These are strange times for even the richest Americans: A pandemic shook the world and yet everything rose in value. Now many are calling up their wealth managers, asking more—and often unusual—questions.
Can a third or fourth home be a good investment? Should I add cryptocurrency to my investment portfolio? How do I leverage my art collection? Is it time to sell the family business and move to Florida—or maybe just move to Florida? Can grandkids join the next estate-planning call on Zoom?
As head of Bank of America Corp.’s private bank, Katy Knox has been hearing it all, and then some, while overseeing more than 4,000 employees who help customers ready to invest at least $3 million—and often far more. The 35-year banking veteran took over the division in 2018, leading the business through a period of re-branding from what was previously U.S. Trust to Bank of America Private Bank. Some clients have more than a billion to invest.
Knox’s current experience shows an industry in the throes of rapid change. Competition among wealth advisors, particularly for the ultra-high net worth individuals, is high. And assets are growing.
The first thing to note is that there are suddenly many more millionaires seeking advice across financial firms. The economic quakes set off by Covid-19 have been tough for much of society but, by and large, good for people who started off with significant amounts of cash and assets, or business that the pandemic benefitted. Prices for stocks, real estate and fine art soared. Sectors such as tech flourished.
BofA’s private bank now has a local presence in 40 markets across the U.S., growing from 25 since Knox took charge. This year it aims to increase that number to 50, essentially doubling over a four-year period.
But with that growth, and the pandemic, has come a lot of queries that would have been uncommon a few years ago. One of the chief topics: moving residences—or buying a second, third or even fourth home as future investments.
“It’s the hottest market I’ve ever seen,” Knox said in an interview from the 50th floor of her office overlooking New York City’s Bryant Park. One out of every five properties purchased by clients of the private bank or the Merrill Lynch division is now an extra home, up from every seventh before the pandemic.
Many clients start by shifting residences. Some left cities during early Covid outbreaks and “fell in love” with the cozier locales where they bunkered down, such as the Hudson Valley, and the Hamptons, Knox said.
Florida Homes
But they’re also eyeing warmer locales—such as Florida’s Palm Beach, Naples and Miami. Apart from the weather, the state has another attractive feature: lower taxes—which is another hot conversation topic at the bank. The wealthy have spent the past year pressing their advisors for insights into further levies Democrats controlling the White House and Congress could extract from high earners.
“There were a lot of what-if scenarios” being discussed early in the pandemic mainly around capital-gains tax, Knox said. The new year presents the potential for more change to come.
Clients are looking for opportunities to mitigate potential tax changes, including on income and managing trust distributions, she said.