I’m not sure what was more surreal last month – hearing that Donald Trump was about to go to Davos to tell everyone how great America is as an investment or watching his chief economic adviser, Gary Cohn, deliver the news on TV.
Cohn seemed convinced in his own message, although it was interesting to see his old firm, Goldman Sachs, suggest that emerging markets offer a better opportunity than the US this year. Yes, that’s right – some of those ‘shithole’ countries may outpace America’s growth.
Other national leaders, however, had different messages for the World Economic Forum.
Justin Trudeau, prime mister of Canada, for example, urged corporates to tackle gender inequality. The UK’s PM Theresa May talked about the responsibility of technology firms to protect internet users. President of France Emmanuel Macron talked about the need for “moral ways to make profits” and taxation justice. Angela Merkel, Chancellor of Germany, talked about fighting climate change together. China’s president Xi Jinping talked about working together as a community.
In a nutshell, they all talked about a fairer society – a topic the US might feel it needs to address.
A report from the US Federal Reserve at the end of 2017 showed the top 1% in the country now hold almost 40% of the nation’s wealth, up from 34% in 2007. The bottom 90%, meanwhile, now hold only 23% of the nation’s total wealth, down from 29% in 2007.
The reality of these statistics is evidenced across the US, from tent towns in Orange County, California, to rural poverty in Arkansas. One teacher I spoke with in December makes a roundtrip of 30 miles to visit nine payday lenders every two weeks because she cannot live on her salary.
I often think that when it comes to closing the wealth gap, we will simply need a revolution by those at the wrong end of it, but in January I was comforted to discover that hundreds of people in the 1% are starting this revolution themselves.
Morris Pearl, for example, worked for BlackRock and is now chair and founding member of Patriotic Millionaires – a group of wealthy individuals lobbying for higher tax rates for the rich. Billionaire environmentalist Tom Steyer has also been vocal in his criticism of the current administration’s policies.
Why is this important? Because when it comes to US politics, the wealthy have the ear of the politicians.
Another member of the 1% shared a story with me to demonstrate. At a fundraising dinner for a Democrat senator – where everyone in the room had paid at least $1,000 to attend – the senator gave everyone in the room two minutes of his time for them to share their views.
At the end of the dinner, the senator said how grateful he was to be able to travel the country and speak with normal folks like those in the room.
As my storyteller says: “We were a group of millionaires who paid, in many cases, a few thousand dollars to be there. In what world did he think we represented the normal view of the US? And then you realize, left or right, these politicians only hear the people who are paying to be heard.”
This means, sadly, that unless the wealthy fight for the ‘normal’ guy, policies will continue to reflect their concerns.
What gave me hope was that some banks are beginning to talk about these issues with wealthy clients who are concerned about inequality. They are asking how the 1% can better align their wealth (in addition to their voices) to close the gap?
In other positive news on equality, first Citi and then Bank of America Merrill Lynch said at the start of the year they would report on and work to close their gender pay gaps, following pressure from shareholder Arjuna Capital. The banks had rejected the proposals in 2017.
That leaves Wells Fargo, JPMorgan Chase, Bank of New York Mellon, AmEx, MasterCard, Reinsurance Group and Progressive Insurance yet to respond to Arjuna’s proposal filed with them again this year. One can’t imagine they will be far behind.
With JPMorgan Chase facing a lawsuit from the US Labor Department for paying female employees less than men, and Wells, well… just being Wells, one would think these two might benefit from such action.
Back in the realm of wealth management, greater opportunities for women may also be on the horizon. Euromoney surveyed private bankers around the world to ask what their firms were doing for the growing number of female wealth holders; 31% say they plan to hire more female advisers. While 51% of the US population are women, only about 15.7% of the country’s financial advisers are female.
Some 24% of respondents say they are looking at female-targeted marketing, 26% say they are introducing targeted products and 23% say their firms are offering internal training on specialist advice for female clients. There is room for improvement, however, because 27% of respondents say they have no plans to address the growing number of female wealth holders at all.