Will Wakeham, Assistant Manager in JTC’s Guernsey office, finds the silver linings of lockdown and the COVID-19 pandemic.
Undoubtedly COVID-19 has shaken the world and caused devastation to many families and economies. However, as vaccination programmes take effect, borders start to re-open, communities begin to sense a return to some sort of normality and businesses look to the future, there is a case that some positives have emerged from the biggest single global disruptive event of a generation.
The private client sector is no exception and, if we can adapt and respond appropriately, there are some very real and exciting opportunities on the horizon…
As we all went into a lockdown situation just over a year ago, for many of us it may have felt as if someone had pressed a pause button. We were in a bit of a state of limbo, in terms of both our professional and personal life.
It didn’t take long, though, for us to realise collectively that there was an opportunity to use this newfound time – free of commutes and office distractions – to think creatively and effectively – an opportunity that we might not have had in a ‘normal’ office environment. Indeed, we’ve seen accelerated thinking in a number of areas such as innovation, digital adoption, mental health and wellbeing, thanks to the additional time we’ve all had.
The experience of the past year has alerted us to the importance of time for self-reflection and creative thinking, and this is a skill that we should be taking forward into this post-pandemic environment. Using time effectively can really help us plan better and future-proof our interests and those of our clients.
The sudden and dramatic changes we’ve seen enforced on us over the past year or so has also shifted our collective response to the idea of change. Not in a lifetime have we collectively been subject to collective enforced change to our daily routines, lifestyle and work.
It’s made us look at the idea of change through a new lens, and whereas before change might have been a gradual evolution, now change can be something we feel more comfortable about, that can be well considered but implemented quickly.
In the private client space, we’ve seen this in a number of ways. Clients are much more used to managing their affairs through different business practices and procedures and interacting with their advisers, partners and service providers remotely through tools like MS Teams and Zoom or even considering alternative investment strategies.
From a family perspective, we’ve also seen a rise in the number of UHNWIs actively looking at key fundamental issues that might otherwise have been put on the backburner – with the pandemic highlighting the reality of mortality, for example, research suggests that 57% of UHNWIs are now reassessing their succession planning.
Being more comfortable with change and being able to manage it effectively is a key outcome and opportunity of the pandemic.
Linked to this idea of embracing change, the pandemic has also taught us to be more adaptable if we are to identify and realise opportunities.
Whether it’s been preparing a corporate structure for future growth or preparing for an exit event, being adaptable to the times and the wider environment has become a key skill.
It’s why, over the course of the pandemic, some substantial transactions have surfaced, proving that for those that have been open to adaptability, it is possible to capitalise on opportunities in an otherwise challenging market.
In the corporate space, for instance, Citrix’s acquisition of Wrike for a reported $2.25 billion; Uber buying alcohol delivery service Drizly for $1.1bn; and Jay-Z selling a majority stake in Tidal music streaming service to Jack Dorsey’s Square for a reported $297m, are all big deals to take place over the lockdown environment.
Meanwhile, in the real estate sector, we’ve seen a growing trend for UHNWIs to adapt to the market and purchase second homes. Certainly, we have been busy over recent months completing both commercial and residential transactions. In fact, research suggests that 26% of UHNWIs are currently looking to buy a second home.
The luxury tangible assets market is also subject to transformation as digital innovation has impacted the asset class and investor attitudes have shifted. Artwork has really showcased itself in Q1 2021, for instance, with the emerging popularity of ‘non-fungible tokens’ (NFTs) creating new ways to draw on blockchain technology to authenticate art. As a result, Beeple’s recent piece recently fetched US$69m at auction with Christie’s.
Looking forward, being ready to adapt and able to draw on technology to identify and execute opportunities is going to become increasingly important, and it’s a skill we’ve had the opportunity to hone through lockdown.
Finally, with interest rates at record and persistent lows, clients are looking elsewhere for those superior rates of return, assessing how they can best navigate this unique fiscal environment and exploring new and diverse areas that they may not have looked at before.
Greater access to cheaper capital, for example, is providing a strong argument that now is the time to restructure group debts or release equity, while we’re also seeing clients look increasingly at alternative investments as co-investment and club deals have become more attractive and more accessible opportunities.
The idea of sustainable finance has really risen up the agenda too, with purpose-driven and ESG investments providing clients with a new perspective and dynamic in their strategies, alongside chasing returns.
Meanwhile, the stamp duty holiday introduced in the UK is also playing a significant role, with a significant increase in the completion of property transactions seen over recent months, as highlighted above.
For advisers in the private client space, what we’ve learned is that clients need access to an ever-widening pool of expertise as their interests become more and more diverse, and this is a long-term opportunity as we look to support clients in new and different ways and provide them with a service that is truly holistic.
Overall, there’s no doubt that the aftershocks of this societal and financial earthquake will continue to be felt for some years to come.
However, amidst all the negativity there are positives to be taken from this shared experience, both for clients and for those advising and serving them.
Being ready to adapt and being open to change are key qualities and long-term learnings from this experience – please do get in touch if you’d like to talk to us further and explore how you could make use of your added ‘downtime’ productively.