"The COVID-19 pandemic proves to be a lucrative opportunity for wealth managers"
In a guest article published on the Danish financial portal AM Watch, investment professional Frank Hvid Petersen, co-owner of Jentzen & Partners, has assessed the current situation for the wealth management industry and raised concerns about the long-term consequences of ultra-loose monetary policy.
According to Hvid Petersen, consumer prices have recently risen unusually quickly in several countries, including the US, UK, and Germany, but he does not yet assess whether this is only temporary or if inflation will also increase in the long term. Despite this uncertainty, he believes that a change of course from the current ultra-loose monetary policy is increasingly likely in the coming months.
The financial expert suggests that the regular bond purchases by central banks of industrialized countries should stop immediately. Hvid Petersen's concerns are rooted in the potential negative consequences of the current monetary policy, including real estate bubbles, unaffordable housing, enormous wealth transfers, growing inequality, debt-financed companies, a global debt tsunami, and zombie companies.
The wealth management industry has benefited from the increased demand for investment opportunities due to the pandemic-related savings. Many traditional savings accounts are incurring zero or negative interest, causing many customers to seek alternatives for their savings. The fear of real money loss has brought many new customers to wealth managers.
Central banks have injected large amounts of money into the market through bond purchases, driving global asset prices to record highs. This easy money can inflate prices in asset markets, increasing financial instability risks, as Hvid Petersen points out.
While a specific impact of the crisis on the wealth management industry was not detailed in the provided article, Hvid Petersen stated that the Corona crisis is a massive gift for the wealth management business.
General economic understanding suggests that ultra-loose monetary policy, characterised by very low or negative interest rates and large-scale asset purchases, can have several long-term consequences. These include inflation risks, asset bubbles, distorted incentives, and reduced policy space for central banks.
Without Frank Hvid Petersen’s specific assessment, this general view provides a framework. If you require his expert opinion, I recommend consulting his direct publications or interviews.
Investing in personal-finance alternatives, such as wealth-management or other investment options, might be a wise choice for individuals seeking higher returns due to the zero or negative interest rates in traditional savings accounts. However, the long-term consequences of the current ultra-loose monetary policy could pose risks, such as inflation, asset bubbles, and financial instability, as raised by investment professional Frank Hvid Petersen.
