Serving one-quarter of the world’s billionaires globally, Citi Private Bank offers a time-tested approach to preserving and growing family wealth, seeking to help legacies flourish for generations to come
Significant wealth can take many years or even a lifetime to create. Successful entrepreneurs and business leaders work tirelessly as they build their ventures over time. Sustaining the wealth that they achieve, however, typically proves to be an even greater challenge.
Almost every culture around the world has an old saying about wealth’s tendency to dissipate within a couple of generations. These include such pearls as ‘from shirtsleeves to shirtsleeves in three generations’ (a Scottish proverb) and ‘The first generation accumulates, the second enjoys and the third loses’ (an ancient Chinese proverb).
Such wisdom remains relevant today. In response, we see the latest generations of wealth owners seeking a wide range of customised services. Investing for the long term, strategic borrowing, making cash reserves work harder, and planning and structuring their wealth are pressing priorities. Given their increasingly international presence, many individuals and families also require solutions that span multiple jurisdictions globally.
“We are in the midst of the greatest intergenerational wealth transfer in human history,” says Lee Lung-Nien, chairman and head of Asia South, Citi Private Bank. “Drawing upon Citi’s global network spanning 160 countries and our extensive heritage, our mission is to enable clients as they strive to grow their wealth and ensure their successors are well-equipped to uphold the legacy passed down to them.”
Diversify to thrive
Many families generate their wealth from a single company, perhaps operating in one industry and in one country or region. While such concentration may initially deliver substantial gains, it also creates great risk. If the business suffers company-specific issues or industry-wide problems, its value can fall sharply. In a worst-case scenario, the losses may become permanent.
Whether a family is retaining a concentrated business or whether it has been sold up, Citi Private Bank believes that establishing a core investment portfolio is essential. This involves assembling a carefully considered mix of different asset classes from around the world, such as equities, fixed income, and for suitable and qualified investors, alternative asset classes including private equity, real estate and hedge funds.
A diversified core portfolio can help mitigate various risks over time. As explored in Citi Wealth’s recent Outlook 2024: Mid-Year Edition, having a broad, global mix of asset classes and assets has added resilience in the face of geopolitical shocks such as the outbreak of hostilities between rival powers. A high-quality fixed income—especially bonds issued by creditworthy governments—can potentially appreciate even as equities are sold off due to geopolitical or economic uncertainty.
Risk mitigation is an important part of the quest to preserve wealth. While diversification does not guarantee profit or protection against loss, if successful the family not only defends its purchasing power but increases it over time. Having exposure to multiple sources of growth, such as new technologies and other transformative themes, are among the ways to do this.
To help build diversified core portfolios, Citi Private Bank uses proprietary techniques to determine a suitable mix of asset classes for each client. To put the plan into action, it then enables access to a range of investment strategies from its global platform.
Invest fully, do not hoard cash
Holding excessive amounts of cash can feel comforting. This is especially true during intense sell-offs in equities and other markets. But while cash can hold its value during periods of turbulence, failing to put liquid resources to work has a high price. Over time, cash may not keep up with inflation. At the same time, those with large cash balances held for the long term typically miss out on the potential opportunities of rising markets. As a result, cash hoarders tend to become poorer relative to those who are fully invested.
The long-term investment plans that Citi Private Bank builds for each client are based on the principle of maintaining exposure to risk assets throughout market cycles. Rather than switching to cash during times of market stress, strategies that seek to capitalise upon volatility or preserve the value of existing investments are among the possibilities.
A structured approach
Just as important as how wealth is invested is the way in which it is held. This is where a comprehensive wealth plan comes in, along with related structures. Putting these in place can assist in preserving assets against many challenges. These include excessive taxation, inheritance disputes, divorce and other legal actions. With suitable structures, assets can be passed confidentially and more smoothly to designated beneficiaries.
The wealth planning process should begin as early as possible. It needs to be holistic, addressing the family’s entire wealth. Rather than just financial investments therefore, a wealth plan should consider homes, businesses, treasured collections, yachts and aircraft. Reflecting the jurisdictions where family members and assets reside is an increasingly common priority.
With wealth planners based in leading global financial centres and strategic locations, Citi has helped clients safeguard assets and facilitate seamless wealth transfer for more than two centuries. It can provide the expertise to assist in creating dynamic plans and structures in collaboration with each client and their independent tax and legal advisers, and consider adjustments as circumstances change over time.
Promoting family unity
As family wealth grows, so do the responsibilities of managing and governing it. Establishing a family office can provide the necessary infrastructure to handle these complexities as it serves as a centralised entity that oversees investments, administration and legacy planning.
By consolidating the family’s financial affairs, a well-managed family office can help to foster consistent and strategic decision-making, as well as enhance governance. Guiding the family in defining its values and goals, ensuring connectivity between family members, and preparing the next generation for future responsibilities are increasingly part of family offices’ remit.
Through its Global Family Office Group, Citi Private Bank serves private investment companies, family foundations and family offices worldwide. As well as providing institutional-calibre services, it also advises on the setting up, structuring and running of family offices.
A trusted partner
Citi Private Bank’s investment philosophy and process reflect time-tested practices that have helped families sustain their wealth for the long term. Families can draw upon the institutional power of Citi—one of the world’s leading banks—as it offers a comprehensive suite of strategies, encompassing banking facilities, financing, custody and investment services. Citi’s ability to provide tailored advice and support across different jurisdictions makes it a valuable partner for families seeking to preserve and grow their wealth for future generations.
“The strength of the Citi network across personal and institutional banking means that we can provide our clients with solutions that meet both their personal and business needs, no matter where they are,” says Lee. “Combined with our client-centric focus, we hope to be able to help our clients protect their legacy for their children, grandchildren and beyond for many years to come.”
This story first appeared in the September 2023 issue. Purchase it as a print or digital copy, or consider subscribing to us here
