a lot when talking about current markets – the crashes, spikes in volatility, unemployment, fiscal stimulus packages, monetary measures, and more.
We are not saying that the months following the World Health Organisation’s declaration of a global pandemic have not been remarkable, but we have been there before. Perhaps not in the same combination of a debilitating pandemic along with other ailments including an enduring tariff war between the US and China and an oil crisis driven by a price war and the crippling global demand.
Even as each of these issues threatens the global markets like the straw that eventually breaks the camel’s back, the point is that we have seen severe crises before. Those that come out of it, come out stronger, hence underlining the importance of going back to the basics and being objective when it comes to wealth preservation, especially in times of uncertainty and unfounded optimistic rallies.
Of late, we have seen a delirious rally in US equities, propped up by promises of an unlimited fiscal stimulus and a monetary policy move to zero out interest rates. Given that we are nowhere near out of the woods with the pandemic, this rally should be making one feel uneasy at the very least. Is it truly tenable?
Objective evaluation of your current financial arrangements
The last major economic crisis of 2008 saw markets collapse, but also triggered the reimagination of private wealth management and advisory, especially in Asia, as we know them today. As in 2008, in difficult times like this when markets are delicate, that’s when ultra-high net worth clients would begin to critically re-evaluate the strategies and portfolios that had been constructed for them, assessing the rationale behind transactions and their frequency, especially if targeted returns were not met and unnecessary risks were taken.
With a possible deepening market rout, many will look forward to weathering market cycles and this uncertain period is the time for you to pause and reflect if your investment advisory truly has your best interest at heart. While it is impossible to have investments unscathed by the pandemic thus far, it is important to question whether there was preparation for a market downturn once COVID-19 came to light in early 2020. No one can truly predict the severity of the downturn but professionals with their clients’ multi-generational wealth goals in mind would have made the necessary preparation, by being more cautious and calculated, which would have allowed for a smoother recovery and provided you with the opportunity to better manoeuvre the market transition now.
Prioritise capital preservation
While maximising growth remains a key objective, even in precarious times, the crux of any investment strategy is capital preservation. This may seem like an obvious strategy for wealth preservation, but emotionality is a trait difficult to suppress during times of great uncertainty. It is exactly during these times that it is especially crucial to stay calm and maintain a sound judgement with pertinent and trustworthy advice.
Firstly, it is paramount to structure your portfolio such that your base is secured across cycles with astute risk awareness, along with clear contingencies set in place to alleviate the situations that may not work in your favour. This sets the foundation to safeguard your primary capital before you can confidently explore diversified capital growth that seize opportunities when presented.
Secondly, strive for stable investments across longer horizons, laced with timely tactical plays to opportunistically capitalise on the recovery portion of the cycle. It is likely there will be an extended period of low interest rates, hence investors will have to contend with a yield-starved environment where long term value may stem mainly from equities.
Thirdly, you will need to adopt the right mindset to be disciplined, bide your time in some cases and avoid getting caught up in any bear rallies. Exercise discernment and flexibility to consider and cater to different possibilities in the medium to long term, while being careful not to indulge in any kneejerk, reactive investing.
Finally, a key theme that we believe will only continue to grow in relevance both as an investment philosophy and a fiduciary responsibility, is sustainability. This extends beyond investing to do good societally or environmentally but also challenges strategies to improve risk-adjusted returns in a diversified and transparent manner capable of growing wealth across cycles. Comprehensive and transparent sustainability and governance overlays should be integral as the standard building blocks for strategies and portfolios, which brings clarity to the evaluation process for various investments and resilience during market shocks.
Adopting the right mindset with your investment advisors
In times of crises, having access to the right advice to exercise informed and sound judgement will be one of your greatest allies. This will help you keep your emotions in check and navigate through the clutter and noise that comes with volatile markets. Arming yourself with a reliable and independent sounding board is vital to hone an investment strategy entrenched towards capitalising the recovery of markets, while protecting your investment and interests.
As a multi-family office, we stand by and align ourselves to our clients’ interests. Whether it is in building investment portfolios or broader wealth and legacy preservation conversations, we advocate for multi-generational thinking. Especially in Asia where a large proportion of business families are in their first generation, it is necessary for us to be the ones guiding them towards thinking about leaving a legacy not just for the next generation, but many generations to come.
This is why in engaging our clients, we devote our resources to comprehensively understand each client as every client’s story is unique. While clients often come to us thinking private wealth management is what they need, they soon realise that this is only one dimension within a holistic proposition. One that goes beyond long-term wealth preservation to include family governance, NextGen grooming, and comprehensive plans for overall succession planning.
As more volatility looms in the foreseeable future and the full repercussions from the pandemic remain to be seen, having the right mindset, armed with a solid team of wealth advisors is more critical than ever. All in all, the professionalisation of their legacy planning will be imperative to ensure that the multi-faceted needs of their private wealth management and succession planning requirements are handled to solidify their family legacies for the generations to come.
If you’re seeking independent private wealth advisory, feel free to approach us for a no-obligation consultation.
A focus on multi-generational wealth and legacy preservation is the hallmark of investing through a family office. This is made possible through clear alignment of interests with clients, deeper and more comprehensive risk management and a focus on long-term growth and value.
Family offices come in a range of shapes and sizes, but their central mission statement – to manage wealth – rarely varies.