Right before the clock struck 12:00, and 2022 turned to 2023, we had posted our most recent Fireside Conversation with Sune H. Sorensen. Our own Frank Suess and Mr. Sorensen had a full, in-depth discussion that covered a number of very key areas for investors and knowledge seekers alike. If you haven’t had the chance to watch, we certainly invite you to do so. For your convenience, we’ve dissected what we felt were the key learning points and provide a quick-reference guide that will surely whet your whistle for more.

What follows are the key takeaways from our recent Fireside Conversation with Sune Sorensen…

We are drifting away from a uni-polar to a multi-polar world.

After the 2nd World War, the United States came into its true primacy, and we’ve lived in a US-led world for 70 years. It hasn’t always been pretty, of course, but if you consider all things on a broader scale – technology, economics, finance, wealth, amongst others - this uni-polar world served many very well.

But now, different systems are starting to butt up against one another: the US, China, Europe, Russia. Historically, these types of periods we are in, with different world powers jockeying to find their true identity, times of great volatility have always followed. No, the world isn’t ending, and China is looking less likely that they will take that role over and become the new power, but while the powers-that-be figure things out and everyone else in between finds their place amongst them, anyone starting a business or investing in a portfolio should be careful to not expect the same things to work as they had decades before.

Extraordinary results can no longer be achieved through ordinary efforts.

Thanks to the credit cycle of the past 25 years with very low interest and inflation rates, we had been going through a period where “bland” investment choices could yield double-digit returns. Traditionally, that has not been the norm. That cycle was flawed as it was credit driven and a lot of mal investment was made.

If you think you can continue do ordinary things to get those extraordinary results, those times are over. We are in for a reality check, for a rude awakening, but as painful as it might be, it’s also healthy.

Outcome of inflation for investors: the unsuspecting frog in slowly boiling water

Will we come out of the current inflation situation quickly, or gradually over time? And is there a benefit to for having it one way or the other?

In a probability of outcome for investors, the greatest likelihood is that we will see higher than average inflation for a prolonged period of time, and a sticky inflation at that. Using an apologue of the frog in a pot of boiling water – if a frog is suddenly put in boiling water, it will jump out, but if put in tepid water which is brought to a boil slowly, it will not perceive the threat and slowly be cooked –  inflation will lead to a loss of purchasing power and wealth over time, and investors will suffer those losses if staying anchored in the ways of the past, as the water gets warmer. Investors risk being “boiled” if they don’t start taking appropriate action now.

The upcoming “storm”: take shelter or take advantage?

Change brings risk, but it also brings opportunities.

When a storm (for our purposes, economic and financial risks, to name a few) approaches, you can either take shelter, or in the case of Sune’s analogy, you can build windmills to take advantage of the winds. In all actuality, you need to do both.

The new era is here. We're witnessing a manifold of changes that are bringing along with them great risks and new challenges, some of which we’ve never had to face. It is essential to stay on top of your wealth strategy and planning. But don't forget that such phases of change are also accompanied by the emerging of new opportunities. Be prepared, be safe, but don't be scared. Observe and benefit!

Investors need to consider not only WHAT assets they own, but HOW they own them.

In this new era we find ourselves in, the concerns and risks we must keep our eyes on have changed considerably from what we had to – or didn’t have to - concern ourselves with over the last 30-40 years. Those times are long gone.

Today, investing is one part growing your wealth, but equally important is the “structure” side, or in essence, how you are structured to retain your wealth. Where do you hold assets, what structures are you using to help protect your assets, etc.? Americans today are a prime example, as they are particularly susceptible to litigation and other risks that can literally steal their wealth from them. A broader concept, which includes thinking outside the box, and planning is now required for investors.

Safety should be top priority, and particularly in the custody of your assets.

Custody of where you are holding your assets and investments is critical, and actually can pose the greatest risk to your assets if not given proper care and thought.

There are three levels you need to consider: jurisdictional (for example, where are my assets held in the world and what regulatory framework there is for the custody of assets there), institutional (are my assets exposed to creditors of the institution) and contractual (are you exposed to losing assets if something happens to the custodian).

The Swiss model for custody of assets still offers the best protection for investors, along all three of the levels mentioned. Not the Credit Suisse’s or the UBS’s, those that are exposed to obligations of creditors, that are heavily involved in investment banking-types of activities or are in the business of aggressive strategies. But traditional Swiss banking, at its core, as real custodial banks, still stand up strong and healthy to those three critical levels of safety.

The devil is in the details. We should be planning for worst-case scenarios, and in doing so, there should be no “gray”, only “black” and “white”.

For more details, and to listen to the full Conversation, we invite you to have a look at our new Spotify Channel, where you’ll be able listen to and watch this and all future Fireside Conversations, or check it out at YouTube.

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