The main recommendation is that clients have to understand the costs
drivers and pricing models better to be able to cut costs. However, the
pricing models offered by most wealth managers are often intransparent and
only report the direct costs either as a “flat-fee”, “transaction fee” or
“performance fee”. Many clients are not aware of various indirect costs,
hidden in many products and services, easily doubling the direct costs of
managing a portfolio.
“Widely used vehicles to hide costs are funds and structured products
which can cost up to 5% per year”, explains Christian Nolterieke, Research
Director of MyPrivateBanking.com. “In a pricing model based on
transaction-fees a higher-churn of the portfolio generates extra costs and
often not all transactions are required respectively beneficial to the
investor.”
Most of the clients are not aware that a huge chunk of the hidden costs
charged by und providers are actually returned to the wealth managers as a
reward for “encouraging” investors to choose their products. Overall, these
kickbacks to the wealth manager can make up to 50% of what the client pays
to the bank.
By rather simple measures, detailed in the MyPrivateBanking.com guide,
clients can gain transparency and take control over costs:
1) Choosing a strategy and a particular wealth manager best for their
investment personality and amount.
2) Pushing the wealth manager for full transparency, the use of
cost-effective products, and full disclosure and payback of all kickbacks
and commissions.
3) Choosing a price-competitive wealth manager by meeting various wealth
managers, assessing their competence and requesting an offer.
4) Opting out of all services provided by the wealth manager that are not
required, or that can be done somewhere else at a cheaper rate.
Finally, and very important: Clients should negotiate. As Steffen Binder,
MyPrivateBanking.com Managing Director points out: “There is plenty of room
for fee reductions. Clients should educate themselves about the market and
communicate precise and determined their requirements; and within minutes
they can save a lot of money.”
About MyPrivateBanking.com
MyPrivateBanking.com is an independent platform for information and
networking for wealthy private clients across the world. Established in 2009
in Switzerland, MyPrivateBanking.com offers a variety of information to
assist investors in making their decisions. This includes in-house research,
articles and updates related to asset management, detailed bank directories
and client evaluations of wealth managers across the world. The interactive
“MyWealth” online network allows the clients looking for asset managers and
private banks 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
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Contact:
Christian Nolterieke
MyPrivateBanking.com
