Marcel Kreis of Credit Suisse Private Banking looks at how high net worth individuals should approach and manage their wealth, as well as their banking relationships.
Date: May 2011
Tags: Estate planning, Education, Transparency, Expectations
For example, they need to be clear about the importance to them of the safety of the financial institution they use and of its credit rating, and about whether they just want to keep their funds on deposit and take a gradual approach to investing before making any decisions or engaging relationship managers and investment consultants in conversations about risk and returns.
Clients also need to consider estate and succession planning in a wider sense, added Kreis. Plus, they need to think about what type of account they want and the purpose of it.
Choosing wealth managers
For entrepreneurs, Kreis said they should consider whether the institution they look to bank with has services which go beyond traditional wealth management, for example to help with their businesses through raising capital, restructuring or lending.
These clients must also decide if it is important to them for their institution to be entrenched in the market place, he added, with a large client base that might be useful going forward when it comes to buying or selling a business via the bank’s own network of customers.
For clients with large pools of money, and who want to involve their children or spouse in managing the assets, Kreis said they need to consider whether the bank offers family office-type service to help them structure their family governance.
At the same time, with the increasing degree of financial and investment sophistication combined with the lessons learned from 2008, Asian high net worth individuals are demanding greater transparency on products.
Kreis said clients want to know what they are buying, rather than buying based on trust. So wealth managers need to be much more explicit in terms of product features, risks and expected returns. Clients also expect these products to match the profile of their portfolio, he explained, so a conservative investor doesn’t end up with a portfolio which is 60% or 80% in shares, options or FX trades, for instance.
Educating children
As investible assets grow, Kreis said there is a generational handover of businesses and investment responsibilities, and many clients want to make sure their children understand how to manage and preserve the various assets.
Clients increasingly want to get their children involved in the family wealth, he explained, so are asking their bankers to provide internships and market exposure to get experience. While there is obviously a limit on what firms can do in terms of an intake, it shows the growing need for training and education.
Given that Credit Suisse spends a lot of time, effort, resources and money in training its own people, Kreis said that what a lot of the firm does can be used to help educate clients, too.
Asian private banking myths
According to Kreis, clients don’t always act rationally when it comes to their personal wealth. A lot of it becomes emotional, he explained – for example if they are happy with their relationship manager they tend to follow their advice. And if that individual joins another bank, clients might follow, resulting in multiple banking relationships.
In addition, Kreis said managing, preserving and growing investible assets requires clients to take a hands-on approach. They can’t rely on the bank exclusively to make investment decisions on their behalf.
Also, he added, taking an asset allocation, risk-based approach is important, and clients need to engage the bankers in discussions along these lines. This is something Kreis said is increasingly important as the volatility in the market continues.
Further, he said, clients who are not comfortable with the banker they are dealing with need to say so, and then ask for someone more suitable. More emphasis needs to be put on the selection process in matching clients and bankers to ensure a positive ongoing relationship.
