A tailored wealth strategy for Asian private clients

Paul Smith of Triple A Partners discusses some key issues and considerations for high net worth individuals in how they manage their wealth, and looks at ways for clients to “professionalise” the process.

  • When managing their wealth, the first thing any individual must do is determine their investment objectives – then find a suitable institution to help them
  •  It is a challenge to manage multiple banking relationships, so a more professional approach via a family office is often a solution
  • Clients can quickly determine whether their private banker or adviser is really acting in their best interests by asking them how they get paid

When managing their wealth, the first thing any individual must do is determine their investment objectives, said Paul Smith in an interview.

So that is what any good private banker or wealth manager should focus on – helping the client get clarity around their strategy. For example, asking questions such as: Are they trying to grow it for themselves? Are they trying to pass it on? Are they trying to help their nearest relations? Do they have philanthropic objectives?

Trying to answer these and other similar questions is not straightforward, as many people aren’t clear on their strategy so need help in the process, said Smith. By definition, he explained, new wealth means people have never dealt with these issues before.

Finding a suitable institution

Once an individual has a clearer strategy, Smith said finding a suitable institution to manage their wealth comes down to personal preference – whether they like an individual wealth manager and whether they prefer them to offer products they manage themselves, or whose product range is drawn from best-of-breed globally. Or a hybrid offering.

It is about a client determining their own investment style first, he said, either via funds or having direct access to markets, along with their investment preferences.

Managing multiple relationships

Given that a lot of high net worth individuals in Asia have more than one wealth management relationship, Smith said it is a challenge to manage these. With four to five private banking or wealth management relationships being the average, there is an obvious issue of consolidating and aggregating all the information and simply understanding what they are doing with their wealth at any point in time.

Some families look to set up their own family offices to deal with this; others appoint a third-party administrator or trustee to try to do the aggregation. In general, said Smith, the more complicated an individual makes their life in terms of numbers of wealth management relationships, the more they need to build appropriate infrastructure to manage the process.

The problem, however, is that this is poorly done by most families in Asia, he explained, as they don’t professionalise their own internal operations to enable them to get the most out of the range of financial advisers and offerings.

A default option, added Smith, might be to use a single financial adviser – which for wealth up to certain levels can be a good solution. 

Being more professional

According to Smith, taking a more professional approach to wealth management includes families incorporating accounting and legal expertise to deal with the various structuring and consolidation issues.

It also involves them making a decision at the outset whether to internalise the investment expertise and effectively become their own chief investment officer, he added, or whether they need to import these skills.

This then takes families further to the question of whether they are looking for a “manager of managers”, or someone who is going to have investment execution expertise. This is where lines can blur.

He said that outsourcing the investment part to a manager of managers and bringing on board a legal consultant and an accountant can often be the answer – as long as there is the required clarity of purpose at the outset.

Aligning interests

Smith said clients can quickly determine whether their private banker or adviser is really acting in their best interests by asking them how they get paid. While it feels embarrassing to ask, he said it is key that clients understand the fee-charging structure within the bankers’ organisation.

He explained that he doesn’t think Asian clients are completely against the concept of paying for advice, but in general they don’t like paying fees. Smith advised them to look beyond this, however, given that nothing comes for free and clients should look to pay their adviser a proper fee for services they provide.

From a personal perspective, Smith said he looks for as much clarity and transparency as possible, preferring to execute at market rates and pay a fee to an adviser, rather than executing sub-optimally and not being completely sure of how much he is paying.

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