Wealthy Feeling Pessimistic, Threatened, Survey Says
Up until 2008 the very rich lived a very "Gatsbyesque life," said Christopher Falkenberg, president of Insite Security, but a survey conducted by his company shows them to be so pessimistic about the current global economic climate and political and social unrest that they are altering their lifestyles and are even afraid of getting mugged.
To gauge the impact global unrest has had on the high-net-worth community-the degree to which Falkenberg stressed cannot be understated-Insite Security, a security and risk management firm for corporations and high-net-worth individuals, in conjunction with the polling firm IBOPE Zogby International, surveyed more than 300 HNWs in the U.S. on their post-recession attitudes about the economy, politics and ther lifestyle.
The results were published in, "High-Net-Worth Attitudes After the Financial Crisis/Meltdown," a white paper that notes that 94% of survey respondents are actively concerned about global unrest, and that 90% expressed an overall negative view of the current global economic climate. Nearly three quarters of respondents (73%) said they would rate the current climate for individuals looking to invest globally as negative, with 24% categorizing the investing climate as being poor. And 41% said they have little or no faith that the U.S. will be able to right itself in this fiscal climate.
Closer to home, these HNWs have taken a hard look at how they are living their lives, with a clear concern for a potential backlash against profligate spending behaviors, according to the report. Fifty-five percent of respondents reported limiting "flashy" purchases to lower external awareness of their wealthy status because they feel less secure today than they did before the financial meltdown. Thirty-three percent have somewhat curtailed flashy purchases, with 22% saying they have eliminated them entirely. The report notes that where once hedge fund and private equity managers were spending millions on artwork and flying their teams around the world on junkets, they are now scaling back. We can also expect to see fewer Rolex watches, Hermes ties and Brioni suits worn by the very wealthy in public, according to the report.
Security is a top concern among HNWs who were surveyed, with 35% stating that security concerns have negatively impacted their business or investment plans, and 28% reporting they have had to change investment or business plans due to political unrest in other markets. For example, 38% report that they are now more likely to fly private than commercial. As for personal security, HNWs are concerned not only with identity theft and cyber attacks. "What keeps the very wealthy up at night are threats of physical harm or theft," the report states.
While the rich do not believe that the financial crisis is short term-38% feel they are worse off today than they were last year and 36% believe their personal finances will be worse off by this time next year-fear has not stopped them from taking real steps to forestall another financial collapse, the report points out; 70% of HNWs surveyed have already made significant life-choice changes in this regard.
"While this data shows that the wealthy are very pessimistic, it also shows they are starting to empower themselves to guard against future political and fiscal uncertainty," said Falkenberg. The full study and white paper can be found at www.insitesecurity.com.
In other news ...
Wealth-X, a provider of ultra-high-net-worth prospecting, intelligence and diligence information, has published a report highlighting opportunities in the Middle East and Africa. Saudi Arabia, the UAE, Kuwait, Israel and Qatar have the highest number of UHNW individuals and account for 68% of all Middle Eastern individuals, representing a combined net worth of about $575 billion, according to the report. Wealth-X estimates that there are 2,400 individuals in Africa worth more than $30 million, and that the Middle East and Africa together hold a combined total wealth of just over $1 trillion. Go to www.wealthx.com for detailed information.
UBS AG and Royal Bank of Scotland Group Plc are among banks boosting their wealth management operations to attract Middle Eastern clients, as the region's richest seek to protect their cash amid political turmoil. Former Credit Agricole SA banker Albert Momdjian will join UBS in August to head its wealth unit in emerging markets, while Coutts, the private banking unit of RBS, plans to more than double its team over four years, according to Bloomberg. Julius Baer Group Ltd. last month hired Credit Suisse AG's Edmond Carton to head its Middle East business, and five bankers began work at Barclays Plc in Geneva this month to target Middle East clients. The Capgemini and Merrill Lynch 2011 World Wealth Report, published in June, noted the number of HNW individuals in the Middle East rose 10.4%, to 400,000 last year, while their combined wealth rose 12.5% to $1.7 trillion-the highest growth rate reported for any region.
The SEC has reached a $1 million settlement with Boston-based hedge fund manager Fontana Capital LLC and its principal Forrest Fontana, charged with short-selling stocks during a blackout period, according to the Globe. The firm has agreed to pay a $165,000 fine and give up more than $819,000 in profits and interest. Fontana Capital was launched five years ago by Forrest Fontana, a veteran of both Fidelity Investments and SAC Capital Advisers, noted the Globe.
Wealthy individuals are feeling more confident about their investments and the economy and appear more willing to make decisions-albeit increasingly conservative ones-about their financial assets, according to a new investment survey by Family Office Exchange (FOX), a resource for wealth owners and their advisors. "FOX Wealth Trends: 2011 Investment Survey Insights" notes that in 2010 the median family office reported 12% annual pretax portfolio returns, and that for 2011, families anticipate a median return of 8%, mirroring the 7% to 8% long-term performance target of family offices surveyed by FOX across the past 20 years. For an executive summary of the report, go to www.familyoffice.com/InvestmentSurvey.
Credit Suisse has been named the "Best Wealth Management House 2011" by Euromoney, based on the results of the magazine's Awards for Excellence Survey 2011; the Swiss bank also received 11 regional and country awards, including "Best Bank in Switzerland." Walter Berchtold, CEO of Private Banking at Credit Suisse, credits the company's integrated banking model as well as its "global footprint in emerging markets, most notably Asia," as key to attracting client assets, according to Credit Suisse. Go to www.euromoney.com or www.credit-suisse.com for further information.
Some see the SEC's new "family office" rule as a manageable obstacle for ultra-high-net-worth families, while for others it marks the end of business as usual, especially in regard to the privacy many ultra-wealthy enjoy, the Wall Street Journal said in an article this week. The article pointed out that for a few, the new rule raised questions about whether having a family office made sense at all. One wealth manager quoted saw the new rule causing more families to opt for commercial-realm providers as a way to balance relative freedom of action with more privacy than a standalone registered firm can expect. The new "final rule" was approved by the SEC on June 22 and defines "family offices" that are to be excluded from the Investment Advisers Act of 1940. Private family offices now may be exempt from registration if they're serving only family members, ex-family members, family-office staffers past and present, and family-controlled entities like trusts and charitable foundations.
The high-net-worth population in the top ten U.S. metropolitan statistical areas increased by 7.3% in 2010, with New York, Los Angeles and Chicago topping the list for the number of wealthy individuals, and Houston recording the highest total growth in HNW population, according to Capgemini's 2011 U.S. Metro Wealth Index. Growth for 2010 was modest, however, compared to 2009, which reached 17.5% after a steep decline in 2008. For further information, go to www.capgemini.com.
For the sixth consecutive year, Merrill Lynch Wealth Management led all financial services firms on Barron's annual "America's Top 100 Women Financial Advisors" list, with 33 advisors in the rankings. Among the top ten, and returning to the list from last year, are Private Wealth advisors Lorna Meyer of San Francisco at number four and Melissa Corrado Harrison of Denver at number nine. The ranking reflects the volume of assets overseen by the advisors and their teams, revenues generated for the firms, and the quality of the advisors' practices. Less weight is given to assets of institutional clients.
Private Client Resources, an account aggregator based in Wilton, Conn., has launched Palette Platform, an open-architecture integration of systems and capabilities that can be customized to the varied needs of private wealth firms. The new product provides a total view of the client relationship and leverages powerful tools that can improve the efficiency and effectiveness of private wealth firms serving the high-net-worth, said PCR. Go to www.pcrinsight.com for further information.
Altegris Advisors of La Jolla, Calif., has launched the Altegris Macro Strategy Fund, which uses a global macro "go anywhere" approach with low minimum requirements and no investor pre-qualifications. The new fund seeks to achieve positive absolute returns in rising and falling markets by allocating its assets between global macro strategies and a fixed-income strategy, said Altegris. Go to www.altegrismutualfunds.com for further information.
Five banks achieved "material organic growth" in their affluent customer base over the past two years, exhibiting superior performance in terms of acquiring and retaining affluent customers, according to a study of 4,600 affluent consumers conducted by the research agency TNS. The banks are Bank of America, Chase Bank, Capital One Bank, TD Bank and Key Bank. The study, "Banking the Affluent Consumer," targeted households with $100,000 or more in investable assets, a segment that controls over 90% of all personal financial wealth in the U.S. Go to www.tns-us.com for further information.
Events
The KL International Conference on Islamic Finance 2011 will be held July 18-19 at the Hotel Istana in Kuala Lampur, Malaysia. Go to www.alfalah-consulting.com for further information.
Opal Financial Group's annual Family Office/Private Wealth Management Forum: The Race for Returns, designed for high-net-worth individuals and family offices in North America, will be held July 18-20 at the Hyatt Island Regency Newport Hotel in Newport, R.I. Opal will kick off the event with its 5th Annual America's Cup Regatta, in which attendees will have the chance to work with a professional sailing charter crew while competing against industry peers. Go to www.opalgroup.net for further information.
The National Energy Investment Summit will be held July 21-22 at the Grand Hotel in New Delhi, India, bringing together capital-raising companies and investors from the Indian energy sector. (India is projected to attract $169 billion in clean-power project investments over the next decade.) Go to www.nationalenergysummit.com for further information.
The Business Excellence Forum, designed for entrepreneurs and others, will be held August 19-20 at the Fontainebleau Hotel in Miami. Go to www.actioncoach.com/businessforum2011-tickets for further information.
The 22nd Annual SRI in the Rockies Conference: The Future of Investing will be held October 2-5 at the Sheraton New Orleans Hotel in New Orleans. Go to www.sriintherockies.com for further information.
The FOX Fall Forum will be held October 17-19 at the JW Marriott Chicago in Chicago. For further information contact Karen Emanuelson at 312-327-1224, or go to www.familyoffice.com.
The Best of Breed Conference, hosted by Everything Channel and featuring presentations by venture capitalists and the latest on cloud computing and other topics in the rapidly changing IT channel, will be held October 24-26 at the St Regis Monarch Beach Resort, Dana Point, Calif. Go to www.bobconference.com for further information.
On The Move
TIGER 21, a New York-based peer-to-peer learning group for high-net-worth investors in North America, has appointed Charles P. Garcia as the new chair of its Miami group. Garcia is CEO of Garcia Trujillo, a consulting, merchant banking, and venture capital firm that focuses on the global Hispanic market. Garcia will enable TIGER 21 to concentrate on HNW investors in South Florida, including the region's large population of wealthy Hispanics.
The Pew Charitable Trusts has appointed former FDIC Chairman Sheila C. Bair as a senior advisor, providing advice and counsel on the ways that federal, state and local governments can best ensure fiscal and economic stability and family financial security. Prior to joining the FDIC in 2006, Bair was the Dean's Professor of Financial Regulatory Policy for the Isenberg School of Management at the University of Massachusetts-Amherst, and a former assistant secretary for financial institutions at the U.S. Department of the Treasury.
Barclays Wealth has appointed Andrew Tailby-Faulkes, a former senior private client partner at Ernst & Young in the U.K., as a managing director within its wealth advisory business. Tailby-Faulkes will report to Rob Withecombe, head of wealth advisory, when he joins in September.
HSBC Global Asset Management (USA) Inc. has appointed Deborah Hazell regional head of HSBC Global Asset Management, North America, based in New York City. Hazell, responsible for expanding the reach of HSBC's emerging markets expertise, previously served as president and CEO at Fischer Francis Trees & Watts, and was a portfolio manager at UBS Asset Management in New York. Sylvia Coutinho, who before Hazell's appointment was CEO, HSBC Global Asset Management, Americas, has taken an expanded role as HSBC's head of Retail Banking and Wealth Management in Latin America.
HighTower, a Chicago-based national advisor-owned financial services company serving high-net-worth and institutional clients, has expanded with a new advisor team, VWG Wealth Management, headquartered in Vienna, Va. VWG is led by John Verfurth, Richard Weeks and Jeff Grinspoon, who will serve as managing directors and partners at HighTower.
Chortek & Gottschalk, a Milwaukee-based firm of CPAs and business advisors whose clients include family offices and non-profits, has acquired the Washington, D.C. CPA firm of Martin & Wall, which serves non-profits, charter schools and independent federal agencies.
Montage Investments in Leawood, Kan., with about $8 billion in AUM, has appointed an executive team to head the firm's distribution efforts. Included are David Henriksen, previously at Tortoise Capital Advisors, a Montage affiliate, as head of distribution; Anthony Carrubba, former VP of strategic accounts at Ivy Funds, as national sales manager; and Jenny Rhodus, former national director of the RIA channel for Ivy Funds, as director of national accounts. The new hires will lead Montage's 17 professionals in providing wholesaling support to financial advisors, institutions, and consultants.
Barclays Wealth has appointed Hans Olsen as a managing director and head of the firm's investment strategy in the Americas. In this newly created role, and based in New York, Olsen, former CIO for Private Wealth Management at JP Morgan, will focus on delivering regionally-customized investment strategies for high-net-worth clients throughout this region.
Merrill Lynch Wealth Management has appointed Concetta Caruso as chief operating officer of Merrill Lynch Bank (Suisse), Sophie Chapuisat as global head of intermediary business, and Christopher Robinson as head of legal. All three will be based in Geneva.
Liongate Capital Management, a fund of hedge funds manager with offices in London, Zurich, Malta, Mumbai and New York, has appointed Richard Teisch as U.S. director of investment research. Previously, Teisch was a managing director at Cliffwater, a U.S.-based alternatives consulting and advisory firm.
-Cort Smith