Investments  

How to protect a client's portfolio in uncertain times

  • Describe the economic challenges at present
  • Identify the right kind of products to be invested in at present
  • Explain why these products are suitable
CPD
Approx.30min
How to protect a client's portfolio in uncertain times

While all investors naturally want their assets to be safe, the issue becomes imperative for wealthier private clients.

Those with greater assets frequently prioritise protecting their wealth over taking on risk to maximise their returns.

Recent research showed that 75 per cent of high-net-worth (HNW) individuals see future-proofing their wealth as more important than ever, while conserving assets for their future was the top investment goal. 

For this group, preserving their lifestyle and passing on wealth to the next generation is key, but both are goals that can become more challenging in adverse market conditions. 

Reintroducing risk as uncertainty grips the global economy

In a world of benign economic growth, and with asset prices buoyed by quantitative easing and low interest rates, a rising tide lifted all ships.

That has certainly been seen by many HNW investors since the financial crisis.

For many, with the yield curve depressed, the temptation may have been to take on more risk, without necessarily suffering the pain or volatility that higher risk can bring in times of more normal monetary policy. 

However, in uncertain geopolitical conditions, the risk/performance balance is not the only part of the equation.

As the economic cycle shifts, investors’ concerns over their assets, and their exposure to loss, will no doubt be heightened.

This sheds light on another indeterminate aspect of futureproofing assets: succession planning.

As such, it is important that investor portfolios reflect not only risk appetite but also a wider approach based on legacy and wealth transfer – especially if protecting their wealth is a key priority.  

Warning lights have been flashing across the global economy in 2019.

Many of these have been triggered by political instability and policy decisions from the governments of the world’s largest economies.

The escalating trade war between the largest of them all, China and the US, for example, is still dragging on the global economy.

In fact, the OECD has predicted that global growth in 2019 will be the lowest in a decade, citing trade conflicts as a core risk.

China’s economic growth continues to slow, the recent outbreak of Coronavirus adding complexity and anxiety.

Last but not least, the inverted yield curve in the US, seen for the first time since 2007, is thought to be an indication of a downturn.

While five years of relative political stability are now forecast for the UK, the recent volatile, political chaos is still on people’s minds.

Furthermore, the uncertainty around the future trading relationship negotiations over the course of 2020, and the lasting impact on the economy and wealth management industry of the country’s departure from the European Union is another cloud on the horizon.

This causes disruption on both sides of the Channel, at a time when there are already concerns over their respective health.