Navigating Geopolitical Risk: Insights from Wealth Managers and Clients

Geopolitical Risk: A Wealth Manager’s Conundrum

When private clients sit down with their wealth managers to discuss their finances, one topic consistently looms large: geopolitical risk. From cyber attacks to military invasions, the fear of international calamity keeps many high-net-worth individuals up at night.

According to Ed Smith, co-chief investment officer at Rathbones, the concern over geopolitical risk is a top priority for their clients. The annual survey conducted by the company reveals that disasters such as these are the primary worry for many individuals. This sentiment is echoed in a global survey by UBS, which found that family offices with an average net worth of $2.6bn are most concerned about the threat of a major geopolitical conflict.

Navigating the treacherous waters of geopolitical risk is a daunting task for wealth managers. The unpredictability of major international events makes it challenging to provide concrete solutions. However, some general advice includes investing in high-quality fixed income, gold, and energy assets.

To help clients prepare for potential scenarios, firms like Rathbones assess the most significant geopolitical risks each year and work with strategists to monitor them closely. Some of the sobering warnings include the possibility of China invading Taiwan, nuclear threats in eastern Europe, full-scale war between Iran and Israel, and systemic cyber attacks.

In addition to geopolitical risks, clients are also curious about other financial topics. One common question that arises is the future of the FTSE. The debate around the relative cheapness of UK equities and whether investors should consider them is ongoing. While the UK equity market has diminished in value and number of listed companies over the years, there are still opportunities for growth, according to some wealth managers.

Another hot topic is the rise of passive investing and whether investors still need a wealth manager if they choose this route. Wealth managers are increasingly incorporating low-cost index trackers into their investment strategies, but active management still has a role to play in diversifying portfolios.

Elections also play a significant role in shaping clients’ financial decisions. Concerns about potential tax changes under different political regimes can impact investment strategies. Finally, as mergers and acquisitions become more prevalent in the wealth management industry, clients are curious about the future of their wealth managers and whether they will be under new management in the coming years.

In conclusion, navigating the complex world of geopolitical risk and financial uncertainty is a challenge for both clients and wealth managers. By staying informed, diversifying portfolios, and seeking expert advice, individuals can better prepare for whatever the future may hold. Wealth managers play a crucial role in guiding clients through these turbulent times and helping them make informed decisions to secure their financial future.