Marco Bardelli of BDG Singapore Private explains what structure and style of advisory services are needed to successfully service ultra high net worth individuals (UHNWIs).
Date: May 2010
Tags: Open architecture, Asset allocation, Family office, Trust, Succession planning
According to an interview with Marco Bardelli, the starting point of a successful advisory business for UHNW clients in Asia is open architecture.
In line with this, it is critical to have a more extensive methodology to do the global asset allocation, he said.
The challenge, however, is that Asian UHNWIs typically have several accounts, often in multiple jurisdictions, yet rarely will they have an internal family office-style function.
While these individuals are very successful in their business activities, they want to keep the management of their personal wealth separate, explained Bardelli.
As a result, there is a vacuum in this first step of the advisory process: coming up with a comprehensive global asset allocation.
Winning the trust of UHNWIs
To win trust from UHNW clients, Bardelli said advisers need above anything else a certain type of credibility.
They then need to be able to clearly present the methodology they intend to implement when looking after the clients’ assets, he added.
Within the same risk profiles, Bardelli said he doesn’t think there are any magic alpha-makers who consistently outperform other advisers, so it is better for advisers to be clear about the fundamentals they are basing their strategy on, and their implementation plan.
That means the asset manager is not regarded as a black box, he explained, nor relying just on their experience and gut-feel. Instead they have a scientific approach, which is appropriate and necessary when managing assets of that size.
Portfolio challenges for UHNWIs
For UHNWIs, Bardelli said a key wealth management challenge comes from the fact that they rarely have a complete picture of all their assets under management, in terms of risk profile and strategy.
For example, he said, bank 1 might have a certain in-house view on commodities and might be long on them, so manages the client’s portfolio against this backdrop.
But by the time the client has a conversation with bank 4 or bank 5, the client has forgotten the strategy at bank 1, so just focuses on the individual view of the bank they are talking to at the time.
As a result, such multiple portfolios might create contrasting strategies depending on an individual bank’s in-house view, said Bardelli.
This also has consequences for the client’s risk profile. They might [incorrectly] think their exposure to certain risky asset classes is minimal, he explained, because they don’t have in mind an aggregate view of the absolute exposure across their entire portfolio.
Asset liability management
Asset liability management is an issue for advisers of UHNWIs in Asia to be aware of, said Bardelli.
In traditional long-term investment strategies, advisers want to try to smooth the ride between cycles.
However, said Bardelli, in Asia, medium-term requests for cash from UHNW clients – to take advantage of certain investment opportunities – can put the entire asset allocation into disarray.
Resolving this can only be done at the level of the entire global asset allocation, he said.
Some part of the portfolio should be managed almost like a pension or insurance fund, he suggested, with the remaining part managed with alpha in mind. This is impossible to introduce in individual accounts across multiple banks, he warned.
What UHNWIs look for in advisers
According to Bardelli, at the beginning of any conversation in Asia between an UHNWI and an adviser, the client is always looking for alpha.
It takes time to deepen the conversation into global asset allocation and succession planning, he said, explaining that this can be months and years rather than hours and days.
To acquire big families, it can take years rather than weeks, he added.
The client needs to digest the concept and convince themselves that this approach will help them, explained Bardelli.
Succession planning for UHNWIs
When creating a succession plan for UHNWIs, Bardelli said the client might have concerns over how their assets are wrapped up, both in terms of the various jurisdictions they are held in as well as the structures used.
To help them in these areas, he said clients should directly approach specialists to give them specific guidance.
It is very difficult to try to put the tax, legal and asset management advice under the same roof, said Bardelli.
