In this second episode of Insider Talk, Dominic Gamble CEO of WEALTHexpert.com, sits down with Urs Brutsch, CEO and founder of a leading Singapore boutique, HP Wealth Management, one of the pre-eminent boutiques in Asia, to confront this head-on and ask him:
• Why do independent asset managers exist? (Part 1)
• What is the difference between a private bank and an independent asset manager?
• What’s the future of Independent Asset Managers versus Private Banks?
There is much talk about boutique wealth managers, otherwise known as independent asset managers. They are often mooted as the future of high net worth wealth management and are a force that will prove stiff competition to the private banks in the coming years.
But that’s only happening slowly. If the proposition is so strong, why are boutique brands so rarely recognised by clients (in our experience at least)
1. What Is the Difference Between a Private Bank and an Independent Asset Manager?
DG: Ok. So how does a boutique work for a client? Let’s look from a private client perspective – Say, for example, I haven’t heard of you, but I’m familiar with Private Banks, and I’m quite possibly even an unhappy client. But I see your name and perhaps I don’t recognise it – how does a relationship with you work?
UB: The same as directly with a private bank, only better!
• Independent advice
• Fee transparency
• Consolidation of assets
• We work for you
UB: Clients of HP Wealth Management still place their money with a private bank because we [HP Wealth Management] are not a bank, we are an investment manager or advisor. That choice of bank may simply be the one the client currently uses or it could be a new bank that they prefer or we recommend.
If the bank is the same then there will be a form at their bank that needs to be signed by the client nominating us as a Limited Power of Attorney holder.
If a new bank is required then we will manage the account opening for them.
We help with this process from start to finish and we become the interface for the client, it’s no longer the bank. Instructions to transfer, deposit, or trade any client funds are sent to the independent asset manager. All administration is done by the independent asset manager, all investment advice and execution is done by the independent asset manager.
The crucial element is that the account is in the client’s name, not ours. So one year later if the client doesn’t like us, they still have a bank account in their name and we can very simply be removed. It is also important to note that the Limited Power of Attorney does not allow us to move or withdraw assets.
A client may initially think that by using an Independent Asset Manager he only adds another layer of fees. However, that is by and large offset by the reduction of transaction and custody fees at the bank. Through us the client enjoys “wholesale” rates at the bank.
We have our own fee schedules for our clients with the banks. Overall the involvement of an Independent Asset Manager is not more expensive compared to the client dealing directly with a private bank.
Consolidation of Assets
Most of the Asian investors have multiple Private Banking relationships. Very often, they look at each relationship in isolation. One of our core competencies is the ability to consolidate assets held in different portfolios with different custodians. This allows us to show the client all his assets and liabilities in a consolidated balance sheet. From there, we can then advise on a holistic basis across all portfolios. That is something a client would rarely do with a bank.
We Work for You
We are not tied to using any one bank. We can source investment ideas from anywhere in the market and aim to bring best-in-class solutions to our clients. The client pays us, and the client can fire us if we don’t deliver the value he expects.
2. What’s the Future of Independent Asset Managers Versus Private Banks?
UB: We hope there will be far more independent asset managers, raising awareness that there is another choice instead of using a private bank directly. We hear so many stories of dissatisfied private bank customers which is why the independent asset management industry is growing day-by-day.
The transition to independent asset managers will be led by the clients themselves. As private banks continue to perform poorly in the eyes of the clients and as the era of wealth creation matures and the focus will he on wealth preservation in Asia, boutiques like HP Wealth Management will continue to grow their client base and services for the UHNW Individuals and families in need of unbiased advice for their wealth.
Don’t forget also that independent asset managers are not strictly in competition with private banks because we still use them and work with them. But we do it in a way that protects client interests and uses the banks as a service provider, so we see the banks as our partners and a conduit to bring the best solutions to the clients.
DG: Thanks Urs. And hopefully our service is playing its part to raise awareness of all the different types of wealth managers that exist, helping clients make the right choice.
In part 1 of this series, we asked Urs Brutsch why independent asset managers exists?