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[B-SIDE Podcast] Wealth lessons for high-net-worth individuals

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The economy has faced several headwinds in recent years, from the coronavirus disease 2019 (COVID-19) crisis, the impact of the Russia-Ukraine war, to rising global inflation. No single strategy can cope with the financial fallout of these challenges, which variedly affect people — including high-net-worth individuals (HNWIs).

In this B-Side episode, Ruben L. Zamora, head of Institutional Investors Coverage Division at Metrobank, explains how uncertainty, led by higher global inflation, will affect HNWIs.

“HNWIs do tend to have exposure to risk assets such as stocks and bonds. So, in terms of the impact of this uncertainty, this environment, on wealth, it has hurt them. It has hurt their portfolio of assets because financial markets do not like uncertainty,” he told B-Side.

Mr. Zamora classified a HNWI as someone who has built up wealth over the years, holds high disposable income, is inclined to plan, save, and invest, and “puts his or her money to work harder.”

The weaker peso, meanwhile, is not necessarily a greater threat to HNWIs and their wealth in comparison with other factors. He maintained that inflation was the “greatest threat” because it erodes wealth or the earnings of people from their investments over the years. It diminishes everyone’s purchasing power.

Still, the weaker peso would be a concern or a material risk for a HNWI if they have many dollar debt and other such obligations, especially if they do not have a matching dollar denominated income source to cover those obligations.

But comparing the ability of HNWIs from before in confronting possible crises, Mr. Zamora believes that these individuals are “a bit more ready now.”

“Broadly speaking, the HNWIs are probably in a better shape for another slowdown that is potentially looming,” he said. “It is very important, though, that HNWIs work with their financial advisors to have a clear understanding of the health and resiliency of their portfolios.”

TAKEAWAYS

Buy when ‘there is blood on the street’ and diversify your portfolio.

One of the lessons from previous crises is that the best time to buy risk assets is when “there is blood on the street,” Mr. Zamora said, as he tells investors that they can take advantage of its downward trend to book profits.

“You need some of your advisors and wealth managers to help you understand when is there blood on the street. You don’t actually wait for that to happen,” he said.

However, he noted that in turbulent times like this, good assets are being sold along with bad ones. Hence, investors need to work with their advisors to identify which asset is actually a good asset.

Another lesson is “not to put all your eggs in one basket,” in case the situation goes sideways.

“Markets move very, very fast in pricing or new expectations. So, if you’re caught in with just one thing or one type of asset that just moves in the same direction, you’re going to feel the pain. It’s really portfolio management, constructing it, and ensuring you’re well-diversified. That is portfolio diversification,” Mr. Zamora said.

“Investors can never buy at the very bottom or sell at the very top. But at least, what you want to do is take as much advantage of opportunities, both in the selling part by talking with your advisor,” he added.

Cancel the noise, pay attention to what matters.

Aside from having access to expert financial advisors, HNWIs could also help themselves by developing their grasp of financial markets and investments to be able to make their own decisions. This, however, can be a double-edged sword, said Mr. Zamora.

“What I mean by that is there’s a lot of information out there — all the news, all the time, anywhere. So, unless you really look at markets day in and day out, that kind of information overload can lead the investor towards the wrong decision,” he said.

“Here in Metrobank, the advisors spend a lot of time trying to cancel out all that noise, so our clients only pay attention to the things that really matter to them as investors.”

They can also get curated market news along with expert insights and investment ideas through Metrobank’s new website, Wealth Insights.

“Curated content, noise-free for investors. It’s really kind of tailored for them. They can just go there and get an understanding of what’s going on in the market,” Mr. Zamora said. “The other important feature in our new website is the availability of our highest conviction ideas from our team of advisors and experts here in Metrobank. These are the folks who live and breathe markets.”

Made for Metrobank’s high-net-worth clients, Wealth Insights delivers expert advice, investment ideas, thoughtful perspectives, and timely news that could help them preserve and grow their wealth.

Recorded remotely in October 2022. Interview by Santiago J. Arnaiz. Produced by Joseph Emmanuel L. Garcia and Sam L. Marcelo.

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