Wealth Managers Shun Transparency
These private banks and wealth managers typically manage clients’ assets through defined mandates in discretionary accounts (often labeled “conservative”, “balanced” or “growth”) that are very similar to the investment strategies of mutual funds. In both investment approaches the investment decisions are completely in the hand of the wealth manager or private bank. However, while most countries require extensive transparency on mutual funds such as performance data after fees, the total expense ratio, twice-yearly publication of fund holdings, the benchmark index, there is very little disclosure to the public on the discretionary accounts by private banks and wealth managers:
Non-transparent wealth management fees:
• 35% of analyzed banks and wealth managers discuss the costs and fees of wealth management in general terms.
• 22% give some quantitative information about fees.
• Only 18% offer precise, quantitative information on various wealth management fees.
Lack of performance data:
• A mere 13% of analyzed private banks discuss the topic of their performance in general terms.
• 10% offer some quantitative data on their discretionary accounts’ performance.
• Only 8% offer a 3-year track record (or more) on the performance of their discretionary accounts.
In MyPrivateBanking´s view, wealth managers are acting in a comparable role to fund managers when managing their clients’ wealth through discretionary accounts. Consequently they should offer the same level of transparency to the public. “Banks and wealth managers should publish basic data on the performance and cost of their discretionary accounts. This data is important for potential and existing clients wishing to compare and benchmark their current banks with other providers and in order to find the best provider”, comments Christian Nolterieke, Research Director of MyPrivateBanking.
MyPrivateBanking recommends that banks and wealth managers be much more transparent about their core services of investment management. They should use the Internet as an effective communication channel for disclosure and distinguish themselves form competitors by a high level of transparency. “Banks can show that they have an edge in managing investments by disclosing their track record on discretionary accounts. Over the long term it is just a question of whether banks will become more open voluntarily or if regulators are going to have to come up with mandatory disclosure standards”, adds Steffen Binder, Research Director of MyPrivateBanking.
A positive example for fee transparency is Deutsche Bank that publishes a comprehensive list of wealth management fees on its public website. Standard Chartered sets a benchmark with a monthly updated portfolio review on its various wealth management mandates.
Analysed public websites:
ABN Amro, ANZ, Banco Bilbao Vizcaya Argentaria, Bank of NY Mellon, Banque Pictet, Barclays, BNP Paribas, Citibank, Clariden Leu, Coutts & Co, Credit Agricole, Credit Suisse, DBS Bank, Deutsche Bank, Erste, Goldman Sachs, HSBC, ING Groep, Itau Private Bank, J.P. Morgan, Julius Bär, Kleinwort Benson, Kotak Mahindra Bank, Lombard Odier, Macquarie, Merrill Lynch, Morgan Stanley, Nordea, RBS Coutts, Rothschild, Royal Bank of Canada, Sal. Oppenheim, Santander, SEB, Societe General, Standard Chartered, U. S. Trust, UBS, Vontobel, Wells Fargo.
MyPrivateBanking is an independent research and networking platform for wealthy private clients and wealth managers across the world. Established in 2009 in Switzerland, MyPrivateBanking offers a variety of information to assist investors and providers in making their decisions. This includes in-house research by MyPrivateBanking Research, articles and updates related to wealth management, detailed bank directories and client evaluations of wealth managers across the world. The interactive “MyWealth” online network allows the clients looking for wealth managers to get in touch with one another and exchange experiences. MyPrivateBanking.com aims at making wealth management more transparent, more cost effective and giving it a greater client focus. For further information please check www.myprivatebanking.com.
Christian Nolterieke, Managing Director
Tel.: +41 (0) 71 670 0489
Fax: +41 (0) 8671 670 0483
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