YOUR MONEY MATTERS: Wealth Management. The Best Option?
Private investors come in all shapes and sizes and so do the professionals that help navigate the waters of wealth management. Know-how, acumen, and continuity are important factors contributing to a successful, long-term wealth management strategy. What works best – Do-It-Yourself, Private Banking, or Independent Wealth Management?
Do-It-Yourself (DIY) Wealth Management
DIY investors build and manage their investment portfolios on their own, mostly by utilizing discount brokerages and online investment tools and platforms as they prefer discounted commissions and fees. They also often make use of robo advisor-managed portfolios with some form of free interactive personal financial advice, e.g. research and analysis tools, as well as recommendations and insights to help investors make investment decisions at a minimal fee.
DIY investing gives investors sole control over their own investment decisions and the timing of executing trades, and can save them money in fees—but it also puts all the entire responsibility of research, due diligence, risk management, and portfolio analysis on their shoulders, a time-consuming process requiring an abundance of know-how and skill.
DIY investors are on their own, and as an amateur the learning curve may be steep and costly.
The Private Banking Advisor or the Independent Wealth Manager?
If investors with substantial wealth and complex issues feel that they have neither the know-how nor the time to manage their investments themselves, they can choose to work together with a professional advisor and wealth manager. There are two options: Going directly to a bank and getting advice from their Private Banking Advisors or selecting an Independent Wealth Manager.
The Private Banking Advisor
Private banking means personalized financial services with a variety of perks, privileges, and personalized service and products aimed at an exclusive high-net-worth clientele. Private banking clients often receive discounts or preferential pricing on financial products or access to extensive research and more exclusive investment opportunities. In addition to the buy-and-sell of investment vehicles, it includes a wide range of wealth management services, often provided under one roof, including services like investment strategy and financial planning advice, portfolio management, customized financing options, retirement planning as well as tax services, insurance, and trust and estate planning for passing wealth on to future generations.
A dedicated Private Banking Advisor is appointed to handle all issues an investor may have.
However, there are some drawbacks to working with a Private Banking Advisor. Employee turnover rates at private banking divisions can be high, terminating relationships. Often banks expect their client relationship managers to handle an extremely large number of client relationships and, therefore, private banking services are becoming more streamlined, making tailor-made personal services rare, except for the wealthiest clients.
As the Private Banking Advisor is compensated by the financial institution and not the client, there may be conflicts of interest and loyalty. Banks have countless in-house funds and products that they have an interest in selling to their clients and bank employees usually have strict sales targets that influence the advice that they give.
The Independent Wealth Manager
An Independent Wealth Manager (IWM) makes sense for investors that are looking for a long-term partner who will give unbiased advice and discretely manage their money, adapting to changing circumstances and stages in their lives.
After getting to know their clients and setting up a suitable investment strategy taking the individual client’s situation, needs, objectives, risk tolerance, and timeframe into consideration, an IWM receives a limited power of attorney to manage the assets at their discretion. Many also provide advisory services only, and investment decisions are up to the investor.
An IWM assists their clients with the opening of a custodian bank account in their own name from a selection of third-party banks. However, an IWM is not able to move or withdraw funds from the account on their own.
IWM’s have a fiduciary duty, putting their clients’ best interests before their own, serving clients in a truly transparent and supportive way, protecting their clients’ interests. Their investment decisions are not limited to, or influenced by, in-house products and services. They can source investment ideas from anywhere in the market and aim to bring best-in-class solutions to their clients. IWMs are not considered to be “sales people” and their commitment is fully to their clients and not to a parent bank.
In addition to investment advice and portfolio management, IWMs have either in-house knowledge or partner with experts in a broad range of customized financing, retirement planning as well as tax services, insurance, and trust and estate planning for passing wealth on to future generations. Citizenship and residence planning including relocation services are often provided as well. Many provide personalized “family office” services as required.
IWMs are often privately or partner-owned and take pride in personal relationships with their clients. The incentive to provide excellent, discrete service and develop long-term client relationships is strong and emphasis is placed on continuity, often over generations.
IWMs tend to negotiate favorable transaction and custodian fees for their clients with the selected custodian bank and their own fees are transparent, often a percentage of the assets under management, without extra hidden fees.
IWM’s also often have the ability to consolidate assets held in different portfolios with different custodians to be able to advise their clients on a holistic basis across all portfolios.
Jurisdictional considerations lead to Switzerland
Home-bias is understandable, it is what investors know in-and-out. It is a level of comfortableness that, to a certain degree, “dulls the senses” preventing action-taking on opportunities just beyond the “comfort zone”. There is no tangible reason to feel uncomfortable with international and jurisdictional investment diversification and engaging a wealth manager in Switzerland.
A Swiss wealth manager, with an ingrained international upbringing and years of education, training and experience will bring different perspectives to the table. Asian markets are still active during typical Swiss working hours and being at least six hours in action before the North American markets open gives them a headstart. Multi-currency, internationally-diversified investment portfolios are the bread-and-butter of what they do every day. Naturally, an investment portfolio in Switzerland should complement an investment portfolio already in place back home and not compete with it. However, a globally-diversified portfolio can also include domestic investments to round off the international holdings. A Swiss account also gives globally mobile investors access to funds outside of their home country.
Switzerland has an element of safety, underlined by long-term political and economic stability and neutrality, the acknowledged AAA-rated, “safe haven” quality is unmet by other countries. Switzerland is renowned for its resilience in times of crisis and is considered the world’s “private banker”.
Swiss wealth managers and client relationship managers are also appreciated for their very personal service, discretion, reliability, preciseness, and availability, ready for a phone call outside of Swiss office hours to accommodate their investors’ local time zone. A professional relationship with an independent Swiss wealth manager often evolves into something more personal and long-term.
Swiss IWMs are obliged to get a license from FINMA the Swiss Financial Market Supervisory Authority and adhere to the comprehensive regulations FINMA has laid out for the protection of investors.
Specifically for American clients, there are Swiss wealth managers that have registered with the Securities and Exchange Commission in the United States as investment advisors and are able to provide their wealth management services to U.S. citizens, residents, and expats from around the world.
Publications are for your information only and are not intended as an offer, promotion, or solicitation to buy or sell any financial instrument or perform any other financial transactions. All information and opinions expressed in the publication reflect current views as of the date of publication and may be liable to change without notice.
