Choose Wisely - Spear's Magazine

Choose Wisely

Five points to consider when selecting the ideal wealth manager from Sebastian Dovey

Five points to consider when selecting the ideal wealth manager from Sebastian Dovey

New wealth clients are becoming more discerning about their selection of wealth manager. The white noise in the market is making them consider their options a little more deeply – which is good news. For those starting the quest, here is some advice on choosing the right provider.

Think about what is the most compelling business model for you. Some clients like a firm to be independent, others want it owner-managed, and others want it to be a subsidiary of a financial conglomerate. Each model has specific characteristics that either suit you or don’t.

For instance, many emerging-markets clients like to be part of a large branded global financial institution such as Citigroup Private Bank or HSBC Private Bank, because it lends them comfort to know they are managed by a giant. They like the enormity. Other clients could think of nothing worse.

How do you want the relationship staff and senior management to be paid? Should their compensation be either wholly or significantly linked to a performance bonus? Or should it be a packaged salary that is neutral to most performance issues?

Furthermore, should the senior management be aligned to the business in their compensation? For example, should they have unlimited liability such as the partners at the esteemed Pictet & Cie? Or should they be aligned to the markets and become volatility junkies?

In this context, the point often made by clients is that compensation effectively tells you how the corporate animal is going to behave. Clients may suggest that an overweight market performance-linked package might backfire as the professional may not always have their interests aligned to the client.

So, the tip is to ask the bankers how they are rewarded, and ask them to tell you how their management are rewarded too.

Determine how your client servicing team is structured. Some clients like the primary contact also to have their fingers on the buttons when it comes to portfolio management. They like the sense of accountability, market knowledge and, let’s face it, someone that is a bit like an impresario.

Others are more comfortable with a team-based solution, pointing out that the impresario’s skills and attention to detail may be increasingly limited if their number of client relationships swell beyond their time-management skills. Also, in this vein, meet the whole team that will work with you and pay particular attention to the juniors, because when it comes to much of the day-to-day stuff, they are likely to be your contact point.

Check whether the bank is prepared to offer access to other clients in the selection process. If they are not willing to do this, and many still won’t even consider the idea, then the next best option is to see what levels of client interaction they offer in their normal business practice.

For instance, if the bank offers client education events or specific co-investor syndicates, then both are a sign that the institution is comfortable with you meeting with other similar investors. This shows a higher degree of confidence in their ability and the satisfaction levels of their clients than if an institution does not want you to venture from their sight within the corporate universe. We have found this is particularly appealing to the entrepreneurs.

The fifth and final tip is to examine how often the firm has adjusted its strategy and senior management in the past five years. This is particularly important for those of you who are looking for stability and continuity in the bank you work with.

All firms will try to stress their centuries-old histories, but really you need to know what they did in the last decade – did they follow fashion, lead fashion or panic? Some banks thrive on corporate volatility and make strategic changes as often as the seasons. They would argue it fosters the high level of financial performance that clients enjoy as a by-product.

This tip is crucially important if you are looking for continuity in your own relationship with the bank. Indeed, if a bank has been shuffling strategies as fast as a deck of cards, then you may not be buying into the stability you crave. If you want a little more settled consistency, then perhaps it is not the place for you.



 

FOLLOW US ON