Financially empowered women and family governance emerged as key themes at a Wilmington Trust conference in midtown Manhattan.

Dollars, debts and demographics dominated Wilmington Trust’s 2013-2019 capital markets forecast, unveiled yesterday at a press briefing in New York. Financially empowered women, family governance and the new US tax laws also emerged as key themes at the midday presentation “Investing and Managing Wealth in Uncertain Times” in midtown Manhattan.

The wealth management firm, a subsidiary of M&T Bank since 2011, projected continued slow but steady economic growth in the US at 1.5 to 2 per cent this year, and annualized inflation averaging 2 per cent through 2019.

The forecast described equity returns as “somewhat rich” this year, estimating nominal total return for large-cap US stocks at 5.5 per cent. Investors looking for more returns need to “go beyond the US border,” said Wilmington chief investment officer Rex Macey.

Developed international large-cap value stocks, for example, were projected to return 11.2 per cent, while Wilmington forecast a nominal total return of 10.7 per cent for emerging market equities.

Massive buying by central banks has created asset inflation and “a lot of dollars,” Macey said. Despite dramatic expansion of central bank balance sheets, however, weak loan growth and less than robust corporate capital spending point to “muted” economic growth for the foreseeable future, according to the Wilmington forecast.

Under-performing bonds, damaging demographics

As for debt, the bad news for investors is that “investment-grade bonds won’t even keep with inflation,” Macey said. Indeed, Wilmington estimates negative returns ranging from minus 0.4 per cent to minus 1.4 per cent for various government bonds. As the forecast succinctly noted “excessive amounts of debt, particularly in the public sector, will weigh on the economy and capital markets as we move forward.”

Demographics were represented in the forecast by the estimated 10,000 US Baby Boomers retiring every day. Because they will need to live off their savings and ultimately sell more securities than they buy, Baby Boomers are going to be “a headwind for stocks” for the rest of the decade, Macey said.

Women’s time has come

Women, however, represent a bright spot for the wealth management business, said Kathy Karlic, Wilmington’s chief client officer. She argued that the financial empowerment of women was not in the future but “here today.” Karlic noted that women will be in charge of an estimated $41 trillion worth of assets, and will decide where that capital will be allocated.

What’s more, 1 out of 11 businesses are now owned by women and female Baby Boomers, according to Karlic, “wield more spending clout than any other group in the US.”

And because women live longer than men, it’s estimated at least 80 per cent of females will face managing finances alone at some point in their lives, Karlic said. Not coincidentally, Wilmington has been targeting women over the past year in a series of forums and presentations and Karlic said women want an “empathetic” experience when it comes to working with financial advisors. “They need a different delivery system for advice,” she said. “One size does not fit all.”

Governance a “huge opportunity”

Family governance is another “huge opportunity” for wealth managers, said Tom Rogerson, senior managing director and wealth strategist for Wilmington.

Wealthy families are increasingly concerned with making sure their children are not “dis-incented” by the family fortune, said Kemp Stickney, chief fiduciary officer and head of family wealth for Wilmington. As a result, according to Rogerson, “next generation” education has become more popular, as wealthy families want to be sure their children are able to handle the wealth they will receive.

“Wealth managers can’t just do estate planning anymore without preparing families for what’s going to come up in life,” Rogerson said.

Top tier in good spirits

All in all, wealthy families are in good spirits as the New Year gets started, according to the Wilmington executives. Above all, they’re feeling relieved that the new tax laws weren’t more onerous. “For the top 1 per cent, it’s not as bad as it might have been,” Macey said.

And even though charitable deductions have been reduced, Stickney thinks wealthy families will continue being generous to their own charitable foundations and other philanthropic causes. “[The new law] will have a slim effect on giving,” he predicted.

Nor will higher taxes put a damper on spending, said Stickney. Wealthy people will continue to pursue their passions, especially collectors, he said, noting that a rare GTO sports car recently sold on the private market for $35 million.