Didier Duret of ABN AMRO Private Banking explains how the advisory process has evolved since 2008, and looks at the changing attitudes of clients in both Asia and Europe towards investing and risk generally.

Date: Feb 2011

Tags: Asset allocation, Transparency, Liquidity, Risk profile

• The business of advising clients is getting more professional, and the quality of conversations with clients is very different from two years ago
• The general intolerance of clients towards products which are not clearly explained has led to a return to the classical way of managing money – which means getting the asset allocation right
• There is a greater openness from Asian clients today towards international diversification – especially compared with a few years ago
• While Asian clients were ready to take risk a year ago, European clients have stayed on the sidelines, accumulating cash

According to Didier Duret in an interview, the business of advising clients is as tough as it ever was, although the people providing the advice are getting more professional, and the quality of conversations with clients is very different.

For example, there is a more acute sense of what clients want and also a clearer need for simplicity in investment advice.

At the same time, he said, clients will not be swayed by structured products just because they have an attractive return. Clients want to know more about the product, or they might want to only buy simple products.

In general, Duret said that the general intolerance of clients towards products which are not clearly explained has led to a return to the classical way of managing money. Which means getting the asset allocation right, and having a good range of liquid products as a base to the portfolio.

There is also less concentration of risk than in the past, he added. For example, there was previously a big concentration into the financial sector – either through bonds or equities.

A shifting approach to investments

When visiting with Asian clients today, Duret said there is a greater openness from them towards international diversification – especially compared with a few years ago.

For example, Indonesian clients realise they have had an extraordinarily good run over the last two years, and are open to diversifying into either other Asian countries or developed markets.

In terms of European clients, Duret said they have been very conservative and have learnt two main things from the crisis.

First, he said, if people move too aggressively with the crowd, then they are likely to underperform. Secondly, he added, from an asset allocation perspective, there is an awareness of the need to look at the potential sources of return.

People cannot be absorbed by all the bad news propagated by the media and other commentators, he warned.

Evolving risk profiles

According to Duret, it is important to separate Asian and European clients when looking at their risk profiles.

While Asian clients were ready to take risk a year ago, European clients have stayed on the sidelines, accumulating cash.

As a result, he said there is now a feeling among European clients that they might have missed out on some opportunities. This is leading to a dynamic environment for advisers.