The view from the family office

Unsplash/Yaroslav Muzychenko

Wealthy families and the financial experts who advise them are dealing with a new era of heightened risks.

Over the course of 2022, as geopolitical unrest has magnified the economic consequences of the coronavirus pandemic, businesses have been disrupted, inflation has surged and markets have been rattled.

The annual Julius Baer Family Barometer surveys finance professionals to find out which subjects are preoccupying their ultra-high net worth clients. In 2022, the top three topics – apart from investments – are family wealth, family governance and health. 

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In 2021, health replaced regulation as a top-three priority, with the pandemic prompting wealthy families to focus on access to jurisdictions with robust healthcare systems.

This year, health remains in the top three and the trend is set to continue, given the scope for Covid-19 to cause further movement restrictions in certain parts of the world.

The coordination of healthcare needs is a critical part of cross-border planning. With homes, businesses and investments in multiple jurisdictions, families need expert guidance to enjoy the benefits of an international lifestyle.

The wealth-related topics preoccupying the survey respondents’ clients include succession planning, wealth structuring and responsible wealth management, which covers sustainability.

Until recently, sustainability considerations tended to be confined to specific investments or philanthropy. Families are now starting to take a more holistic approach to sustainability and want their values reflected more widely across investment portfolios.

This reflects a growing trend for ultra-high net worth families to take a more purpose-driven approach overall.

Family governance was a top priority in 2022 and we expect it to remain a topic of debate for many years to come. We live during a time of tremendous global change and families have the opportunity for unprecedented wealth creation by taking advantage of long-term trends.

If poorly managed, however, opportunities could become threats and families must overcome significant challenges to adapt to the complexity.

Consider carbon-neutral investing: the younger generation may steer the family interests along more sustainable lines, although their values may not readily cross the generational divide.

Only families with robust governance are likely to accommodate successfully the shifting priorities between individuals and across generations. Families lacking clear management structures may fall behind or suffer a fundamental breakdown in family relationships.

Despite this, the experts consulted for this survey see a formal governing body in only about one in 10 ultra-high net worth families.

What investments are wealthy families most interested in?

The finance professionals reported a sharp increase in enquiries from families who want their assets to be more geographically diversified.

After a long spell of peace in Europe, the outbreak of war in Ukraine provided a reminder of the risk of geographic concentration. Financial markets are no longer immune to geopolitical shocks; the risk of capital confiscation has risen significantly since the start of the war in February.

For families with interests on multiple continents, the war has consequences beyond the outright loss of local assets. Higher oil and commodity prices have boosted the economies, currencies and equities of countries rich in natural resources, although surging inflation is a concern for central banks globally.

Geographic diversification is likely to be just one way for families and their advisers to respond to the current climate.

Thoughtful asset allocation is critical to the survival and growth of investment portfolios when global events are fast-moving and unpredictable. Families who have not done so already may benefit from scheduling a strategy review with their advisers to discuss their allocations.

Guy Simonius is head of family office services at Julius Baer. This is an edited version of an article that first appeared on the Julius Baer website