Intelligence

The mega-rich are keeping it in the family

Keeping It In The Family: The 1% is so 2012. Let’s talk about the 0.001%. The mega-rich are cutting out the middlemen who once handled their money and instead, opting for “family offices” to scour global markets in search of opportunities.

More importantly, though, is why. Surprisingly, “just because they can” isn’t the answer. After the 2008 financial crisis, there’s been a lack of faith in external money managers and the super rich have shifted their focus to private banks with high fees and questionable transparency, and gone in-house (or, as The Economist puts it, in-mansion).

But there’s an inherent danger of combining very wealthy people to manage the wealth of other very wealthy people. Since 1980, the world’s wealth owned by the 0.001% grew from 3% to 8%, meaning the risk for loss–whether it be because of a Madoff-like scheme; or the explosion of a hedge fund like LTCM–is terrifying. Moreover, “family offices might have privileged access to information, deals and tax schemes, allowing them to outperform ordinary investors.”

Fintech Flop: Robinhood, the online investing platform, reneged its launch of checking and savings accounts late last week after some serious regulatory questions about its promises. The app was guaranteeing a 3 percent interest rate and zero fees, and allegedly, insured by the Securities Investor Protection Corporation (SIPC). But President and CEO of SIPC Stephen Harbeck said he had “serious concerns” about Robinhood’s product when he heard about the promises, writes CNBC. However, no one called him to discuss the product ahead of the launch. Yikes.

It’s not all, bad though. There’s an important lesson to be learned from Robinhood’s misstep: Proceed with caution.

“This situation with Robinhood is a flashing red light for fintechs and lawmakers — our current regulatory environment is not prepared for this rapid transformation,”Karen Mills, a senior fellow at Harvard Business School and former head of the U.S. Small Business Administration, told CNBC. “It’s an example of the fact that we have entered unchartered territory.”

Going Public: 2019 is gearing up to be the year if the IPO. Companies like Uber, Lyft and other tech giants like the rumored Slack, Airbnb and Palantir, are moving full-speed ahead with going public in the next 12 months.

What’s the rush? Potentially, the race against the next recession. CNBC reported that many economists are forecasting a downfall by 2020, and with a cumulative $200 billion in valuation, these companies could miss out if they wait much longer.

Love Or Money: Marriage–what a nice concept. Find the person you can’t live without and spend the rest of your lives together. But let’s look a bit closer at how “live without” is motivated. Ideally, by love; but an article from MarketWatch shows that 56% of Americans marry based on financial security. (We can’t help but hear Kanye in the backs of our heads saying, “Holla, ‘We want pre-nup, We want pre-nup!’”)

Shop ‘Till They Drop: Asos, a massive online fashion retailer, saw its share price dropped sharply after it announced a “significant deterioration” in sales. The nearly-40 percent downfall (amounting to an 800 million-pound, or $1 billion loss) isn’t representative of a struggling company–Asos reported its sales growth was actually up 14 percent–but instead, a general market trend for big clothing retailers in the UK. Next, another UK retailer was down over 6 percent; Marks & Spencer was down 5 percent, and Boohoo shares were down more than 13 percent as of Monday evening.

It’s counter-intuitive, given the proximity to the holiday season, but a combination of poor weather and the aforementioned political turmoil is likely responsible. “It’s as if someone switched the lights off,” writes Andrea Felstead of Bloomberg. “And the malaise is not confined to Britain – Asos says young shoppers in France and Germany have also been reluctant to splash out on coats and pricey sneakers.”

Rising Star: She’s always been a star in our eyes, but we’re super proud of our UK Director Katie Spreadbury, who was awarded Gramercy Institute’s Rising Star for Financial Marketing. This week, Katie recaps what financial marketing trends she’s got her eye on for 2019, on the blog.