Steve Davies of Javelin Wealth Management discusses some of the key considerations for clients when selecting their wealth managers – and how advisers should respond to make sure they provide a relevant and suitable offering.
Date: Feb 2010
Tags: Sales, Trust, Conflicts of interest, Business model, Expectations
Given that different clients have different requirements, it is important for advisers to ensure they are capable of delivering what a client wants.
For example, said Steve Davies in an interview, when some clients come to see him they want to set up a trading portfolio. However, he doesn’t offer that type of service, so he points the client towards a more suitable trading-oriented environment.
Ultimately, said Davies, it comes down to the client finding an adviser that he or she is comfortable with and who is giving the client objective, transparent and independent advice – rather than advice based on any commission the adviser might receive on an underlying product.
According to Davies, the experience of a lot of clients in using large financial institutions has, as a result of the financial crisis, been very disappointing given what have become increasingly explicit conflicts of interest built into the business model of these institutions.
Because clients must make the final decision about whether they want that type of advisory approach, it is important that they are fully informed to do so.
Davies said clients must be careful not to have any unrealistic or misunderstood expectations about their adviser.
For example, in the same way that people spend a lot of time dating their future spouse – as they get more comfortable with that person they ask them more questions about themselves and their goals. This should be the same for any commercial relationship, too, said Davies.
He warned clients that if they don’t understand exactly what they are going to get from the relationship and how much they will have to pay, they need to ask more questions until they do.
Dealing with multiple bank accounts
There are various considerations advisers need to take into account for clients who have multiple banking relationships.
Davies said that because a lot of his clients have more than one relationship, he explains to them that he needs to be aware of what else these clients have in their portfolio in order to make a decision on the part on which he is advising.
For example, he explained, if they have a big mortgage on their property it is important to structure a more conservative portfolio. Or if a client has more exposure to Asia, for example, then the weightings of other parts of the portfolio need to be adjusted accordingly to make sure there is no duplication of risk.
That makes it essential for the adviser to gain the trust of the client, said Davies.
At the same time, the client has responsibility to be as open as possible with an adviser to get the best possible advice.
Characteristics of Asian investors
According to Davies, a lot of clients in Asia tend to have large exposures to physical property.
This needs to be taken into account, he said, because it is typically a leveraged asset with borrowings against it.
As a result, it is important to avoid duplicating these risks via other vehicles, and also to avoid putting clients into other aggressive investments which would affect their ability to repay the debt on the physical assets if and when the need arose.
