As firms set out thoughts for the coming year, here is one of the most prominent names in North America's wealth management sector, explaining what it expects the dominant themes to be and why the industry must pay attention to them.
Don’t follow the investor herd, understand the role of the “rising generation” and expand family learning: these are some of the themes US multi-family office Pitcairn lays out for the coming 12 months.
With the start of a year, it is the traditional point for economists, strategists and business leaders to guess what the dominant trends might be for the year ahead.
“In the coming year, we’re seeing the family office sector having to rethink how it will meet the increasingly complex and nuanced needs of today’s multi-generational families,” Pitcairn chairman, chief executive and president Leslie Voth said in a note. (Family Wealth Report interviewed the firm last year about investment and business strategy: see here and here.)
The themes for the year:
-- “The danger of following the herd in the markets: A decade into the longest bull market in history, both analysts and investors are looking for any sign of recession. As chief investment officer Rick Pitcairn detailed in his quarterly investment commentary, an inversion in the 2 to 10-year segment of the US Treasury yield curve occurred briefly last year, and the election year ahead promises continued political turmoil.”
“However, US equity valuations, while high, are not at excessive levels and retail investors continue to shun the record bull market in stocks. Periods of fear and uncertainty often compel investors to take action and make major changes. In reality, 2020 will be defined by discipline and sound planning, particularly for investors with a multi-generational mind-set.”
-- “The increasing role of the rising generation: There are numerous myths about Millennials and the Rising Generation, many of which have been debunked. What remains true is that future family leaders have a different set of priorities than their parents, and many are eager to have a greater say in the future of their family. This dynamic is at play in many of Pitcairn's client families, where younger generations often crave more open communication. The sharing of control and legacy will be front and center for many families as the great wealth transfer continues to unfold.”
-- “The expansion of family learning: As families recognize the amplified role of the Rising Generation, they are expanding their perspective on education to go beyond investment know-how and a college degree. According to a recent survey conducted by Pitcairn at its annual Wealth Momentum Forum, families ranked `lack of time’ and `lack of a clear path’ as the most significant obstacles to family learning. In addition to financial knowledge, family leaders are looking to education as a way to share values and pass on the knowledge that will inform a new generation of family meaning.”
-- “The pervasive role of technology and the family office: Technology is advancing at a rapid pace, and nowhere faster than in the consumer market. That means many organizations, including single family offices, are struggling to keep up. As the fourth industrial revolution unfolds, the opportunities for technology to drive greater insights and communication is more powerful than ever. At the same time, the threat is also larger, with cybersecurity and data privacy posing critical risks to wealthy families. 2020 will bring an increasing gap between what family leaders expect and what many so-called partners are able to deliver.”
-- “The culture imperative: From impact investing to legacy planning, the role of family values will continue to gain traction in 2020, resulting in a greater emphasis on family culture. That means family culture must be a focus. The year to come promises to continue the trend of families communicating, learning, and sharing values with each other in new and evolving ways. Families who can use technology and learning to foster a unified culture with all family members and their team of advisors and partners will be best positioned for success in the year ahead.”