A version of this article first appeared in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly guide to the high-net-worth investor and consumer. Sign up to receive future editions, straight to your inbox. Wealthy investors have made the best trade over the past week — largely doing nothing. While many hedge funds and institutions have been selling over the past week, wealthy individual investors were largely sitting tight or even doing a little buying. Interviews with several top executives in wealth management suggest that unlike the crashes in 2020 or 2008, high-net-worth investors were feeling less pressure to sell over the past week. Some started buying Friday afternoon. And many used the lower prices as an opportunity to do some tax-loss harvesting and estate planning. Here’s what advisors to the wealthy say their clients are responding to the market roller coaster. John Mathews, head of private wealth management for the Americas at UBS Like most Americans, wealthy investors are feeling a wide range of emotions from the market and policy turmoil. They’re split down political lines, which shape their economic outlook and investment impulses, according to Mathews. “Our job is to take the emotion out of it and try to level-set,” Mathews said. “Most of the time we’re psychologists.” That helped clients to avoid making big trades or financial decisions based on feeling over logic. Mathews said many UBS clients started trimming their stocks and “de-risking” in January. While markets were soaring in the first two months of the year on hopes for the new Trump administration, many of the wealthy were selling and adding cash. Their large cash cushion helped keep them calmer during the past week’s market turbulence and provided funding for later buying opportunities. “There is a lot of dry powder on the sidelines right now,” he said. “Some of the really wealthy clients were thinking [in January], ‘I made a lot of money, it’s been easy for two years in a row and everything was working exactly how we wanted it to. But in 2025, we’re going to start to see some different things pop up so why not take profits now?'” Many clients were buying on Friday, when the Dow dropped 2,200 points, Mathews said. “Friday afternoon, we saw a lot of buying,” he said. “Clients were asking whether they should buy individual stocks that have been punished that they always wanted to get into, or just go ahead and buy the indexes.” For the most part, wealthy clients have stopped trading, waiting for more clarity on policy and markets. Others added money to private equity, which is less volatile on a day-to-day basis but still faces challenges with a lack of IPOs and liquidity. “The question is exits,” Mathews said. “How are you going to get exits and when? Our wealthier clients have time horizons of 10 or 15 years to get their money back, so they’re not as concerned.” Gold is another big theme among wealthy investors. While it’s come off its highs over the past week, gold has been seen as a safe haven even before the week’s market gyrations. “We’re getting a lot of questions about gold,” Mathews said. “Everybody is interested in having a piece of gold as a hedge right now.” Mathews said one client summed up the broader dilemma for investors this week with a property analogy: “He said, ‘It’s like I wanted to buy a property that had been $10 million and it goes to $8 million. It’s cheaper, and I still like it. But now it could also go to $5 million. So what do I do?'” Pamela Lucina, head of family office solutions at Northern Trust During market shocks, Lucina guides wealthy clients according to her “three Ps” – don’t panic, don’t predict and engage in planning. She said Northern Trust makes sure clients always have plenty of cash and other liquid holdings on hand when markets fall, so they don’t have to sell at a loss. These so-called “portfolio reserves” can provide cash for spending when they need daily liquidity. “We’ve been telling them forever to plan for volatility, which is inevitable,” she said. “They can pull from those risk-off assets to fund their lifestyle.” Lucina said her clients didn’t make big moves to buy last week. But she said some clients who had just sold their businesses and excess liquidity started putting some of the money into the market. “Some of them are starting to deploy it into equities,” she said. The main advice Northern Trust has given clients over the past week is to engage in estate and tax planning, she said. The market slide created three main planning opportunities. First, lower asset prices make grantor retained annuity trusts, or GRATs, more attractive. Many clients were creating or “freezing” GRATs while stocks were down to create tax savings when transferring wealth to family members. She also said more wealthy clients were doing Roth conversions, or transferring funds from a pre-tax retirement account to a Roth IRA. Converting at market lows allows investors to pay taxes on the lower valuations and hedge the risk of higher tax rates in the future. Finally, she said, clients were tax-loss harvesting, or selling their losers and using tax losses to offset investment gains later in the year. “What we found is that when we were able to turn the conversation more towards planning opportunities, people feel more in control,” Lucina said. Matthew Fleissig, CEO of Pathstone “We’re getting less fear from our clients right now and more, ‘Should we be buying?'” Fleissig said. Fleissig said the fear levels from his clients didn’t feel anything like 2000, 2008 or 2020. Family office clients, or those with $100 million or more, were “layering in” to the market and buying. Clients were also interested in structured products, which can offer protection on the downside but strong upside. “In times like these, it’s our ability to find asymmetric opportunities, like opportunities in private markets or structured products that investors look to us for,” he said. One warning: private credit. Wealthy investors and family offices have poured into private credit in recent years, leading to a flood of capital chasing deals with less regard for risk or returns. “I think a lot of deals in private credit are extremely covenant-light,” Fleissig said. Dmitriy Katsnelson, deputy chief investment office at Wealthspire Katsnelson noted wealthy investors tend to hold more cash at the end of the first quarter for tax payments. This year, the cash is serving the added purpose of buffering them from stock and bond losses. “That timing has been helpful,” Katsnelson said. “And people are asking whether this is a good time to start buying and becoming more aggressive.” For the most part, investors across the wealth spectrum are avoiding major changes in their portfolio, he said. Yet smaller investors, those with $2 million or $3 million, and those who are close to retirement were feeling the volatility more than the ultra-wealthy clients. That latter cohort has more investments in alternatives, like private equity and direct deals, which don’t price on a daily basis. “Mainly people are venting,” Katsnelson said. “They have direct exposure, and we’re there to listen.”
People walk past the New York Stock Exchange (NYSE) in New York City. (Photo by Spencer Platt/Getty Images)
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A version of this article first appeared in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly guide to the high-net-worth investor and consumer. Sign up to receive future editions, straight to your inbox.
Wealthy investors have made the best trade over the past week — largely doing nothing.