Historically, international investing has been a fine way to diversify a client’s portfolio and take advantage of the financial relationships that exist between countries of the world.
Advisors with a solid working knowledge of international markets can assist clients in benefitting from the ways global investing works. Clients who invest in products and services offered abroad often use those investments as a balance against the fluctuations in the American markets, and vice-versa.
But in today’s world, international investing requires more focus than ever before, and not just because of the promises of the Trump administration to renegotiate all major trade agreements to better favor American companies and investments.
The meeting over the April 8-9 weekend between U.S. President Donald Trump and Chinese President Xi Jinping illustrates the flexibility of the current international investing scene. In the meeting, President Trump reportedly urged the Chinese government to provide better access to the financial sector investment market, as well as beef exports, and Chinese President Xi agreed to provide that.
While there are clients who avoid international investing for a variety of reasons, many investors enjoy the opportunity to get involved in markets overseas. According to Spectrem’s study Asset Allocation, Portfolios and Primary Providers, 55 percent of Ultra High Net Worth investors with a net worth between $5 million and $25 million own international or foreign mutual funds. Twenty-eight percent own individual international stocks. Thirteen percent expressed interest in beginning or increasing investment in China and 6 percent in Korea.
Do these percentages hold up in your clientele, or are your clients even more engaged in international investing? Either way, conversations about the state of international affairs and their relationship to investing potential need to be held with your investors who have global exposure.
Apparently, concern over the state of the world’s relationships has moved ahead of concern over domestic political issues in the minds of UHNW investors. In Spectrem’s study Financial Behaviors and the Investor’s Mindset, 58 percent of UHNW investors express concern over the United States’ relationship with China, and 51 percent express concern over the United States’ relationship with Russia. Such concerns are higher among World War II investors and Millennials than with Baby Boomers.
Concerns over international affairs does not mean that advisors should recommend getting their clients out of global investments. International conflicts happen all of the time, and all global markets continue to operate. The current state of relations between the United States, China and Russia currently require greater attention to detail, not only for clients who invest frequently in foreign markets but also for Americans with a domestic portfolio who are invested in firms with a large global exposure.
While advisors may have specific clients who immediately come to mind when international issues crop up, it might be wise to send out an updated newsletter or firm-wide message to investors to make them aware of how international markets are reacting to news of nationalism in both America and in Europe. Letting investors know that your firm is on top of the news internationally could make them a recommended site should investors who wish to diversify look to international stocks or mutual funds for fresh investment options.