My Notes From Private Wealth Latin America & Caribbean Forum 2017

Last week I attended what turned out to be a very interesting event in Miami, the Private Wealth Latin America & Caribbean Forum. Topics ranged from “A More Transparent World” covering reduced privacy and more sharing of information on accounts between governments all the way to “Millennials and Technology” and “Women in Wealth Management” so I have chosen to share my notes from each panel that I attended.

A More Transparent World?

• Changes simply allow tax authorities worldwide to know whether or not taxpayers are properly reporting income and paying taxes
• No new reporting allocations created
• FATCA is a limited exchange of info with 45+ countries and the USA
• CRS is the Common Reporting Standard with more than 110 countries signed on
• No real financial privacy remains
• Clients intend to be tax compliant but want privacy
• “Privacy” can mean different things in different cultures. Europeans view privacy differently to Latin Americans
• Security of information is paramount and we need to know which countries are investing in security and where the info is being stored
• Switzerland will implement 81 CRS agreements by January 1, 2018
• Many clients going back to irrevocable, discretionary trusts

Millennials and Technology: How Families Are Adapting

• Graduated into a “No Job” economy and so less likely to listen to those who say to follow this path and you’ll turn it just fine
• Egalitarian and likely to support Ron Paul or Bernie Sanders
• Gen X and Late Boomers are parents
• Kids are “special”
• College is important — 30% have a Master’s Degree
• Grew up with the Internet (or on the cusp of mainstream Internet penetration)
• They think that the world is not fair
• Extended adolescence (goes into mid-20s)
• Get lots of information from the Internet but less wisdom
• Don’t talk same language as older generations
• Find older Millennials with same values to be role models and mentors
• Highly mobile group
• Highly entitled group
• Financial advisors must add Design Intelligence and Behavioural Finance, become financial coaches, not just advisors
• Try to understand their decision-making approach
• Clients don’t need more info, they need more direction — Build a roadmap
• Segregated disciplines, not silo effect because only the client loses (each discipline must coordinate — legal, insurance, wealth, etc.)
• Virtual family office is ideal — a hub
• Much more video-conferencing
• Millennials want to be engaged in the charity, not just give away the money — local projects are one way to involve them
• Financial advisors must become curators of content because 7 out of 10 HNW (High Net Worth) Millennials do financial research before making decisions — Be an educator

Assessing Real Asset Investment Strategies

• Laws of gravity have not changed
• Down-cycle is coming but cannot predict when, only prepare
• Must plan for the down-cycle and stress-test portfolio
• Long-term investments do not focus on timing the market
• Liquidity is a premium some investors are willing to pay for
• 50% of the wealth in the USA was created in real estate
• Latin American and Caribbean investors like assets they can see and touch

Alternative Investments: Private Equity, Hedge Funds and Private Credit

• Private credit aka hard money loans or private lending on real estate is usually secured in 1st lien position using a low LTV (loan-to-value) ratio
• Yield compression is taking place (rates coming down)
• Focus on higher quality loans with higher quality collateral
• Some funds use leverage but most do not

Family Governance: Maintain and Growing Wealth

• Make sure that you have a Family Constitution, Vision and Mission
• 7 out of 10 Millennials make investing decisions aligned with their political, social and economic values
• Major requests for impact investing from Millennials
• Hire Millennials to work with family offices and HNW individuals
• Very into transparency and fairness
• Currently at an inflection point where HNWs are no longer differentiating Financial ROI from Philanthropic Giving
• Check out TheImpact.org
• Impact is more return
• Every Rockefeller child started financial lessons at age 6
• Millennials are more focused on responsible consumption and production

Women in Wealth Management

• Individual questions:

(1) Are you passionate?

(2) Is achieving success a personal goal?

(3) Do you have what it takes to persevere?

• Organizational questions:

(1) Is your strategy rooted in proof?

(2) Are the right processes in place to support your efforts?

(3) Are you involved in the right programs?

• Go get what you want
• Promote yourself
• Ask for what you want
• It will take 169 years before there is equal pay for women at the current rate

Sports is Business & Business is Sports by Dave Shula

1. Have a good plan
2. Hire good people — Not the most talented
3. Train them well — Don’t assume anything
4. Hold them accountable — Allow mistakes
5. Stay focused
6. Motivate and Innovate

Impact Investing: A Growing Market

• You can make money with investments that have social transformation or environmental transformation as a focus
• Financial return not mutually exclusive from doing good
• Definition; An investment approach that intentionally seeks to generate financial return and social/environmental positive and measurable impact
• Family offices becoming more active in impact investing
• Wealth is about more than cash and assets; It is about experiences and having an impact
• Millennials typically drive the questions around philanthropy and impact investing
• One patriarch gave the Millennial children some of the family money with the caveat that the gains from the investment could be given away to charities of their choice. This worked as a major educational opportunity to teach the new generation how wealth is preserved
• Families don’t like to talk about money but they do like to talk about things they believe in
• Impact investing has brought multi-generational families together and made them closer
• Affordable housing, Renewable energy and Healthcare are the three biggest impact investing areas for family offices