Any private banking customers here?

[wondrdoggie]

Depends on the bank and the client. I've found that private bankers tend to be reasonably upfront about how much they're taking in fees, and they'll usually even be upfront about how much they're taking on the embedded derivatives, as long as you know enough to ask. Double bonus points for you if you then take that price elsewhere and get a competing quote or an independent valuation (which is where I come in).

The corollary, though: if you don't ask, they'll know they can rip your face off and they will rip your face off.

Bulge-bracket and WM guys probably won't even have a clue, because none of their customers ever think to ask "how much are you taking on this?".

Totally agree to pit one bank against another and compare prices. One of the reasons why I use a few.

 

[mikezuper]

Totally agree to pit one bank against another and compare prices. One of the reasons why I use a few.

Gone are the days where Private Banking Customer follows the RM?

Now RM works not much added value then?

Unless brought in due to network?

 

[Majestic12]

Private banks are decaying - more senior and even junior bankers are shifting to the External Asset Manager platform. There is a much smaller conflict of interest for the client while the advisor is free from most non-key activities that banks force on to them.

This trend is just beginning in Asia and will continue to accelerate as more HNWs and UHNWs realise that private banks and priority platforms do not always have their interests at heart.

I am in the segment amongst others and this is one of the key places to be.

 

[Shiny Things]

Gone are the days where Private Banking Customer follows the RM?

Now RM works not much added value then?

Unless brought in due to network?

I don't think so. Wondrdoggie's a pretty smart investor - she knows that she can't take the RM's recommendations at face value.

But not all private-bank customers are going to be so smart - just ask Oei Hong Leong and the bankers who sold him that hilarious BRLJPY exotic that blew up in his face last year.

I bet he just looked at the bit that said "look at all the money you'll make if spot stays around this level!" and ignored the downside that would bite him in the behind if BRL collapsed (which it subsequently did, USDBRL's gone from 2.00 to 4.00 in the space of a couple of years); he did the same thing in 2008 when he sold a truckload of calls on 30-year US treasuries and lost a few hundred million.

 

[Majestic12]

You have to realise that the size of a portfolio influences the kind of modelling and planning a client needs. A 10% drawdown on a $1m portfolio vs a $10m portfolio is vastly different.

Correct me if I am wrong but I guess access to alternative investments that mass affluent advisers cant access? I guess they charge even more coz they really actively manage your portfolio with trades and hence the higher fees associated with a risky portfolio.

That would be my problem paying for such a service, if they cant consistently beat market indexes after fees, why would i be paying 1.6% for? Wouldn't buying different etfs to suit your own risk appetite be more suitable ie have an advisory portfolio.

 

[neanea]

What is external asset platform?

Private banks are decaying - more senior and even junior bankers are shifting to the External Asset Manager platform. There is a much smaller conflict of interest for the client while the advisor is free from most non-key activities that banks force on to them.

This trend is just beginning in Asia and will continue to accelerate as more HNWs and UHNWs realise that private banks and priority platforms do not always have their interests at heart.

I am in the segment amongst others and this is one of the key places to be.

 

[V_for_Vanilla]

Private banks are decaying - more senior and even junior bankers are shifting to the External Asset Manager platform. There is a much smaller conflict of interest for the client while the advisor is free from most non-key activities that banks force on to them.

This trend is just beginning in Asia and will continue to accelerate as more HNWs and UHNWs realise that private banks and priority platforms do not always have their interests at heart.

I am in the segment amongst others and this is one of the key places to be.

Does this mean the banks will find it harder and harder to retain their private bankers?

 

[Bedokian]

Depends on the bank and the client. I've found that private bankers tend to be reasonably upfront about how much they're taking in fees, and they'll usually even be upfront about how much they're taking on the embedded derivatives, as long as you know enough to ask. Double bonus points for you if you then take that price elsewhere and get a competing quote or an independent valuation (which is where I come in).

The corollary, though: if you don't ask, they'll know they can rip your face off and they will rip your face off.

Bulge-bracket and WM guys probably won't even have a clue, because none of their customers ever think to ask "how much are you taking on this?".

Allow me to quote this IB commercial which I always see on CNBC:

 

[klarklar]

There are basically 2 types of service - advisory and discretionary. Or combo.

Advisory means you make all the buy sell decisions yourself. They provide info, platform, advice on products, world economy, reports etc. You pay per transaction. Your rates depends on your relationship with the bank. For bonds it's 0.25, equity around 0.2, funds 1%, hedge funds are normally 2/20 (not sure how much the bank takes vs the fund), PE is around the same.

Discretionary means you give them a lump sum and they will invest for you according to your profile and wants. Across the world and all asset classes, usually meaning bonds, equities, fx, hedge funds and some derivatives. Usually no private equity as that timeframe is more than 10 years. Min can be as low as 100k-500k, but usually at least 1m. Jpm is USD2m. You pay a % with a minimum sum. The more aggressive your portfolio, the higher the rate. Eg, for a growth portfolio with 70% stocks, 20% bonds and 10% others, it's about 1.6% pa. Again, depend on the bank and actual mandate.

Performance wise, because it's a global multi asset class mandate, it's not easy to find an index that fits the exact model. My personal experience, they do better than me with more consistency. And my portfolio, they do better than closest indexes over the last 5 years. Not a ton better though.

Basically, I think it's good for people like me who know their limitation and disposition.

Don't quite understand the rationale of using advisory, particularly with equities. Why can't a person take advice from the bank, then execute on the ultra-cheap Interactive Brokers platform? Why pay the more expensive 0.2%? Or is it just the honorable thing to do to use the bank's more expensive platform if you take their advice? Not everyone is as honorable as you. Otherwise, we won't have people asking questions at Best Buy and buying at Amazon.

 

[wondrdoggie]

Don't quite understand the rationale of using advisory, particularly with equities. Why can't a person take advice from the bank, then execute on the ultra-cheap Interactive Brokers platform? Why pay the more expensive 0.2%? Or is it just the honorable thing to do to use the bank's more expensive platform if you take their advice? Not everyone is as honorable as you. Otherwise, we won't have people asking questions at Best Buy and buying at Amazon.

Not really about honor... Look at it this way, you need certain AUM in the bank to be a client. If you were to just take their advice and buy somewhere else, you end up having to transfer money in and out, plus you will need to monitor your portfolio and allocation yourself. In any case, people who use PB tend to want that higher service level and don't mind paying for it. The commitment and implication of buying an electronic product is not quite the same thing.

Another important feature of PBs is that they allow you access to products that you can't get as a retail investor, namely hard to get in hedge funds and private equity.

 

[shareholder]

Not really about honor... Look at it this way, you need certain AUM in the bank to be a client. If you were to just take their advice and buy somewhere else, you end up having to transfer money in and out, plus you will need to monitor your portfolio and allocation yourself. In any case, people who use PB tend to want that higher service level and don't mind paying for it. The commitment and implication of buying an electronic product is not quite the same thing.

Another important feature of PBs is that they allow you access to products that you can't get as a retail investor, namely hard to get in hedge funds and private equity.

Please share whether private banks are able to get at least 8% returns consistently? Thanks.

 

[Laneige]

Think some is help do some trust n investing ones

 

[Shiny Things]

Please share whether private banks are able to get at least 8% returns consistently? Thanks.

This is a bit of a silly question - the only thing that can promise 8% returns consistently is a Ponzi scheme. The private banks have access to a lot more products, and in theory those products give you better risk-adjusted returns, (hedge funds like to claim they can do this), but it's not about "ooh guaranteed 8%".

 

[focus1974]

This is a bit of a silly question - the only thing that can promise 8% returns consistently is a Ponzi scheme. The private banks have access to a lot more products, and in theory those products give you better risk-adjusted returns, (hedge funds like to claim they can do this), but it's not about "ooh guaranteed 8%".

I think he was trying to ask what is the value add of the Private Bank, if not for the allure of honor/prestige.
Coz the returns private bank gives you is what retail investors can do themselves, even when private banks are telling you ..you have access to all the exotic products...and hard to get into hedge funds... and private equity..

 

[subprimelive]

I think it also depends on quantum. If your base is 200-500k, yes I think quite manageable to DIY and have good control over your portfolio. But once it's in the millions, then you have further access to products that you can't at the lower levels and that opens up more options to consider.

Also, it's not very equitable to compare directly a multiasset portfolio to a straight equities or bond index.

But to each it's own. PBs are a multi billion dollar industry, they can't all be useless. Speaking for myself, it works for me because I am not good with DIY.. I tried it for 4 years already. Conclusion is that they do it better than me, even with the fees. So I let them manage some of my money while I still fiddle with some on my own. Another important consideration, it frees up time for me to do other things in my life.

Independent financial advisor that do wealth management services charge substantially less than private bankers , is it because they dont have access to hedge funds private equity??

 

[Majestic12]

Independent financial advisor that do wealth management services charge substantially less than private bankers , is it because they dont have access to hedge funds private equity??

That's a retail level advisor. There are independent advisors catering to high networth.

 

[wondrdoggie]

Guys, I am not saying that private banks are better. They work for some people (like me), they won't work for others. If there are questions about PB experiences or how it works, I just try to share what I know.

 

[neanea]

That's a retail level advisor. There are independent advisors catering to high networth.

Majestic12, are you IFA?

 

[Majestic12]

Majestic12, are you IFA?

Even better, I am fully licensed and yet I don't sell any products - no conflict of interest.

 

[Perisher]

Majestic12, are you IFA?

Even better, I am fully licensed and yet I don't sell any products - no conflict of interest.

You guys might wanna chat in private?