At dinner recently, conversation turned to the state of the world, as it does, and consensus was reached at lightning speed: things have never been worse. The guests passed on the baton of gloom: a pandemic that just won’t end, Ukraine, inflation, Palestine, recession, climate change, Taiwan, the markets, Oh God, the markets… eventually the person next to me said, “So, you’re a wealth manager. What should we do?”
Gulp. How do I answer this question?
Should I use the frame of personal financial advice? “Well, it depends…” Of course, it depends, on a hundred different things: circumstances, goals, your lifestyle, what you are really worried about... But “it depends” at a dinner party is totally lame and a good way not to be invited back.
What about some historical perspective? “Humans pretty much always think that things have never been worse, even when, on so many measures, they’ve never been better. We have a tendency to discount progress and overweight imperfections in our lives and our world…”
I can see eyes rolling already. No, I couldn’t say that.
Mostly because there was a big danger of coming over a bit Rees-Mogg (“One only needs to consider the plight of the Bavarian principality during the Pfeifferhaus uprisings of 1467 to 1485 to realise how fortunate one is today…”).
In the end I laughed, turned to my host and said something inane like, “I think we should enjoy more of this amazing bread – did you really bake it yourself?” (She did.)
As the sole Representative for the State of Finance amongst an artist, a deli owner, a billionaire divorcee and a strategy consultant, I could have expounded on my area of expertise, the markets. The first half of the year was historically bad: the worst start to equities since the 1950s; the worst bond market returns since the mid-1800s!
Riskier assets (like US tech, biotech and crypto) and supposedly safe bonds were hammered in the first half of the year. Many ‘low’ or ‘medium’ risk portfolios – some mix of equities and bonds, say 40/60 or 60/40 – turned out to be anything but.
Probably our primary preoccupation is this: how do we ensure that, no matter what’s going on in the world, your portfolios will stay afloat, on track to meet your goals, even in the choppiest waters?
It paid off in 2022. I don’t expect a pat on the back for being down “only” a few percent in lower risk portfolios when others are down double digits. But I am satisfied that we are fulfilling our role as guardians of your wealth at times like these:
Everyone wants returns but it’s not when markets are rising that you face existential risks to your wealth. It’s when the rollercoaster gathers pace on the way down that people scream to get off, when the revulsion and panic is too much to bear and you will do anything to avoid it again.
Despite monitoring markets as usual, we haven’t felt the need to make a single call or any significant changes. What we’ve set up, at various risk levels appropriate to your circumstances and goals, has been performing as we hoped it would in very challenging market conditions – at a time when, according to dinner party conversation, things are worse than they’ve ever been.
Of course, my fellow guest didn’t really expect a proper answer to her question. “Appoint a decent wealth manager” probably wouldn’t go down well but gets close. After all, one of the reasons for doing so is precisely not to have to figure out what world events mean for markets. You delegate that, so you can get on with running your business, spending time with family or pursuing your passions, and I hope that’s exactly what has preoccupied you this year.
- FS Aug '22