Q: Households have seen their net worth shrink and the wealthy, by definition, have more to lose. Are you noticing a different mindset or change in assumptions among your wealthier clients?
A: Regardless of how much your net worth number is, you feel the impact. People’s confidence has been shaken. I don’t think having more cushion has helped ease the pain. People are shedding their appetite for risk, they are recalibrating.
The wealthiest people in the world typically make their money from stock and real estate speculation, which require long time horizons. Nobody can tell you what will happen tomorrow. And no one can tell you if this rally is for real or not. What we are really focused on is taking risk out of financial portfolios. The markets will do what they will do.
Q: What lessons have you taken from all the turmoil of the past years and how has that changed the way you advise clients?
A: Clients are less focused on returns. They are really focused on how much risk is in their investment portfolio. Our business model is focused on planning. A lot of people had financial plans. It was on a shelf.
Nobody saw the depth that this would go. Investment returns have been down systematically. The people who sleep better at night are those who understand what they have.
Q: Next year, the estate tax goes away. Do you think it will return, and will the wealthy face higher taxes going forward?
A: We don’t know yet what is going to happen. There are a lot of concerns about what the impacts of tax policy will be. There are going to be some unique giving and estate-planning opportunities in 2010 and we are working closely with our client advisers.
We are reaching out to clients. There are financial service providers that are no longer in business. Now is a good time for people to revisit their estate plans.
Edited for length and clarity by Aldo Svaldi
