3 ways COVID-19 changed wealth management for UHNW families

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“Before COVID-19, we were scared to bring up our wealth with our children.”

These were the candid words of a longtime client who called about a month ago, echoing a sentiment I hear more often than I’d like. But fortunately, for many ultrahigh-net-worth families like his, there has been an important shift during the pandemic. Meetings that used to be one-on-one — just the patriarch or matriarch and a financial advisor — began taking place, like everything else, on video calls, and the roster of attendees ticked upward as uncertainty abounded.

Spouses joined those calls. Adult children showed up as well, often with their spouses. Families that spent decades avoiding challenging conversations — about their values and beliefs, about succession planning and what impact they want to collectively have in the world, and so on — were ready to start talking. They got serious about hosting family meetings facilitated by their financial advisor or a member of our Family Advisory and Philanthropy Services team.

In this setting, these topics were discussed at length in order to help the family learn from each other and lay the foundation for how they would make decisions together during this time of crisis and well beyond.

The result is that almost a year into the pandemic, many wealthy families have been jolted into long-overdue changes — changes I believe will only continue to define a new era for families engaging with their total wealth, not just their money.

Here are three of them.

1. Consolidating advisors, redefining personalization

Pre-pandemic, UHNW clients would often maintain three or more relationships with various advisors and institutions. We were already seeing some contraction, but COVID-19 accelerated the trend. We’ve seen many clients consolidate to just one or two key relationships. In a crisis, they want simplicity, and they want personalization.

That simplicity is the result of technology that helps streamline and secure their portfolio, but it’s also about having an easy and trusting relationship with an advisor that allows for wealth to be about more than dollars and investments but rather about a family’s total capital, including human, intellectual, social and spiritual aspects.

We know a family’s true wealth is not just about how much money they have in their bank accounts. Matters of personal well-being, community, relationships and more that fold into a broader view of wealth have never been more important. This is where personalization is paramount. For the wealth management industry, these demands won’t be met as they often are in other sectors.

Take retail, where personalization has been defined by a ubiquitous digital direct-to-consumer model and then applied to countless products from vitamins to glasses. Some financial firms have attempted similar “solution-in-a-box” models, but for UHNW clients, that approach won’t work. For them, personalization increasingly means specialization and customization, which manifests in solutions that make a client know they are cared for rather than just supported by conventional services. Only a “one-size-fits-one” method will work in these relationships moving forward despite the formulaic trends proliferating in other industries.

2. More stakeholders, new decision-making dynamics

The new voices in advisory meetings have brought the rising generation of inheritors — and their priorities — to the forefront of wealth conversations. For most of those inheritors (74% of millennials and 55% of baby boomers, worldwide), the pandemic has impacted how they think about wealth. Among millennials, especially, the pandemic was more likely to raise concerns over job loss or the need to work longer to make up losses.

Those experiences have certainly influenced larger conversations around risk aversion. Independent of the pandemic, however, their values and ways of viewing the world — from innovation to the environment to education — are also shaping where and how these families allocate their wealth. Even more than their parents, adult children are mindful of topics such as sustainable investing, philanthropy and technology.

As UHNW families adjust to communicating with more candor about their overall wealth, a common theme has emerged in nearly every instance: the desire to ensure everyone is well, physically, emotionally and then financially. It’s reassuring to see so many families coming together at a time that could easily be divisive and tense.

3. Prioritizing succession planning

As COVID-19 brought mortality into focus, many families got serious about planning for the future. Hypothetical conversations about wealth transfer were no longer enough. The pandemic has disrupted every aspect of society and has pushed many to crystalize their values. These are nuanced and difficult conversations for many families. As a result, trust continues to be a critical differentiator for wealth management relationships — even more than it was in the 2008 economic crisis.

The wealthiest clients require teams of professionals leveraging the highest touch service with a global reach, Markus Lammer, COO of Credit Suisse’s UHNW business in the U.S., explains in an episode of Financial Planning’s Invest Podcast.
May 14

In the wealthiest of UHNW families, the billionaires, new research from UBS and PwC found that nearly 17% have accelerated succession planning in the past 12 months. More starkly, nearly 60% say they will do so in the next 12 months. In these moments, family meetings are critical for stewarding conversations and decisions that will likely impact the family for generations to come. It may be overdue from my standpoint, but I welcome the newfound sense of urgency: Establishing a long-term plan brings consolation to families when outside certainty is largely absent. Taking the time to reassess how the family defines, measures and uses their true wealth brings invaluable perspective.

Fears into strengths

As for my client whose dialogue with his children about wealth was largely absent a year ago, he went on to tell me that thanks to the conscious efforts they put in these past months, “Now, [my kids] know everything. They know how we make our money, how we invest and how we engage in philanthropy and what our goals are. Going forward, our children are going to help make all those decisions with us.”

Many UHNW families like his are embracing a form of collaborative, transparent crisis response that I believe will be positive for them and for the wealth management industry overall. Families have turned their fear into new strengths.

In turn, wealth managers can use those strengths to arrive at much more personalized strategies, ready for whatever disruption comes next.

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Client strategies Ultrahigh net worth Coronavirus Wealth management UBS