2024 In Review And Themes To Watch

The editor takes stock of what sort of themes have worked out during 2024 and what sort of issues to expect in 2025. We wish our readers a very happy holiday season and New Year.

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In looking forward into 2025 and trying to figure out the issues
wealth managers track, it is worth taking stock of what an
extraordinary year, in some ways, 2024 has been. 

As far as the sector is concerned, one standout theme has been
technology: AI. This was the year when artificial intelligence
and the various
use cases for it became a general feature of conferences,
research reports and initiatives. I think the acronym “AI”
decisively pushed another one, “ESG”, aside, even though concerns
about energy transition and governance remain important. But if
you look at the performance of companies linked closely to AI,
such as Nvidia, Microsoft and other Big Techs, the impact of AI
is undeniable. The wealth sector is wrestling with how to use AI
in ways that don’t dent the “white glove”, value-added aspect of
private banking and wealth management that HNW individuals pay
for, but how to embrace it in ways that augment the role of
advisors. 

And with compliance issues and cybersecurity important topics in
a volatile world, expect AI to remain very much in the
conversation. We intend to spend a fair amount of our editorial
time talking to firms and individuals about this during 2025 (and
see our
forward features calendar). 

I also expect that another important area in 2025 will revolve
around the theme of “protecting the client”. That protection will
be against cyber and physical threats. Take the latter. While
obviously a sensitive and upsetting topic, we have to consider
the implications of the murder in Manhattan in December 2024 of
UnitedHealthcare CEO Brian Thompson. Alas, those in the public
eye, including people working at the top of banks and other
institutions of capitalism, are potentially vulnerable to those
nursing grudges or carrying ideological agendas. I expect those
firms involved in areas relating to security will be busy
offering advice and support. 

Cybersecurity, particularly given fraught relations between the
West and countries such as China and Russia, remains a big area.
Ransomware attacks, from all kinds of sources, are legion. Wealth
managers and banks are in the frame because, as the saying goes,
that is where the money is. To mention AI again, I expect such
tech to play a role in combating this. Another and related part
of protecting the client is how advisors counsel clients to be on
guard about use of social media, for example, and manage their
online reputations. In this era, one misstep can hurt a business,
philanthropic organisation and family.

The protection theme also extends into areas such as care for
elderly relatives and the young, as in cases where families have
to consider powers of attorney in relation to a parent suffering
cognitive decline, for example. 

The investment side of wealth management remains central. US
stock markets have risen considerably this year, powered for much
of the year by those Big Techs, with the AI story playing its
part. We have had scores of elections this year. And from 20
January in the US there’s a familiar face calling the shots again
in the White House: Donald J Trump. He’s keen on tariffs,
fracking and deregulation, with the likes of business tycoon Elon
Musk offering his advice. The threat of wealth taxes on the rich
appears to be out, for the time being. By contrast, in Europe, a
continent experiencing sluggish growth and a fondness for a
Precautionary Principle regulatory approach to areas such as AI,
it must try and keep up and not fall further behind the US. It
remains an open question whether Europe can win back its growth
mojo. 

China has been attempting, meanwhile, to reinvigorate growth
after Beijing’s crackdown on certain sectors such as tech three
years ago weighed on markets. China has for years helped boost
the wider Asia-Pacific economy, making APAC a rising wealth
management region. There’s been a maturation effect to some
extent. The scorching pace has decelerated.

Mention of China and Russia is a reminder that geopolitics is
worrying, and of course we have to throw the likes of Iran and
the wider Middle East, and North Korea, into the mix. Perhaps
what’s remarkable is how many equity markets, despite all this,
have done as well as they have. But as any shrewd investors
knows, markets seldom move up in a straight line for very long,
and there could be problems at some point. For example, if Trump
does ramp up tariffs and hits the likes of Europe, Canada, and
Asia, will this force inflation higher in the US and hurt the
wider world economy? Experience and economic logic shows that
tariffs rarely work as intended and impoverish the wider world.
Adam Smith had this worked out 250 years ago. On the other hand,
it is quite possible that AI, and maybe other related
breakthroughs, could boost growth in certain ways.

Growth, and how to achieve it, is going to remain a strong theme
in 2025. Politicians of various stripes say how important it is.
They know that if GDP growth picks up, it makes it easier to
control spending and keep budgets in robust shape. Even so, there
is a need for a willingness to face financial reality, and
unfortunately, the past 25 years have, in nearly all major
countries, been ones in which growth has run alongside consistent
budget deficits. We’ve been racking up debt and relying on
central bank cheap money to push the consequences down the
road. 

Offshore and the business of wealth

The past 12 months have demonstrated that any attempt to write
off offshore financial centres as outmoded is foolish. With some
governments such as those of Norway and the UK pushing up taxes
on HNW people, for example, this has encouraged emigration. The
UAE, Monaco, Jersey, Guernsey, Malta, Singapore, Italy, Portugal
and Spain, among others, are beneficiaries. Capital remains
mobile. What’s clear is that when debt-laden governments hike
taxes (sometimes also for ideological reasons, such as in the UK
after the 4 July election, for example), people respond. I
recently moderated a panel discussion in London about Switzerland
and the UK. There’s a lot of interest in the idea of moving to
places such as Switzerland. This is going to continue. To some
degree, this also mitigates a bit of the hit to Switzerland’s own
economy from the 2023 “shotgun wedding” of UBS and Credit Suisse.

Another theme that played out this year was industry
consolidation. Besides the mergers conducted amid stresses
(UBS/Credit Suisse, Silicon Valley Bank) in 2023, the past few
months have seen a continuation of firms being acquired (wholly
or partly) by private equity and sovereign wealth funds. In the
UK, to give one example, a consortium including a Middle East
sovereign wealth fund
bought into Hargreaves Lansdown. In Canada, CI Financial,
which three years ago had been busy buying a raft of US wealth
managers, said it was
going private, with another Middle East-based sovereign fund
in the mix. In fact, the role of Middle East wealth in driving
such changes, reflecting the dynamism of places such as Abu Dhabi
and Dubai, is clear.

The family office industry has continued to be a growth story in
2024, although some of the pace may have slackened, given a
desire by authorities in jurisdictions such as Singapore to
tighten standards. A few weeks ago we wrote about an initiative
by a family offices network group to try and benchmark what a
family office actually is and
weed out those masquerading under that title. Whenever there
is rapid growth, some questionable characters try to tap it. Even
so, much of the growth speaks to a genuine desire by families for
control, and I don’t see that changing. 

Another steady theme during 2024 was talk about growing access to
private market investing. The drivers of this are well-rehearsed.
I did get a sense from some in the family offices sector that
there is a bit of
hype creeping in; private equity/credit/other funds typically
charge higher fees, for example, than on a fund of listed stocks,
and clients need to be aware of what they are getting into. Also,
with all the tax changes being mooted or actually taking place,

asset location has risen to be as significant as asset
allocation. The share class, structure and location of a specific
fund/investment is becoming as important as the split of assets
themselves. 

Compliance and alignment of interests remain important themes in
the sector. During 2024, we were able at the end of July in the
UK to mark the first anniversary of the
Consumer Duty package of reforms, designed to produce better
outcomes for clients. It has had some impact. Around the world,
however, there remain challenges of how banks, for example, which
are under shareholder pressure to deliver return on equity, can
square this with treating clients well. 

Digitalisation of parts of the value chain and the
disintermediation impact of technology could also continue to
shake up how wealth management/banking is delivered. 

At this juncture, I look forward with a mix of trepidation on
geopolitics but also optimism about the industry. I never fail to
be struck by the amount of entrepreneurial vigour that exists. A
few days ago, for example, I chatted to a young Turkish woman
from an affluent family who has built a family office advisory
firm – something of a ground-breaker. A young Swiss
family office/investment firm is trying to make breakthroughs
in venture capital. And I am struck by the dynamism of much of
the North American wealth sector, and the speed of growth in
Asia. The UK, for the moment, concerns me because of what I think
are foolish policy choices by the current government. Maybe there
could be changes ahead?

To finish on a cautiously optimistic note, let’s go to Argentina.
President Javier Milei, a devotee of “Austrian”, free market
liberal economics, has upended conventional wisdom on what is
doable. He has cut spending and the public sector payroll,
deregulated sectors such as rental housing, cut inflation low
single digits, and bond yields have sunk. The Argentinian peso
has risen more than 20 per cent versus the dollar this year. So
much so that some commentators are starting to call the peso’s
exchange rate a problem. (There is just no pleasing some people.)
But that rate also means Argentina is drawing in capital rather
than losing it. If progress continues, that could mean a higher
standard of living for a country wracked for too long by poverty.
Caution is key, of course. But if Argentina manages a decisive
break with its Peronist past, then this could be one of the
most promising developments in years. 

Anyway, prediction is always difficult – particularly about the
future! Whatever 2025 brings, the wealth management sector will,
I am sure, continue to demonstrate the kind of energy and focus
that clients will expect. I wish all our readers and my
colleagues a very happy holiday season and a prosperous, happy
and hopefully more peaceful 2025.