May. 20, 2009
The Economist has just reported that, according to a survey, 15% of the wealthy had left their main adviser last year and a further 70% had pulled some of their money away. So it seems that quite a few wealthy individuals are right now looking for better alternatives to their present or former wealth managers.
In fact, most investors put more effort into finding their favourite restaurant than they do to identify the best wealth manager. A mistake that often costs millions.This is the reason why MyPrivateBanking.com has just released a comprehensive guide on chosing the right Wealth Manager. There are a few key take-aways from this study that matter to almost anybody on the lookout for professional help with their money:
- Do things systematically, and proceed step by step
- Avoid emotional decisions: it is not about finding the most likeable wealth manager, but about finding the best
- Start with an analysis of your case: your needs and prior knowledge would be decisive
- It is worthwhile to put in some effort and objectively compare various providers
- Never put all your eggs in one basket
- Take your time
Analyse yourself
Only those who know their investor personality properly can hope to find the right bank or right wealth manager. That is why the first thing the wealthy private customer needs to do is to perform a honest self-analysis. the most important things to do are to determine your goals as an investor and to analyse your risk tolerance.
Make a list of potential candidates
Once you are clear about your starting situation, the next step will be to draw up a list of potential candidates. We find it useful to talk to at least five to ten wealth managers in person. Don´t worry about the time: It will be a good investment.
Put your candidate through the paces
The most important clue for you would be the questions put to you by your candidate. A good wealth manager is characterised by his efforts to get a precise understanding of your personal situation. It is only in this way that he will be able to draw up a custom made investment proposal for you. We believe that only a structured questionnaire ensures a comprehensive profile. At the end of the meeting the wealth manager should send you a detailed, written investment proposal.
Thoroughly analyse the investment proposal
By now you will be well acquainted with wealth managers. You will know something about your own expectations, know-how and needs. And you will have a stack of investment proposals in your mailbox. What next? You are not a financial analyst? No problem, with a few simple analyses you will be able to assess the quality of the proposal.
The most important factor is the “Asset-Mix”: This means the proportion of various investment classes such as shares, bonds, property, cash and others. In fact, it is this composition and proportion that normally determines the major part (about 90%) of the performance and the risk. The asset mix is even more important than the choice of individual titles, that is, for instance, which shares will be selected. You will need to be very clear about the kind of asset mix that you are aiming to achieve and then evaluate the suggestions of the wealth manager against it. The greater the deviation, the poorer the suggestion. The right choice of asset mix depends largely on your personal preferences and your economic situation.
Have you evaluated all the investment proposals? By now you will definitely have found one or two favourites for your investment. In some cases, it is useful to distribute the assets across several wealth managers. By distributing your assets across several managers, you can further reduce your risks, especially for the eventuality where a bank should go bankrupt. Secondly, you can also compare the strategies of the two managers, their research and service. Many differences will become clear to you only as time passes. Also, the competition between the managers will often liven up the business.