“Chances that your wealth manager is a future Buffett are about as high as winning the lottery”
May. 12, 2010
Group discussions at MyPrivateBanking.com in April focussed towards the end of the month more and more on the implications of the Greek crisis for members’ wealth management. We will have a closer look on the comments in our May review, but as an appetizer an interesting viewpoint from Orchid, one of our members based in Hong Kong.
“Does anybody think that for us in Asia Greece or even the bankruptcy of Portugal and Spain has any long term significance? Any jobs lost in India or China? What I’m trying to say is take your portfolio where the future is! Where young and ambitious people are, eager to work. And not a continent where people are used to spending more than they have and then go on strike if they are close to bankruptcy.” (Read full post)
Provocative, nevertheless thanks for the “outsiders” perspective from the Far East. In April we had some good exchanges on the value a wealth manager can bring to the tablecompared to the benefits of managing your assets yourself. Pedro had a clear opinion. There is just one Warren Buffett and one do better giving up looking for wealth managers who can beat the market.
“I know some would say that settling for the index returns is mediocre, but go and look in Morningstar how many funds have beaten the index over 10 or 15 years in after tax returns. Buffett thinks indexing and diversification is mediocre….There are not that many Buffett's out there (we would have heard about them by now). And the chances that the wealth managers you come across is a future Buffett are about as high as winning millions at the state lottery." (Read full post)
Chiffre7 agrees that wealth managers hardly ever outperform the markets and therefore one can manage one’s assets better oneself and save the high costs.
“(…)…there is an upfront cost (for self-managing) in terms of time. But once your allocation is picked and the indexes selected it gets much more routine. It helps to remember you don't have to give 1% or more every year to some 3rd party, and that you’ll most likely end up with better returns.
He also has clear ideas on how one should view and conduct your relationship with a wealth manager:
“(…) would you just give control of a business to someone else based just on a few meetings - and no public track record - and then stay away from that business, hoping for the best? Probably not. Same line of thinking with your money. Anyhow, what I miss most from wealth managers is the birthday card and gift (US) or the leather document case (Europe). But, looking on the bright side, I don't have to say ‘thank you’ for a gift they bought with my money.” (Read full post)
Our member Basel08 agrees with this view point and wonders why so many clients are less critical of their wealth managers than of other business partners.
Treat your wealth management as a business and your wealth managers as suppliers, meaning pressure them, challenge them, negotiate with them and change them if you don’t like them. I found it amazing how often businessmen enter the marble reception hall of a bank and within minutes they transform from the street-smart "tough guy" into the soft-spoken, submissive client that says thank your for the coffee and cookies and not much more.
Finally, not only a clear opinion of excellent01 on the bonus practices at banks, but also a decisive call to action:
I have taken a lot of money away from Credit Suisse. I found it absolutely disgusting, that the CEO got more than 70 million Francs and also the head of private banking more than 30 million!! Guess who paid for these millions and how much of your portfolio performance was lost to pay him!! (Read full post)
To end on a good note: Terry is happy with his wealth managers and highlights the importance of looking around and investing time to find the right one for your needs and life circumstances:
„I had to search for a long time but, after a lot of trial and error, I found a good adviser, who is paid based on my portfolio’s performance. Maybe that’s a rare case, but I am busy in my life and I just don’t have the time to manage my assets myself. After all, I have to run a business!”
We thank all of our members for sharing their experiences and insights!