Affluent investors abandon traditional wealth managers

As the big banks write off billions, the dissatisfied ‘new rich’ are switching to the rising stars among the smaller independent banks, says Lorna Bourke

Lee Robertson, chief executive of wealth manager Investment Quorum, is similarly scathing of the high- street banks’ private banking services. ‘They are just sales operations. They offer a personal banker, but basically they just package up services and sell them for a higher rate.’

He points out that the banks suffer from a shortage of experienced, qualified staff and the advice is standardised, with no access to the fund managers behind the investment products. ‘They like to use structured products with a one-size-fits-all approach and they tend to shy away from specialist vehicles such as exchange traded funds, which are cheaper to use,’ he says.

Investment Quorum’s typical client has between £1 million and £2 million to invest. Fees are around 1 per cent. Like other wealth managers, it bases its recommendations around model portfolios. Typically, clients in the income portfolio will have 15 mutual funds, 10 individual shares, a couple of investment trusts and possibly a fund of hedge funds. ‘Right at this moment, one third of clients’ portfolios are sitting in cash,’ says Robertson, who is a member of the Financial Planning Society and has more than 30 years’ experience.

Sophisticated investors who want facilities to invest in currencies, derivatives, private equity, structured products, hedge funds, commodities, property and the whole range of global investments, will need to do some homework to find out exactly which banks have the relevant expertise. Most of this information is available on the Internet.

It is very much horses for courses. All will claim to be able to do everything – a bit like lawyers. But ultimately it boils down to a personal relationship. At the American wealth management institutions, an estimated 70 per cent of clients follow when their personal adviser leaves to join another bank. You have to trust the person you are dealing with. Common sense dictates that anyone looking for a wealth manager would be well advised to see several banks and wealth management firms before making a decision.