Financial institutions must respond to growing individual wealth by forging stronger partnerships with independent intermediaries. Good relationships with advisers are the key to keeping clients happy
As international wealth management increases in importance within the financial services sector, clients are looking for bespoke solutions to their specific needs. Wh ile many potential clients will be sophisticated investors, a growing number are looking to qualified, independent intermediaries such as advisers, lawyers, accountants, independent trust companies and investment managers to assist them in finding the best providers for their requirements.
To meet this demand, more and more financial institutions are adapting their services and products and are willing to integrate these into an overall advisory and management relationship.
Clients, wherever they are located, are often less concerned with specifics of individual product components. Instead they are mainly interested in achieving overall solutions to their personal, family and perhaps business situation. Moreover, because international clients require an increasingly wide range of services, they will expect intermediaries to advise on these, as well as manufacture or source them.
These often include banking and credit requirements, investment advice and management (on both traditional and non-traditional asset classes, and perhaps involving insurance-wrapped products), custody services and fiduciary structures. The international tax planning around each of these components is also a necessary ingredient.
UK non-domiciled residents, for example, require segregated capital and income accounts, which should be treated as a matter of course when establishing a relationship with an offshore bank. Understanding the critical importance of such issues is essential when building relationships with the client's professional adviser.
Intermediaries can strengthen their client relationships by working closely with an institution that clearly understands and values the need for bespoke advice and services, which can be tailored to meet a client's needs.
Intermediaries may well look internationally for their customers' wealth solutions, including access to expertise on international investment markets or in-depth technical skills of a trustee. Sometimes the choice of provider may be for the client's personal reasons and come down to issues such as the relationship with a particular financial institution or relationship manager, or the confidence a particular adviser has built up with a specific financial services provider over time.
Managing client assets
The effective management of client assets is fundamental to the success of the long-term relationship. An investment manager who has a one-on-one relationship with the client is more likely to maintain a clear understanding of what the client really needs. At the outset, the investment manager should establish the client's risk profile, time horizons, objective and the family situation, and then be able to construct a portfolio on the basis of this understanding.
Regular dialogue with the client should follow, to monitor agreed guidelines for investment in fluctuating markets and to adapt investment strategy to the client's unique and evolving circumstances. Service delivery from an investment manager may start with asset performance. However, for a client to build the required level of trust and confidence in their investment provider, this needs to extend much further, in particular into communication and administration.
A proactive approach to the client is critical, and must be coupled with faultless administration in areas such as the clarity, accuracy and timeliness of reporting, right down to the basics of handling individual transactions. Clients may take a long-term view in relation to achieving their investment goals, but they will quite rightly lose patience very quickly if service levels are not always of the highest standard.
The experienced financial institution, in addition to offering a broad range of banking and related financial services, is also positioned to look after a wider spectrum of assets and offer leveraging facilities to maximise the benefit of those assets. Furthermore, it can offer structures that can optimise tax planning opportunities. They will have the in-house technical expertise to provide specialist custody or leveraging facilities against existing investments, providing added value to the relationship.
Advice will also be available on the establishment of such niche products as Private Trust Companies, vehicles suitable for holding assets such as yachts, aircraft and artwork where the family is still able to maintain control of the assets.
In the ultra-high net worth wealth management segment there is a growing number of family offices that are independent and seeking external support services, or families looking to utilise the family office service of a renowned financial institution. They are also able to take advantage of these high quality services.
Financial institutions may establish and run their own in-house family offices for international ultra-high net worth families with individual family members located around the globe, or choose to provide selective support services to established, independent, single and multi-family offices or those managed by an intermediary. Many family offices have found it is more cost effective to outsource some of their administration to financial institutions that have the electronic systems in place to provide consolidated financial reports which will aid the family's advisers or intermediary in their day-to-day management of the family's affairs.
A structure offered by the more sophisticated financial institutions that is of interest to the family office is the offshore regulated Protected Cell Company, which permits the holding and segregation of assets through the use of individual cells, so that, for example, groups of investors may be invited to invest as part of the multi-family office function while their assets remain segregated.
On the investment management front, family offices will often maintain in-house expertise for asset management or manager selection. The most pro-active financial institutions are able to partner with the family office's in-house investment process, adding valuable additional investment process or additional expertise in specific areas, possibly on a consultancy basis.
The quality of service delivered by financial institutions to intermediaries or directly to the clients is vital in achieving client satisfaction. It is interesting to note that institutions based in the offshore financial centres are typically providing clients with a higher level of service than their larger onshore counterparts, where greater competition has resulted in a more 'product focused' approach to client needs.
Excessive product focus can result in a failure to genuinely understand and meet the needs of the individual client. Where international clients are expected to 'pick and mix' from the suite of available products to satisfy their demands, this less bespoke service is likely to result in disappointment at the outset of the relationship, possibly leading to it being short-lived.
Word of mouth can be a very powerful tool for both promotion and criticism, therefore financial institutions that suffer from high turnover of clients will find it increasingly difficult to succeed in this market.
There is no doubt that individual wealth is growing. Financial institutions and professional advisers need to work in partnership to provide service excellence for their clients across the wide range of financial products and services required to satisfy their increasingly sophisticated demands. New wealth from the expanding industrial power houses of China and India is providing a lucrative new opportunity for creative and flexible financial institutions working together with intermediaries.
Technical expertise, flexibility, a comprehensive range of financial products and services together with knowledgeable and well trained, dedicated relationship managers who understand and respond to their clients' needs are key to the success of the financial institutions working together with the intermediary to succeed in these markets.key points
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