« Wealth management: towards a new model »

product-driven approach versus services, lack of commitments of managers who became customer relationship experts versus loneliness of adviser, commercial bias versus follower bias... The two main models of private management seem more irreconcilable than ever...

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Entrust the management of its wealth to a professional has never been a such a complex choice. Private investors are solicited by a myriad of managers, bankers and various advisors, all with quite often similar - in substance and in form - presentation of their added-value. But this homogeneity is misleading. Actually, current offerings diverge on many points, including organization, business model, typology of product lines or even the design of the business. The choice is fraught with consequences for those seeking a truly tailored service to their long-term wealth management constraints.

What to choose then? Let us draw an imperfect picture. Private banking world is dominated by two models around which we have the entire profession. On one hand, large networks justify their added value through a proven infrastructure and a strong balance sheet, which guarantee stability and continuity, and also through a large range of offerings able to meet all market configurations and all wealth managements issues, including credit. But this essentially product-driven approach often goes along with commercial bias. Instead of viewing clients as long-term business partner, or as an interlocutor to whom you give the best advices in order to ensure his fidelity, the managers are especially encouraged to maximize short-term profitability of their client portfolios. Insufficiently accountable because of strict obedience to firm’s directives and more incentive to sell rather than to advise, managers merely use the firm’s speech, without "owning" the words, to justify the marketing of flagship products.

In contrast, small wealth management companies or independent advisors are seeking above all to provide intellectual services and they tend to pure consultancy. Although the strong focus of some shops on a charismatic founder may restrain creativity and affect critical thinking, managers are free from constraints of selling an internal product or overweighting a given asset class against their belief. Moreover, they can manage, with full responsibility, the financial wealth of private clients. As the decision process remains local and not intermediated, they can not hide behind advices of strategists or anonymous investment committees to justify their mistakes. As the safeguard of the business relies on the quality of advices, the convergence of interests between managers and investors is -a priori- optimized. Still, the loneliness of managers may pollute given advices with a follower or high conservative bias.

Both models show good points but also structural pitfalls. Product-driven approach versus services, lack of commitments of managers who became customer relationship experts versus loneliness of adviser, commercial bias versus follower bias... The two models seem more distant than ever. Is it still possible to reconcile the best of both worlds? Reconciliation is desirable and even necessary. It is in the interest of private investors and therefore it is linked to their fidelity. Taking into account these issues, some new market players are now positioning themselves as entities combining the strength of a large structure and the quality of a tailored and impartial wealth management. The aim is to enjoy the benefits of significant balance sheet and high skills level while getting clients closer to management and advisory. Wealth management has no choice but to reinvent itself.

Maxime Vermesse December 2010

Article also available in : English EN | français FR




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