By: Max Crampton-Thomas
2 min read November 2020 — Transparency and communication with clients are two sides of the coin that will dictate the future of financial services. Michael Cabanas, regional managing director of Fiduciary Trust International, stresses why helping clients focus on long-term plans during volatile times and not allowing emotions to dictate asset allocation is crucial to accomplishing your goals and, more importantly, achieving peace of mind.
What unique opportunities does South Florida provide for Fiduciary Trust International’s business?
In our Miami office, 80% of our traditional client base are locals, whereas 60% of the new people we meet are transplants. Their children are attending university here, their business opened an office, or their friends and family decided to relocate. Besides the diverse culture and proximity to Latin America, South Florida’s business and cultural communities continue to grow at a rapid place. Although real estate remains a strong component of our economy, other sectors such as technology, healthcare and education are attracting more and more residents to the area. Other benefits, such as not having a state income tax and weather that enables outdoor activities all year round, make the tri-county area an attractive place for families and entrepreneurs to lay down some roots. Parallel to significant changes around the world, you get the United States as a safe place to invest and raise a family.
How have fintech platforms helped financial advisers simplify the experience for their clients?
As our CEO John Dowd says, yes, we are in the wealth management business but every company that hopes to succeed must be a tech company as well. If you do not make it easy and user-friendly to connect through an app, website, impromptu Zoom calls or mobile phone whenever the client needs, you’re in trouble. Offering different ways to communicate is essential, but connecting with clients when and how they prefer is more important than ever. Things are changing rapidly and being able to grant clients access to their team or information whenever the need arises is not only essential, but also expected. This is why we at Fiduciary Trust International will continue to invest in, and expand, our digital capabilities.
How important are data analytics and modeling scenarios within your services?
The bottom line is the most important thing for our clients, and for us. But being able to show clients where they were, where they are now and where we are aiming for is important for giving them peace of mind, and for keeping everyone on the same page. As opposed to speaking in industry specific jargon that is hard to understand, being able to paint a picture using analytics makes it easier to follow plans and recommendations, and to make adjustments along the way. As the saying goes, a picture says a thousand words — and so does a comprehensive chart.
We feel that if you really know your trade and have done a good job for clients, it should be easy to demonstrate what you’ve done in a simple, digestible way that is easy to understand. Our professionals also like to teach as well. We do not want to limit our role to trusted advisers with limited interactions with our clients. We want to continuously educate our clients to make sure they understand what we are doing and why we are doing it. Back to the theme that keeps coming up, communication is what is said, but connecting is what is heard. We want to connect.
How is Fiduciary maximizing its clients’ wealth in the current landscape?
Capital preservation is always important, but it’s vital now more than ever. Losing a dollar hurts a lot more than making a dollar or two dollars. We want to ensure we are prudent in how we invest our clients’ assets, while at the same time not being so conservative that we could miss out in the long run.
We did raise cash last year after a great run in 2019, and in Q1 of this year we entered the pandemic defensively positioned. The downturn in March presented tax-loss harvesting opportunities for some taxable investors. We also prioritized investing in industries that are experiencing strong secular growth and could not only weather the cycle, but also gained market share. Sectors that benefited from stay-at-home orders, like software, communication services, e-commerce, consumer staples and healthcare, have been overweighted in our portfolios.
With interest rates at historic lows, we expect bond yields to struggle to even match inflation for several years. We still hold cash balances of 5% or higher, which we expect to deploy opportunistically.
What opportunities within your space of action have emerged because of the pandemic?
The technology sector continues to outperform. A lot of the things that were not frequently used are now part of our everyday life. Videoconferencing tools like Zoom and Microsoft Teams that were in their infant stages before the pandemic have exploded onto the mainstream globally, and are now a staple in classrooms, corporate America and other sectors like telemedicine. Home delivery of products continues to grow at a rapid pace, and these services are now joined by food delivery services like Grubhub and UberEats. If you don’t know about those, just ask any millennial or Gen Zer. In short, COVID-19 has expedited changes in today’s world that were previously expected to be 10 or 20 years out.
Also, the pandemic-related lockdowns have given experienced and new investors more time to think about what to do with their available capital, and why they invest the way they do. Numerous apps are emerging that make it easier to navigate through buying, selling and tracking investments. Our advice to all investors is to continue to focus on their long-term plans, and don’t allow their emotions to drive any drastic changes. Keep in mind that nothing one does in a hurry is usually a good decision. The fear and uncertainty we have all experienced during the pandemic can certainly tempt people to make impulsive decisions. But despite the volatility, many opportunities are still out there. If you stay calm and continue to buy good stocks and good real estate, 10 years from now you will be happy you didn’t panic and stayed the course.
What is your outlook for the financial services sector toward 2021?
There is going to be more consolidation. Companies that can keep cash on their balance sheets or invest in businesses that can help generate future growth will be able to withstand this time of uncertainty, and come out of it ahead. This year alone, Fiduciary Trust International acquired two wealth managers, Pennsylvania Trust Company and Athena Capital Advisors. In times like this, weighing the value of stagnant cash versus good acquisition opportunities, and having the courage to pursue deals with strong partners, are essential.
To learn more, visit:
https://www.fiduciarytrust.com/
