"May you live in interesting times."
So goes a saying that's usually called a Chinese curse, though its origin is murky. In any case, high-net-worth wealth managers have carried the burden of living and working through "interesting times" in recent years, especially the shocks and aftershocks of the 2008 financial crisis.
Now that the the dust has cleared and the economy is taking some steps toward recover, what is the future of high-net-worth wealth management? Four men with extensive experience in the space tried to answer that question on a recent evening at the Penn Club on West 44th Street in Manhattan.
The informal discussion was hosted and organized by Private Client Resources, which manages assets ranging from as low as $20 million to as high as $800 million.
Wealthy clients are looking for advisors to do more than simply add to their assets, said Alan Rappaport, former chairman and president of the private bank at the Bank of America.
"They have money in excess of what they can consume in their lifetime," said Rappaport, who is now adjunct profess of finance at New York University"s Stern School of Business.
Increasing their wealth is not a top priority, he said. Serving and furthering their values is. Creating a legacy that their children, grandchildren and other descendants can be proud of is also a priority, Rappaport said. The manager who seeks to serve such people must have a clear
sense of these values and a clear plan of how to support them, he said.
"This poses a whole set of challenges," Rappaport said.
Another challenge in the current landscape is that there are so many more kinds of investment vehicles than there were 20 years ago, said Loc Vukhac, managing director, institutional endowment, foundations and family offices at BlackRock.
"I remember the '90s," Vukhac said with a grin. "I'm older than I look." The choices were much simpler then, he said. Large assets typically went to hedge funds and stayed there for years.
"Now you have liquid alternatives," where, unlike hedge funds, investors can get their money out quickly. Yet these funds do many of the things that hedge funds do, such as selling short, investing in derivatives and using arbitrage.
Today's wealth manager has to be familiar with the alternatives and the benefits and drawbacks of each, Vukhac said.
Another challenge today is the wealth of information available to everyone through technology, said Robert Fiore, president and chief executive officer of Private Client Resources, which is based in Wilton, Conn.
Computers and smartphones have made it easy for anyone to have financial information at their fingertips, he said, so wealth advisors have to provide value by interpreting that information wisely and coherently.
"Advisors musts provide a better client experience," Fiore said.
"It's not easy to create value," said Roy C. Smith, professor of finance, international business and management practice at New York University's Stern School of Business and a former general partner at Goldman Sachs & Co.
Another challenge that may loom even larger in the future will be serving the so-called millennials (also known as Generation Y, those born in 1982 or later), who may have different values than earlier generations, Lukhac said.
For example, studies have indicated this generation cares more about investments that have a social and environmental impact. We may be entering a period that will be reminiscent in some ways of the 1960s, Smith said, with the scrutiny of how companies generate their profits.