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Despite economic uncertainty, it is still possible to build and preserve generational wealth, experts told CNBC on Thursday Financial Advisor Summit.
“There is a real opportunity for a soft landing” in the economy, said Mel Lagomasino, CEO and managing partner of WE Family Offices, which has offices in New York City and Miami. “But I think we will still see a recession in profits,” she said, citing rising labor costs due to worker strikes.
While rising interest rates have created volatility in the stock market, they have created competitive options for investors. “Now they’re getting paid for a change,” Lagomasino said. “You can invest money in very liquid, very safe investments and get 5%, 6% or 7%.”
But by the end of 2023, “things will be difficult, especially given the geopolitical environment,” she said, urging investors to remain “very liquid.”
Biggest threat to generational wealth
“The main cause of large wealth loss is concentration,” Lagomasino said, emphasizing the risk of “having many eggs in one basket.”
Concentration risk in the tech community grew during the collapses of Silicon Valley Bank and First Republic earlier this year, said Rodney Williams, co-founder of SoLo Funds. “This effect was felt in so many different areas.”
That’s why “diversification is key,” he said.
Another big risk is debt, especially when accompanied by excessive spending, Lagomasino said. For an investor who is not diversified, it can be a “poisonous cocktail”.
“You can focus for a moment and then diversify,” Williams added. “That’s the game.”