How Advisors Can Prepare Wealthy Clients for an Uncertain Year

It’s been a familiar tale over the past several months, with economic uncertainty and business owners and entrepreneurs in flux and facing significant headwinds that could shake market and investor confidence, even among advisors’ high-net-worth and ultra-high-net-worth clients.

In a recent phone interview, we asked Brenda O’Connor Juanas, senior vice president, wealth management at UBS, about some of the biggest issues facing HNW and UHNW clients.

O’Connor Juanas, an expert on exit and wealth planning, as well as portfolio construction, also told ThinkAdvisor what UBS advisors are telling these clients to prepare them for what she expects will be another 6-12 months of “stormy weather.”

THINKADVISOR: What would you say are the most concerning trends right now for advisors and their clients and why? What are business owners and other HWN/UHNW clients saying they are most concerned about?

BRENDA O’CONNOR JUANAS: It’s been a pretty horrible year for investors and business owners alike, and a lot of this has to do with the same issues. When I think about what these real headwinds are in terms of priorities, obviously markets are off 20% to 30% depending on what index you’re looking at.

We’ve had interest rates essentially start the year off flat or now 4% after what the Fed did [Nov. 2]. You have inflation that just won’t stubbornly go below 8%. You have a strong U.S. dollar, the strongest we’ve seen in the last 20 years. You have wage growth, which has made it difficult for companies to hire and retain talent.

Across the board, it’s just been a really difficult year. I would say what’s most concerning to investors now, and frankly myself as well, and even [Fed Chair Jerome] Powell talked about this [recently], is that we’re not out of the woods yet. There’s still quite a bit of pain that needs to be gone through.

Most of my clients and business owner contacts are just trying to figure out how to protect and really position both their businesses and their portfolios, which for what will likely be another at least six or 12 months of stormy weather.

What are UBS advisors telling business owners and other HWN/UHNW clients specifically now to ease their minds and why?

First, this is a real opportunity just to clean up and strengthen balance sheets. So that can mean a few things for investors and business owners.

One thing that we’ve been doing with our clients is paying down credit facilities or debt that’s become a lot more expensive than it has been at the start of the year. Businesses that are in our portfolio are cutting costs on the business side.

In terms of the portfolios that I manage, it’s really been an exercise of entrusting portfolios to improve quality. So improving balance sheet strength is something we’ve looked at across the board.

I think the other item that we engage clients on pretty frequently, both business owners and investors, is how to leverage this volatility into an opportunity.

Some of my smartest clients that run businesses are using this period of volatility to bring supply chains on shore [and], if there’s any weakening of competitors, to look at that as a potential opportunity once the market is stabilized.

On the investor side, I’m not going 100% into the markets with fresh cash. But I’m certainly looking at this opportunistically.

There are certain areas of the market, certain geographies that are starting to look interesting from an evaluation perspective that we’re dipping our toe in.