28 September 2020

Impact of Covid-19 on Family and HNW Wealth

Author: JB Tanqueray

The current pandemic has unravelled one of the most significant challenges of our time in an increasingly globalised world, with fortunes of the wealth being under scrutiny. According to a new report co-written by Morgan Stanley and Oliver Wyman, the base case scenario model for global HNW wealth shows that global HNW wealth is expected to fall by 4% (or $3.1 trillion) in 2020 before rebounding in 2021 (Oliver Wyman, 2020). This reflects roughly one year of low wealth growth compared with pre-Covid19 forecasts. Given this uncertain future, families may need to reassess their investment strategies to preserve their wealth levels and adapt to this “new normal”. They now need to shift their priorities from wealth expansion to wealth preservation, staying vigilant and responsive to protect their assets carefully. They may even consider a diversification approach for their investments to protect their wealth. The potential restructuring of family assets may also be necessary to achieve resilience and flexibility in times of market volatility with the extreme scope of uncertainty (KPMG, 2020).

Apart from making careful management agendas, planning infrastructure will need to be modified to become equally nimble. Continuity plans need to be inaugurated; these plans need to be continually revised to ensure their adaptiveness to cope with the ongoing valuation challenges in this changed reality presented by Covid-19 (PwC, 2020). It is also essential to stay abreast on the changing obligations and requirements from regulators, tax authorities and governments in different jurisdictions, as there may be amendments in response to Covid-19. Contingency plans should therefore be created to buffer against any potential caveats that may affect your wealth in the future.

The key to managing any crisis is preparation. Besides assessing asset value, the possibility of triggering events should also be evaluated, by examining the possible impact on your liquidity management and reviewing forecasts, models and assumptions (PwC CN, 2020). It would be prudent to conduct scenario analysis to test preparedness, asking searching questions to highlight critical sensitivities. For example:

  • What would be the best- and worst-case scenarios?
  • How could I cope with those?
  • What could the longer-term impacts be on liquidity and tax?

During crisis times, families and HNWI will need to be prepared with agile and resilient plans that can act quickly to sudden changes, stay vigilant and alert to respond effectively, to navigate through this period of unprecedented change and unpredictability.

References

lie, A., 2020. COVID-19: Are Family Offices At Risk?. [online] KPMG. Available at: [Accessed 4 August 2020].

Oliver Wyman. 2020. Wealth Management: After The Storm. [online] Available at: [Accessed 4 August 2020].

Phillipps, J., 2020. Coronavirus To Wipe $3.1 Trillion Off High Net Worth Wealth In 2020, Report Says. [online] Forbes. Available at: [Accessed 4 August 2020].

PwC CN. 2020. Beyond The Storms Of COVID-19: Steering Asset And Wealth Managers Through Uncertainty. [online] Available at: [Accessed 4 August 2020].

PwC. 2020. Asset & Wealth Management And COVID-19: Emerging Stronger From Uncertain Times. [online] Available at: [Accessed 4 August 2020].

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