FTWEEKEND Saturday June 16 / Sunday June 17 2012 Private Client Wealth Management An FT Money Guide Managers face up to lower yields and transparent fees

Stuart Briers Equities Real returns Commission­free Vital to preserve your wealth? Market risk vs inflation risk Is your adviser ready? Pages 2 & 3 Pages 4 & 5 Page 11 2 FINANCIAL TIMES SATURDAY JUNE 16 2012 FINANCIAL TIMES SATURDAY JUNE 16 2012 3 Money Guide: Private Client Wealth Management Money Guide: Private Client Wealth Management

valuations across regions. outperformed equity mar- Average balanced portfolios Capital growth portfolios US equities look the most kets quite considerably. Per cent Per cent expensive, while the UK, Investors will be looking for ‘Risk assets vital to preserve wealth’ Asia and emerging markets assets with a low correla- Bond: corporate Bonds: government Bond: corporate Bonds: government look cheap relative to his- tion in case equity markets 1.8 Property torical levels.” do not perform well; we 5.6 year’s Financial Times have potential to preserve ment officer at Investec tunities to achieve a capital Equities are also the only Charles MacKinnon, part- think this should help the 4.0 0.8 Private equity Equities wealth management survey. the value of their clients’ Wealth & Investment, gain and a rising income way to meet many client ner at Thurleigh Investment case for hedge funds.” 13.3 5.0 Hedge funds But some believe this portfolios in real terms. argues that equities offer have to be taken, Hills con- needs, he suggests. “Inves- Managers, has an allocation Even so, he adds that the 2.5 Property Holdings of shares approach is too “cavalier” “In the current environ- one of the few ways to coun- cludes. “Equity markets tors who need a rising to equities that ranges bank’s relatively low 9.4 while markets are volatile. ment, wealth preservation ter western governments’ now offer very good value, income stream, for example between 15 and 65 per cent, weighting to equities at Equities 3.4 Commodities remain high in a Equities 56.3 0.7 Private equity 71.4 8.2 UK and international is a primary objective for economic policy. with yields around 4 per to pay school fees, will not but takes advantage of mar- present is “tactical” and he 5.8 climate of financial shares make up 56 per cent investors,” explains Alan “In the hunt for returns cent from quality blue-chip find the solution in either kets falls to increase portfo- expects to increase it when repression, says of the average “balanced” Higgins, UK chief invest- that are better than cash, companies in the UK. These bonds or hedge funds, so lio holdings. the global outlook becomes Hedge funds portfolio, and 71 per cent of ment officer for Coutts. governments are tilting the companies now stand on may need to be brave when However, any higher allo- clearer. 9.3 Matthew Vincent the average “capital “However, with high-quality playing field towards them- ratings that are comparable others are clearly fearful – cation will expose clients to Paul Taylor, managing growth” portfolio – just a government bonds offering selves,” he says. “Financial to 1976 and 1981. to quote Warren Buffett – unacceptable levels of vola- director of McCarthy Tay- Cash/other 3.3 Commodities A need for “wealth preser- percentage point less than record low yields, in some repression, under which the “On both occasions, the and buy some equities.” tility, warns Tom Becket, lor, is also adopting a short- Cash/other vation”, amid a climate of the levels reported last year, cases below the current and authorities set interest rates economic prognosis Bravery comes more eas- chief investment officer of term approach towards Source: FT/Ledbury Research Source: FT/Ledbury Research “financial repression”, is in spite of a 9.2 per cent fall forecast rates of inflation, at a level well below appeared bleak, but equities ily to portfolio managers PSigma Investment Manage- equity investments – albeit the main reason why portfo- in the FTSE World Index in investors need to look to inflation, represents a tax subsequently demonstrated when valuations appear ment. “We struggle to from a higher starting lio managers still have more the past 12 months. higher risk assets if they on savers and a transfer very attractive returns, cheap, suggests Higgins. see how anything higher point. “We hold around 63 than half of their clients’ But wealth managers wish to protect their long- of benefits from lenders to more than doubling in the “When allocating to equi- than 50 per cent in equities per cent in equities against funds in equities, according argue that only “risk term purchasing power.” borrowers.” following five years, with ties, it’s important to can constitute a balanced a target 78 per cent, reflect- to firms taking part in this assets”, such as equities, Chris Hills, chief invest- In these conditions, oppor- reinvested dividends.” take into account absolute portfolio,” he says – point- ing reluctance to buy the ing out that high-yield cor- whole market and client porate bonds, commodities tendency towards caution.” Performance and emerging market debt Short-term caution can can have equity-like charac- only be tempered if a client Average % performance of balanced portfolios invested on behalf of UK Average % performance of capital growth portfolios invested on behalf teristics. is willing to remain private clients (cumulative, not annualised) to end 2011 of UK private clients (cumulative, not annualised) to end 2011 In this year’s FT survey, invested for many years, Wealth manager Over 1 year Over 3 years Over 5 years Over 1 year Over 3 years Over 5 years the highest equity alloca- says Jane Sydenham, tion in a “balanced” portfo- investment director at Rath- Adam & Company -0.38 38.14 14.81 -1.59 45.57 14.04 lio is 88 per cent – held by bone Investment Manage- Ashcourt Rowan PLC -5.80 N/A N/A -8.70 N/A N/A Charles Stanley. But ment. “Managers with very Barclays, Wealth and Investment Management -2.09 32.23 12.57 -4.70 31.27 5.99 Edward Smith, global strat- nervous clients who cannot Berry Asset Management PLC -2.10 26.40 6.60 N/A N/A N/A egist at Collins Stewart withstand volatility, or Bestinvest -2.79 29.39 6.35 -4.74 29.82 9.46 Wealth Management says those who may need to this is excessive. “A man- release cash over a shorter Brooks Macdonald Asset Management -2.40 25.00 8.70 -4.40 27.20 7.00 ager that holds 88 per cent time period, inevitably need Cazenove Capital Management -0.20 28.13 15.23 -0.73 34.13 11.61 in equities for a client more stability so will have a Charles Stanley Group PLC 0.00 39.00 26.00 N/A N/A N/A whose risk profile is any- much smaller equity alloca- Cheviot Asset Management -3.56 35.60 20.02 -5.41 35.00 13.41 thing less than aggressive tion,” she says. C. Hoare & Co. -1.30 28.50 8.50 -4.10 33.70 3.80 can only be described as Communication between cavalier,” he argues. “Man- clients and portfolio manag- City Asset Management PLC -4.50 16.78 N/A -8.77 35.74 N/A aging volatility is more ers is therefore essential. Close Brothers Asset Management 0.91 34.83 N/A -0.66 36.90 N/A important now than ever, as “What is of importance is Collins Stewart Wealth Management -1.06 25.80 14.86 -4.60 30.52 7.97 correlations between asset how individual private Coutts -3.80 16.90 13.30 N/A N/A N/A classes are rising.” banks interpret the word Deutsche Bank Private Wealth Management -4.28 29.96 N/A -6.81 32.08 N/A However, other asset ‘balanced’ for a particular classes can still offer a mandate,” says Peter Duncan Lawrie Private Bank -2.40 28.40 N/A -3.60 31.60 N/A degree of protection, accord- Botham, chief investment Equilibrium Asset Management LLP -3.99 23.27 8.82* -1.16 8.04** N/A ing to many managers. officer at Brown Shipley. “It GHC Capital Markets Ltd -5.96 30.85 N/A -5.39 40.99 N/A “We think the outlook for is vital a client understands Greystone Financial Services -5.92 28.21 4.41 -8.90 36.68 24.50 some alternative assets is their attitude to risk.” Heartwood -3.70 27.80 16.10 -7.90 32.50 N/A more constructive, and Smith agrees. “A good port- HSBC Bank -0.99 29.37 15.39 -5.70 26.89 6.87 potentially less volatile, folio management service than for equities,” says Wil- should involve a dialogue: if Investec Wealth and Investment -3.57 31.94 7.14 N/A N/A N/A lem Sels, UK head of invest- a client has an unrealistic Investment Quorum Ltd -7.16 29.05 N/A -9.43 33.73 N/A ment strategy at HSBC Pri- expectation for return, James Brearley & Sons *** -4.59 23.20 -0.22 -5.42 33.02 4.78 vate Bank. “Although hedge inconsistent with his risk J O Hambro Investment Management -3.62 25.10 17.36 -4.18 31.16 14.20 funds have generally under- profile we have a duty to Jupiter Private Clients & Charities -3.66 29.10 N/A -5.46 30.50 N/A performed bonds, they have either re-educate the client.” McInroy & Wood Ltd -1.70 37.00 29.50 -2.40 41.20 44.00 Newton Investment Management Ltd -4.53 29.62 10.84 -6.96 27.73 12.10 Asset allocations Pictet 0.71 23.00 30.10 -0.59 27.30 21.60 Principal Investment Management Ltd -4.73 23.34 0.88 -6.20 21.86 -5.91 PSigma Investment Management -2.24 22.03 15.32 -2.55 26.32 14.15 Wealth managers’ use of gains we have made in gilts equities in client portfolios bought some time ago and Rathbone Investment Management *** 0.56 34.51 20.71 3.49 36.82 19.81 has remained almost corporate bonds” – but the RBC Wealth Management -3.10 21.50 24.90 -4.60 26.10 21.80 unchanged in the past 12 average weighting in RMG Wealth Management 3.50 N/A N/A N/A N/A N/A months, writes Matthew balanced portfolio is not Rothschild Wealth Management -2.50 23.50 18.90 -7.10 28.90 14.90 Vincent. much higher than last year: Ruffer LLP 1.30 31.80 56.10 N/A N/A N/A “Balanced” portfolios have 9.39 per cent today, up an average equity allocation from 8.49 per cent. Seven Investment Management -5.06 21.13 12.26 -8.43 23.54 7.30 of 56.25 per cent today, Hedge funds and cash Smith & Williamson -0.69 36.96 27.80 -2.32 37.71 27.12 compared with 57.84 per are the only holdings to Société Générale Private Banking Hambros -2.79 30.91 29.94 -4.84 25.27 8.19 cent this time last year. have undergone a Stonehage Group 1.00 19.00 N/A N/A N/A N/A “Capital growth” portfolios significant rebalancing. Taylor Young Investment Management Ltd -3.10 36.00 6.30 -10.60 64.40 7.20 – which hold more “risk” Last year, portfolio Thurleigh Investment Managers -2.70 17.80 8.20 -5.40 20.10 1.70 assets in pursuit of longer­ managers entrusted term returns – have 71.44 9.14 per cent of their Towry -6.70 22.20 9.00 -7.40 25.80 15.50 per cent in equities, on balanced portfolios to Veritas Asset Management 0.30 27.90 35.60 -1.50 34.50 36.80 average, against 72.53 per hedge fund managers. Vestra Wealth -3.32 32.60 N/A -4.02 39.61 N/A cent a year ago. Today, that has fallen to W H Ireland Ltd 0.20 33.40 16.60 -2.30 32.70 10.90 Bond holdings – both 5.82 per cent. Williams de Broë -1.89 33.51 20.97 -5.98 34.57 19.33 government and corporate Thurleigh says it has issues – also appear similar almost exited these Average -2.44 27.95 16.23 -4.60 32.09 13.80 year­on­year, in spite of a investments. Some of the Best 3.50 39.00 56.10 3.49 64.40 44.00 strong rise in the prices of proceeds have gone into Worst -7.16 16.78 -0.22 -10.60 8.04 -5.91 “safer” US Treasuries and cash, which accounts for Notes UK gilts. McCarthy Taylor much of the 9.3 per cent N/A=Not applicable * Since launch 4 years ago ** Since launch in September 2009 ***Performance based on model portfolios before fees. Brewin Dolphin, EFG Harris Allday, Killik & Co, RadcliffesLeBrasseur and Redmayne- reports “an overweight in “other” assets, up from Bentley stated that fi gures were not applicable or available. Brown Shipley, HSBC Private Bank, JP Morgan Private Bank, Lloyds TSB Private Banking, Quilter and UBS Wealth Management and Walker Crips did not disclose fi gures position . . . reflecting the 6.5 per cent last year. 4 FINANCIAL TIMES SATURDAY JUNE 16 2012 FINANCIAL TIMES SATURDAY JUNE 16 2012 5 Money Guide: Private Client Wealth Management Money Guide: Private Client Wealth Management

directly, by buying into outperform comparable Sels accepts. “If one wants ove Capital Management and we will also use some ing investments which may inflation-linked products. government bonds at to achieve consistent says he has done a lot of hedge funds,” he explains. not each have extremely “Our starting point for maturity.” returns of 7 per cent or inflation-proofing of clients’ “We have some exposure to low absolute volatility, but Portfolio balancing act investors concerned about Others are looking to more in the long term, how- investments in the past few gold, but only in a modest in combination provide a inflation is index-linked higher-risk corporate bonds ever, some exposure to months. way.” more balanced and less vol- [corporate] bonds and that are offering yields of equities, currencies or “We tend to use a lot of Others have used the cur- atile comprehensive wealth index-linked gilts issued by 7 per cent or more over the structured products is specialist insurance funds, rent market conditions as position.” the UK and other places,” next 12 months. “US high- required,” he says. “Equi- and infrastructure funds to an opportunity to encour- She says that an impor- says Kenny. “But the prob- yield bonds are paying ties are traditionally a good protect people’s portfolios age clients to discuss the tant point to remember is as inf lation threat rises lem at the moment is that 7.55 per cent, and euro inflation hedge, and are cur- trade-offs between risk and that volatility is not the increased demand for these high-yield bonds at 9.45 per rently trading at a very low return. Tracy Maeter, head only form, or measure, of bonds means yields have cent,” notes Willem Sels, price to earnings ratio, ‘Investors need of investments at RBC risk. “If investors are keen cult position of trying to tile, clients are primarily low of 0.5 per cent for more been pushed down.” UK head of investment which should give us a good to look beyond Wealth Management, says: to pursue returns while also Real returns generate real returns to focused on capital preserva- than three years, investors Alan Higgins, chief strategy at HSBC Private entry point for the long “These conversations high- trying to achieve low vola- keep portfolio values ahead tion,” admits Patrick Con- have flocked to equity investment officer UK at Bank. term.” government bonds light that often what inves- tility, more often than not Financial advisers of inflation, but without nolly at AWD Chase de income funds as well as Coutts, recommends a bal- “If the eurozone’s worst He also likes to use struc- for ways to protect tors are actually seeking the outcome simply shifts fear investors are opening up clients to added Vere. “But this could create specialist funds focused on anced portfolio, mixing gov- scenario can be avoided, we tured products as a way to is relative stability and cap- the risk to another area – risk. Traditional income- problems for them as the infrastructure or private ernment bonds with higher- believe this is a good entry enhance yields while add- their capital’ ital preservation for their such as leverage, lack of too focused on generating assets, such as rate of inflation is greater equity. These can yield risk assets as the best way point and credit spreads ing protection to a portfolio. overall wealth profile. liquidity, or lack of trans- short­term safety, short-dated government than the rates available on more than 5 per cent a year to deliver real returns. would tighten in coming Jeremy Hervey, at Cazen- “This can involve combin- parency,” Maeter warns. bonds, are currently provid- cash savings accounts.” – but, even then, the effect “Investors need to look months, leading to price writes Lucy ing record low yields – as Chris Kenny, investment of inflation, charges and tax beyond government bonds gains.” Warwick­Ching evidenced by two-year Ger- director at Smith & Wil- can make the net return for ways to protect their He prefers to hold bonds man government Bunds liamson, agrees. “It’s diffi- negative. capital and for long-term issued by well-established Wealth management firms now yielding zero per cent. cult to find safe havens for In the current environ- purchasing power,” he says. businesses and recommends have been forced to reduce However, advisers also investors’ money – but too ment, there are also the “One asset class we a buy-and-hold strategy their holdings of low-yield- fear that some clients are much reliance on cash and risks posed by volatility in favour is high-quality cor- over directional trading. ing bonds, cash and “alter- becoming too focused on bonds may prove a much global equity markets. porate bonds. Their yield But for anyone who is will- native” asset classes to pro- short-term safety in the higher risk than investing But wealth managers spreads over government ing to take some short-term tect client portfolios from midst of the eurozone debt in equities of solid blue-chip argue that they have a bonds and strong company trading risk, he suggests inflation – relying instead crisis – and will end up fac- companies. The greatest wider array of investment balance sheets suggest that, that two-year Italian bonds on increasingly turbulent ing losses if they continue risk for individuals is the tools at their disposal than if default rates were to could return close to 7 per equity holdings in an effort to follow a so-called “low- possibility of having invest- in the past, giving them reach the worst levels seen cent in the coming year – to secure a “real return”. risk” strategy. ment portfolios eroded by more options to grow and over the last 40 years, through a combination of Discretionary portfolio “In the current environ- inflation.” protect clients’ assets. corporate bonds would still spread tightening and yield managers say they are find- ment, when real assets are With the Bank of England Some have been address- look attractive in absolute income. But portfolios can- ing themselves in the diffi- proving particularly vola- base rate held at a historic ing the inflation threat Europe’s debt crisis makes it hard to escape inflation Reuters terms – and are likely to not rely on bonds alone,

Investment approach Battling inflation Current asset allocation of average balanced portfolio invested on behalf of UK private clients Current asset allocation of average capital growth portfolio invested on behalf of UK private clients Wealth manager Equities Bond: Bonds: Property Private Hedge Commodities Cash/ Equities Bond: corporate Bonds: Property Private Hedge Commodities Cash/other (%) corporate (%) government (%) (%) equity (%) funds (%) (%) other (%) (%) (%) government (%) (%) equity (%) funds (%) (%) (%) Top performers consistent Adam & Company 75.00 10.00 8.00 5.00 0.00 0.00 0.00 2.00 93.00 0.00 0.00 5.00 0.00 0.00 0.00 2.00 Wealth managers were by Jonathan Ruffer, has Ashcourt Rowan PLC 67.00 9.00 6.00 3.00 0.00 0.00 0.00 15.00 86.00 0.00 0.00 0.00 0.00 0.00 0.00 14.00 Barclays Wealth and Investment Management 48.00 12.00 9.00 4.00 14.00 5.00 8.00 68.00 8.00 4.00 2.00 8.00 6.00 4.00 unable to keep their the top­performing Berry Asset Management PLC 60.00 8.00 15.00 5.00 0.00 0.00 6.00 6.00 77.00 4.00 8.00 5.00 0.00 0.00 5.00 1.00 clients’ portfolios growing balanced portfolio over Bestinvest 41.50 32.20 0.00 8.00 0.00 11.50 3.30 3.50 61.00 20.00 0.00 3.50 0.00 9.00 3.50 3.00 faster than inflation over five years for the second Brewin Dolphin 71.50 15.00 3.00 0.00 5.50 0.00 0.00 5.00 84.00 3.00 4.00 0.00 4.00 0.00 0.00 5.00 the past 12 months – with year in a row – returning Brooks Macdonald Asset Management 41.00 19.00 5.00 6.00 0.00 7.00 3.00 19.00 60.00 12.00 3.00 4.00 0.00 6.00 3.00 12.00 most “balanced” and 56.1 per cent for Brown Shipley 56.00 7.00 14.00 4.00 0.00 6.00 3.00 10.00 72.00 4.00 5.00 0.00 0.00 6.00 7.00 6.00 “capital growth portfolios” investors. Cazenove Capital Management 45.50 17.50 15.00 0.00 0.00 11.90 0.00 10.10 65.50 7.50 10.00 0.00 0.00 7.90 0.00 9.10 Charles Stanley Group PLC 88.00 6.00 4.00 0.00 0.00 0.00 2.00 0.00 N/A N/A N/A N/A N/A N/A N/A N/A making losses, or trailing In last year’s survey, Cheviot Asset Management 72.50 9.50 2.00 0.00 0.00 5.00 0.00 11.00 90.00 0.00 0.00 0.00 0.00 7.50 0.00 2.50 the UK consumer prices Ruffer’s balanced portfolio C. Hoare & Co. 53.00 18.00 13.00 0.00 0.00 12.00 3.00 1.00 79.00 4.00 0.00 0.00 0.00 12.00 4.00 1.00 index (CPI), writes had also come out on top City Asset Management PLC 57.50 17.50 0.00 0.00 0.00 8.00 17.00 71.00 10.00 0.00 0.00 0.00 9.00 10* Matthew Vincent. over three and five years Close Brothers Asset Management 60.00 12.00 12.00 1.00 0.00 2.00 6.00 7.00 70.00 8.00 7.00 1.00 0.00 2.00 8.00 4.00 One­year performance to the end of 2010. Collins Stewart Wealth Management 61.00 9.50 10.50 0.00 0.00 0.00 5.00 14.00 72.00 2.50 7.00 0.00 0.00 0.00 5.00 13.50 figures show the average However, it has now fallen Coutts 39.00 15.00 24.00 3.00 0.00 9.00 6.00 4.00 61.00 8.00 8.00 2.00 8.00 0.00 7.00 6.00 Deutsche Bank Private Wealth Management 50.50 22.00 15.50 0.00 0.00 3.00 5.00 4.00 67.50 10.50 10.00 0.00 0.00 3.00 5.00 4.00 balanced portfolio lost 2.44 out of the top 10 list over Duncan Lawrie Private Bank 62.00 28.00 0.00 0.00 0.00 0.00 0.00 10.00 76.00 14.00 0.00 0.00 0.00 0.00 0.00 10.00 per cent of its value in the a three­year timescale, Equilibrium Asset Management LLP 55.00 20.00 0.00 10.00 0.00 0.00 0.00 15.00 80.00 10.00 0.00 2.00 0.00 0.00 0.00 8.00 year to December 31 2011, reflecting the fact that its GHC Capital Markets Ltd 50.00 5.00 15.00 10.00 0.00 0.00 10.00 10.00 70.00 0.00 0.00 10.00 0.00 0.00 10.00 10.00 but even the best strongest performance Greystone Financial Services 79.00 17.00 0.00 0.00 0.00 0.00 0.00 4.00 98.00 0.00 0.00 0.00 0.00 0.00 0.00 2.00 performers – from RMG came amid the financial Heartwood 54.20 8.00 12.70 7.20 0.00 5.10 0.00 12.80 80.50 3.10 0.00 7.30 0.00 0.00 0.00 9.10 Wealth Management, Ruffer crisis of 2008 – success HSBC Bank 48.00 11.00 16.00 4.00 3.00 2.00 5.00 11.00 70.00 5.00 8.00 4.00 4.00 0.00 4.00 5.00 HSBC Private Bank UK Ltd 35.00 11.90 20.00 5.00 4.00 14.00 4.00 6.10 47.00 9.00 7.00 5.00 5.00 16.00 5.00 6.00 and Stonehage – grew less that is no longer reflected Investec Wealth and Investment 65.50 7.50 9.00 2.50 2.00 5.00 2.00 6.50 73.00 4.40 5.40 2.50 2.00 6.00 2.00 4.70 than the 4.2 per cent rise in the three­year figures. Investment Quorum Ltd 62.00 22.00 0.00 0.00 0.00 7.00 7.00 2.00 74.00 4.00 0.00 0.00 0.00 8.00 12.00 2.00 in the CPI over the Williams de Broe, Veritas James Brearley & Sons 76.50 17.50 0.00 2.50 0.00 0.00 0.00 3.50 87.50 12.00 0.00 0.00 0.00 0.00 0.00 0.50 calendar year. and Cheviot Asset J O Hambro Investment Management 68.00 8.20 8.80 0.00 0.00 5.00 5.00 5.00 80.00 3.40 3.60 0.00 0.00 5.00 5.00 3.00 Capital growth portfolios Management were among JP Morgan Private Bank 33.00 4.00 6.00 3.00 5.00 22.00 4.00 23.00 47.00 0.00 3.00 4.00 6.00 21.00 5.00 14.00 fared worse, losing 4.6 per the strongest three­year Jupiter Private Clients & Charities 68.39 9.27 7.66 0.00 0.00 3.45 5.06 6.17 82.39 6.28 0.00 0.00 0.00 0.00 5.15 6.18 cent on average, with the performers for balanced Killik & Co 74.00 12.00 0.00 0.00 0.00 8.00 3.00 3.00 84.00 0.00 3.00 0.00 0.00 9.00 4.00 0.00 McInroy & Wood Ltd 70.00 0.00 30.00 0.00 0.00 0.00 0.00 0.00 70.00 0.00 30.00 0.00 0.00 0.00 0.00 0.00 weakest performers – portfolios in both this Newton Investment Management Ltd 54.90 14.01 17.45 1.71 0.00 0.00 1.38 10.56 67.22 10.59 10.22 0.00 0.00 4.12 1.95 5.90 Taylor Young, Investment year’s and last year’s Pictet 30.00 23.00 0.00 0.00 0.00 15.00 7.00 25.00 51.00 3.00 0.00 0.00 0.00 10.00 7.00 30.00 Quorum and Greystone – survey. But the top Principal Investment Management Ltd 65.00 18.00 7.00 0.00 0.00 10.00 0.00 10.00 75.00 7.00 3.00 0.00 0.00 8.00 0.00 7.00 falling by more than the performer – Charles PSigma Investment Management 47.50 15.00 7.50 0.00 0.00 0.00 7.50 22.50 62.50 10.00 0.00 0.00 0.00 0.00 7.50 20.00 7.3 per cent drop in the Stanley with a 39 per Quilter 69.50 0.00 17.00 2.50 0.00 6.50 0.00 4.50 82.60 0.00 6.50 2.50 0.00 6.40 0.00 2.00 FTSE 100 index. cent return – did not Rathbone Investment Management 67.00 3.00 11.00 2.00 0.00 13.00 0.00 4.00 84.00 3.00 3.00 0.00 0.00 10.00 0.00 0.00 RBC Wealth Management 32.70 8.90 20.00 0.00 0.00 17.50 0.00 20.90 52.60 5.30 11.40 0.00 0.00 10.60 0.00 20.10 However, every single disclose figures last year. Redmayne-Bentley 75.00 11.00 5.00 0.00 0.00 0.00 5.00 4.00 N/A N/A N/A N/A N/A N/A N/A N/A balanced portfolio Taylor Young had the RMG Wealth Management 25.00 0.00 20.00 0.00 0.00 17.00 8.00 30.00 25.00 0.00 20.00 0.00 0.00 17.00 8.00 30.00 performed better than the best­performing “capital Rothschild Wealth Management 50.00 11.00 5.00 4.00 0.00 12.00 8.00 10.00 63.00 0.00 0.00 4.00 0.00 14.00 8.00 11.00 FTSE 100 – as well as growth portfolio” over Ruffer LLP 51.00 0.00 31.00 0.00 0.00 1.00 5.00 12.00 N/A N/A N/A N/A N/A N/A N/A N/A beating the FTSE World three years, with a Seven Investment Management 42.10 21.90 13.90 2.00 0.80 3.30 3.00 13.00 61.90 10.90 7.00 1.80 1.60 2.80 3.00 11.00 index, which was down by return of 64 Smith & Williamson 68.00 8.00 12.00 3.00 0.00 4.00 0.00 5.00 77.00 5.00 5.00 3.00 0.00 4.00 0.00 6.00 Société Générale Private Banking Hambros 50.00 25.00 10.00 2.00 0.00 0.00 7.00 6.00 75.00 3.50 0.00 0.00 0.00 7.00 6.00 8.50 9.6 per cent in 2011. per cent, Stonehage Group 25.00 22.00 3.00 5.00 5.00 30.00 10.00 0.00 N/A N/A N/A N/A N/A N/A N/A N/A Over longer time periods, having Taylor Young Investment Management Ltd 75.80 0.00 5.90 7.20 0.00 0.00 0.00 11.10 79.40 0.00 0.00 3.40 0.00 0.00 0.00 17.20 the strongest performers in topped the Thurleigh Investment Managers 21.00 57.00 0.00 2.00 0.00 15.00 2.00 3.00 43.00 37.00 0.00 2.00 0.00 12.00 3.00 3.00 recent years have five­year Towry 54.20 4.40 4.30 11.70 0.00 0.00 2.50 22.90 60.50 2.30 2.30 8.90 0.00 0.00 2.40 23.6** continued to demonstrate performance Veritas Asset Management 65.00 28.00 0.00 0.00 0.00 0.00 0.00 7.00 90.00 0.00 0.00 0.00 0.00 0.00 0.00 10.00 their consistency. table last Vestra Wealth 66.20 2.50 10.00 0.00 0.00 5.00 3.00 13.30 76.30 0.00 0.00 0.00 0.00 7.50 2.50 13.70 Ruffer, the discretionary year. Walker Crips Group 50.00 15.00 10.00 5.00 0.00 5.00 5.00 10.00 70.00 6.00 4.00 4.00 0.00 4.00 4.00 8.00 investment management W H Ireland Ltd 62.50 10.00 5.00 2.50 0.00 10.00 5.00 5.00 75.00 2.50 0.00 2.50 0.00 10.00 5.00 5.00 Williams de Broë 59.00 15.00 11.00 3.00 0.00 3.00 2.00 7.00 76.00 7.00 2.00 4.00 0.00 0.00 2.00 9.00 firm founded in 1994 Average 56.25 13.33 9.39 2.49 0.71 5.82 3.30 9.30 71.44 5.60 4.01 1.83 0.76 4.98 3.43 8.21 Max 88.00 57.00 31.00 11.70 14.00 30.00 10.00 30.00 98.00 37.00 30.00 10.00 8.00 21.00 12.00 30.00 Min 21.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 25.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Consistency: Notes: Figures as of May 2012. * Includes private equity and hedge funds. ** Includes non-traditional strategies such as long/short funds, via use of regulated UCITS vehicles, EFG Harris Allday. Lloyds TSB Private Banking, RadcliffesLeBrasseur, and UBS Jonathan Ruffer Wealth Management did not disclose asset allocations. N/A=Not applicable 6 FINANCIAL TIMES SATURDAY JUNE 16 2012 FINANCIAL TIMES SATURDAY JUNE 16 2012 7 Money Guide: Private Client Wealth Management Survey highlights knowledge gaps

tantly, wealth managers paint a damning picture of analysis has shown that likely to consider recom- score their advisers’ finan- Trends need to educate wealthy where wealthy individuals wealthy clients who under- mending them. cial knowledge more highly individuals about their are today in terms of their stand investing are gener- More knowledge makes than their helpfulness, pro- Asset managers finances and investments. financial knowledge. For ally more attractive clients these clients more attrac- fessionalism, responsive- and clients both Ledbury Research’s the sake of transparency, for wealth managers. tive – although the incre- ness, accessibility and annual survey of 500 wealth disclosure and risk manage- These individuals use mental benefits associated proactivity. need education, management clients with at ment, there is a necessity more services, are more with greater knowledge lev- For clients, these non- says Stuart least £500,000 in investable for wealth managers to likely to think management els are gradual among those technical and very human assets recently assessed address this, but there is fees are acceptable, are who can explain three or factors really matter. Rutherford of their level of knowledge also a clear business bene- more satisfied with their four of the financial instru- Indeed, Ledbury’s analysis Ledbury Research when it comes to investing fit. Our consumer-based main providers and more ments. of the key moments in cli- and financial planning. Second, after client educa- ents’ relationships with With fewer than six months We did this by asking the tion, comes training for their wealth managers before the Financial Serv- individuals if they were Clients’ view wealth managers in deliver- shows that it is often issues ices Authority (FSA) intro- able to explain four differ- ing a service. Ledbury such as poor communica- duces new standards for ent instruments: insurance believes firms need to move tion, basic errors, lack of advisers under its Retail bonds, exchange traded Improving standards beyond product knowledge, responsiveness, inaccessi- Distribution Review (RDR), funds (ETFs), hedge funds and focus on developing bility or unhelpfulness that the rush to train wealth and call options. In the High Net Worth responsive, accessible, and advisers’ service skills. prompt them to change managers has become a Our findings, published in report produced by Ledbury proactive” increased from Again, our research into providers. defining theme of 2012. But our Knowledge Trend Research this month, clients 75 per cent in 2011 to 80 wealth managers’ clients While the thought of while the progress evi- Report, reveal that clients of wealth managers were per cent this year. reveals that while RDR-re- more training may seem denced in this year’s survey could explain, on average, asked if they felt their For this FT Guide to lated training is regarded as daunting to wealth manag- results is impressive, we at just 1.6 of the four different “main contacts” at the Private Client Wealth improving advisers’ knowl- ers – particularly as they Ledbury Research believe instruments. firms they used were Management, Ledbury edge, it is having much less rush to get their RDR quali- further improvements in One-third of respondents knowledgeable about surveyed more than 80 UK impact when it comes to fications – there is clearly a education and qualifica- were not able to explain financial products, writes wealth managers – selected rating the service provided. need to address these two tions are needed. any of the financial instru- Matthew Vincent. according to their UK In our High Net Worth additional areas. They Our monitoring of UK ments and another 15 per More than eight out of 10 assets under management. report this month, the per- should remember that their wealth managers and their cent were able to explain said the managers were They were asked to provide centage of clients who investment in product clients suggests that there only one of them. knowledgeable – up from details of their asset agreed that their main con- training is already being are two other training cam- Results were worse for 71 per cent in the past year. allocations, services and tact is knowledgeable about noticed, not just by the FSA paigns to which the indus- women (who could explain Similarly, the number of fees, as at May 18 2012, a range of financial prod- but also by clients. try needs to commit – in only 1.2 on average), and for clients agreeing that their and their portfolios’ ucts and services rose from addition to meeting RDR clients who were 65 and wealth manager contacts performance as at 71 per cent in 2011 to 83 per Stuart Rutherford is requirements. over (who explained only were “helpful, professional, December 31 2011. cent in 2012. However, that research director at First, and most impor- 1.4). Arguably, these results means wealthy clients now Ledbury Research 8 FINANCIAL TIMES SATURDAY JUNE 16 2012 FINANCIAL TIMES SATURDAY JUNE 16 2012 9 Money Guide: Private Client Wealth Management Money Guide: Private Client Wealth Management Services Flexibility remains priority for investors

similar liquidity problems. ing director of HSBC Pri- and want to be able to sell up in property, and/or a managers deciding on port- cation cation * Liquidity “The wider liquidity of the vate Bank, says clients’ some holdings and buy oth- business, so one of the few folio weightings. financial system, though portfolios are far more liq- ers as soon as it arises. places they have liquidity is “The result is that most Wealth managers tight, is nowhere near as uid nowadays, “partly Building liquidity into through their portfolios. So clients should now have move away from constrained as during the through their experience of portfolios is also a key we tend to keep people’s diversified investment port- credit crisis,” points out 2008, and partly because requirement for Chris portfolios flexible.” folios with limited ongoing property as clients Alan Higgins, chief invest- they don’t believe that the Kenny, investment director Far from having memo- liquidity concerns,” says demand quick exit ment officer UK at Coutts. underlying problems associ- at Smith & Williamson. ries that are too short, pri- Patrick Connolly at AWD “That said, a lot has ated with the eurozone and “The exit route from an vate investors appear to Chase de Vere. “The excep- ces routes, writes Lucy changed since 2008, includ- the global economy have asset can be as important have the lessons of 2008 tions will be those investors ed as 'independent' * * ed as 'restricted' Warwick­Ching ing our approach. been fixed”. as the entry,” he stresses. weighing heavily on their or advisers who try to be “Managers are much But he also believes cli- “We also start from the minds, advisers say. Liquid- too clever and are overex-

cation of advice undecided * advice of cation Private clients are still more aware of liquidity risk ents are waiting for the point of view that a typical ity therefore remains a key posed to higher-risk, more seeking reassurance from and wouldn’t buy similar right buying opportunity family will have money tied determinant for wealth obscure, illiquid assets.” wealth managers that their structures today.” Advice classifi Advice classifi Advice Classifi ('open market entire from recommended Products architecture') universe selected from recommended Products ('guided architecture') only products In-house in-house invested poftfolios discretionary % of management portiofolio Discretionary management portfolio Advisory Brokerage equity Private funds) funds (including fund of Hedge Commodities planning Tax planning & estate Trust planning & retirement Pensions planning Philanthropic Insurance Banking Mortgages Other lending services Charity services Offshore Concierge Wealth manager Wealth UK offi Number of advisors/relationship client-facing Number of in UK managers minimum qualifi achieving advisers % of 5 80 100 X X 2.00 X X X X X X X X X portfolios are flexible Of the 59 firms that dis- Adam & Company enough to negotiate stock closed their balanced port- Ashcourt Rowan PLC 18 137 77 X X <0.50 X X X X X X X market volatility. folio holdings to the FT Barclays, Wealth and Investment Management 19 331 90 X X 26.00 X X X X X X X X X X X X X X X X X During the financial crisis this year, more than half Berry Asset Management PLC 1 7 57 X X 0.00 X XX of 2008, clients of several reported a lower allocation Bestinvest 22 54 100 X X 20.00 X X X X X X X X X wealth management firms to property than last year. discovered that their portfo- Overall, the average prop- Brewin Dolphin 40 634 90 X X 0.00 X X X X X X X lio managers were unable erty allocation fell from 7 53 93 X X 2.00 X X X X X Brooks Macdonald Asset Management to sell holdings and cut 11.50 per cent to 2.41 per Brown Shipley 5 71 78 X X 6.60 X X X X X X X X X X losses – because they had cent over a 12-month Cazenove Capital Management 5 69 100 X X 18.00 X X X X X X X X X committed so much money period. Charles Stanley Group PLC 32 550 100 X X 1.50 X X X X X X X to illiquid assets that had While this reflects wider no functioning secondary market sentiment towards Cheviot Asset Management 2 41 100 X X <1.00 X X X X X X X X market. property, it also suggests a 2 53 90 X X 0.00 X X X X X X X X X X X X X X X C. Hoare & Co. “The financial crisis of move away from illiquid City Asset Management PLC 2 9 80 X X 3.00 X X X X X X X X X X 2008 resulted in many inves- assets in case of further Close Brothers Asset Management 9 137 80 X X 0.26 X X X X X X X tors becoming stuck in market turmoil. Collins Stewart Wealth Management 1 34 50 X X 3.00 X X X X X X X X X X investments that applied PSigma Investment Man- restrictions on trading,” agement says it specifically Coutts 28 318 99 X X 0.00 X X X X X X X X X X X X X X X X recalls Caroline Shaw, fund sold its UK commercial 5 Approx. 80 90 X X 0.00 X X X X X X X X X X X X X X Deutsche Bank Private Wealth Management manager at Courtiers. property positions in late Duncan Lawrie Private Bank 3 23 100 X X 0.00 X X X X X X X X “Some of these restrictions 2011 as it had became con- EFG Harris Allday 4 35 98 ** X X 0.00 X X X X still apply, four years later, cerned over slowing inflows Equilibrium Asset Management LLP 2 5 100 X X 0.00 X X X X X and investors have lost to the asset class, and much of the original monies feared the best returns from GHC Capital Markets Ltd 3 9 100 X X 12.00 X X X invested. In some cases, the asset class had been 2 22 95 X X 100.00 X X X X X X X X Greystone Financial Services funds have gone into seen. “Liquidity is a key Heartwood 2 17 95 X X 46.00 X X X X X X administration with no concern, even obsession, for HSBC Bank 1265 1544 N/D X X Varies X X X X X X X X X X X X X X hope of any recovery.” us,” says Tom Becket, chief HSBC Private Bank UK Ltd 10 223 100 X X 17.00 X X X X X X X X X X X X X X X Most notably, property investment officer at Investec Wealth and Investment 11 230 96 X X 2.60 X X X X X X funds – previously popular PSigma. “This year, we 1 4 80 X X 0.00 X X X X X X X X X X with clients – got into seri- have become more con- Investment Quorum Ltd ous difficulty in 2008 as cerned over the near-crip- James Brearley & Sons 5 10 90 X X 0.00 X X X X X X investors tried to head for pling lack of liquidity J O Hambro Investment Management 1 22 82 X X 8.80 X the exit, only to find them- across all asset classes. In JP Morgan Private Bank 1 68 N/A X N/A X X X X X X X X X X X X X X selves locked in by fund all but the very rarest cir- Jupiter Private Clients & Charities 1 13 85 X X 34.30 X X managers unable to sell cumstances, we work on properties and return cash. the basis that if we can’t Killik & Co 10 72 90.80 X X 0.00 X X X X X X X X X X X X X X X Today, at least, the euro- get our money out on the 31 N/D N/D X X 67.00 X X X X X X X X X Lloyds TSB Private Banking zone debt crisis has not day we want to, then we McInroy & Wood Ltd 2 8 100 X X 70.00 X XX caused the levels of panic won’t invest.” Newton Investment Management Ltd 3 33 100 X 30.00 X XX selling that would cause Charlie Hoffman, manag- Pictet 1 7 N/A X N/A X X X X X X X X X X Principal Investment Management Ltd 5 34 76 X X 0.04 X PSigma Investment Management 1 14 100 X X 1.26 X Liquid test Quilter 13 116 97 X X N/A X X X X X X X X RadcliffesLeBrasseur 3 109 N/A N/A X X X X X Monitoring the markets Rathbone Investment Management 11 184 95 X X 2.15 X X X X X X X Wealth managers monitor Income fund a higher RBC Wealth Management 3 82 91 X X 8.20 X X X X X X X X X X X X X X the liquidity of asset classes liquidity risk score due to 35 102 80 X X 0.00 X X X Redmayne-Bentley in their clients’ portfolios by its large size, which would RMG Wealth Management 1 2 100 X X 75.00 X looking at daily trading make it difficult to sell large Rothschild Wealth Management 1 34 100 X X 4.50 X X X X X X X X X X X X X volumes and having regular holdings were there a rush Ruffer LLP 2 26 N/D X 39.00 X conversations with fund of investors looking to exit. Seven Investment Management 2 37 86 X 0.00 X managers, traders and Gautam Chadda, 6 177 c. 95 X X c. 6.00 X X X X X X X X X X X X X X brokers, writes Lucy investment consultant at Smith & Williamson Warwick­Ching. RBC Wealth Management, Société Générale Private Banking Hambros 6 79 N/A X X 2.00 X X X X X X X X X X X X X X X “Most of the volume data says clients should Stonehage Group 2 16 65 X X <1.00 X X X X X X X X X X X X X X X are easily accessible, but remember the difference Taylor Young Investment Management Ltd 1 6 100 X X 16.00 X X we find the insight from between the liquidity profile Thurleigh Investment Managers 1 7 71 X X 0.00 X XX sources at investment in a term­sheet or 19 148 98 X X 100.00 X X X X X banks and trader brokers prospectus for a fund, and Towry vital to our analysis and the liquidity profile of an UBS Wealth Management 7 200 95 X X 11.00 X X X X X X X X X X X X X X X X understanding of liquidity,” underlying asset. Veritas Asset Management 1 10 N/D X 31.00 X X says Tom Becket, chief “Take the example of Vestra Wealth 2 44 95 X X 0.00 X X X X X X X X X X investment officer at exchange­traded funds, Walker Crips Group 8 79 100 X X <5.00 X X X X X X X X X PSigma Investment where the actual ETF may Management. be highly liquid,” he says. W H Ireland Ltd 19 91 33 X X N/A X X X X X X X X He also pays close “However, the ETF may 7 120 98 X X Minimal X X X X X X X Williams de Broë attention to the flows of try to replicate the % offering services 98 64 41 32 44 44 56 64 61 27 20 29 29 34 66 68 12 cash into certain investment performance on an Notes funds. For example, he underlying asset class that * Under new regulations from January 2013 ** estimated. N/A= Not applicable N/D=Not disclosed gives the Invesco Perpetual is less than liquid.” 10 FINANCIAL TIMES SATURDAY JUNE 16 2012 FINANCIAL TIMES SATURDAY JUNE 16 2012 11 Money Guide: Private Client Wealth Management Money Guide: Private Client Wealth Management

Clients, assets and fees including Cazenove Capital per cent for the next £1m, Management, C Hoare and and down to 0.375 per Co and Greystone Wealth cent for those investing a Advisers still Management. further £3m. That leaves as many as 19 But other wealth manag- major UK wealth managers ers remain cagey on how undecided about the type of they will change their fees. grappling advice they will offer Coutts & Co says it has not (excluding those that did announced its tariff yet, not respond at all). They and the same applies to include Coutts and Co, Ves- Barclays Wealth. tra Wealth, Rothschild Bestinvest already offers with end of Wealth Management, Killik financial planning and dis- and Co, Towry, Barclays cretionary portfolio man- Wealth manager Wealth advisory for size Minimum portfolio management discretionary for size Minimum portfolio management discretionary for tariff Annual fee services management portfolio instead hourly fee pay to Option instead hourly fee pay No option to option undecided Hourly fee Wealth and Charles agement on a fee basis but Adam & Company N/A 250,000 1.25% on the fi rst £500,000; 1% on the next £500,000; 0.75% on the next £3m; 0.50% thereafter. Minimum fee £2,000 plus VAT X Stanley. its investment advice has Ashcourt Rowan PLC N/A 50,000 Option 1 (wrapped, ie inclusive of dealing fees): 1.50% plus £10 per transaction. X Option 2 (unwrapped, ie dealing fees charged separately): 1.00% plus 0.75% dealing charge on the fi rst £15k, plus £10 per transaction Some are waiting for traditionally been paid for commission guidance from the Solicitors from trail commission. Barclays, Wealth and Investment Management 500,000 250,000 1.25% on the fi rst £1m, 1.00% on the next £2m, 0.75% on the next £4m, 0.50% thereafter X Advisers will soon need a minimum qualification Dreamstime Regulation Authority, Last year, it launched an Berry Asset Management PLC 250,000 250,000 1.00% on the fi rst £1m; 0.75% on the next £1m; 0.50% on the next £1m; 0.30% on the next £2m; 0.20% thereafter X which is due on July 4, RDR-ready advisory service, Bestinvest 100,000 50,000 1.00% for portfolios of more than £250,000* X commission from providers managers say they are close per cent. But while firms according to a spokesman which can switch to fees Brewin Dolphin No minimum No minimum 0.75% on the fi rst £1m; 0.6% on the next £1m; 0.375% on the next £3m. Minimum commission £50 per transaction. X Regulation for selling their products, to getting all staff up to the are quick to reassure cli- for Charles Stanley. “very easily” – and it will Brooks Macdonald Asset Management 200,000 200,000 0.75% to 1.25% depending on portfolio size and mandate.† X under its long-awaited new QCF Level 4 standard. ents that advisers will meet Bestinvest says its wealth announce what those fees Brown Shipley N/A 500,000 1.50% on the fi rst £1m; 0.75% thereafter. Minimum fee £1,500 X A move to greater Retail Distribution Review To date, 97.5 per cent of the deadline, they are more management services will are later this year. Cazenove Capital Management N/A 1,000,000 Option 1: 1.00% on the fi rst £1m; 0.50% thereafter (commission rates: 1.00% on the fi rst £30,000 of equities, 0.50% thereafter; 0.75% on the X transparency over (RDR). Advisers and wealth Smith & Williamson’s advis- reluctant to say whether be independent, although Other firms have had fi rst £30,000 of bonds, 0.25% thereafter). mangers will only be per- ers have the required quali- they will offer “restricted” it is still considering the their fee structure worked Option 2 (all-in annual management fee): 1.25% on the fi rst £1m; 0.75% thereafter clients’ fees mitted to charge fees for the fication, with the remainder or “independent” advice. position of its investment out for some time. Towry Charles Stanley Group PLC No minimum No minimum 0.50%-1.00% depending on portfolio size. By arrangement, minimum £400 X will come at work they do – radically expected to gain this status Under the new rules, advisory and management has charged fees for the Cheviot Asset Management 250,000 250,000 1.00% on the fi rst £1m; 0.50% on the next £1.5m; 0.40% on the next £3m; 0.30% thereafter X altering the business mod- in coming months. Simi- firms that advise on a lim- services. past six years, while Smith C. Hoare & Co. 100,000 500,000 1.00% on the fi rst £5m; 0.90% on the next £5m; 0.80% on the next £10m; 0.60% thereafter (inclusive) X a price, writes els of firms not yet taking larly, Vestra Wealth and ited range of product types, Brewin Dolphin is aiming & Williamson, Vestra City Asset Management PLC N/A 100,000 1.00% on the fi rst £10,000; 0.5% thereafter X Tanya Powley this approach. Towry say that 95 and 96 or use only certain product to achieve fully independ- Wealth, Charles Stanley Close Brothers Asset Management N/A 250,000 Varies depending on investment amount and type of service selected X At the same time, firms per cent of their client- providers, will have to ent status and expects to be and Brooks Macdonald are Collins Stewart Wealth Management 250,000 250,000 Option 1: 1.50% annual fee with £40 bargain charge per transaction X Greater transparency over will have to change the way facing staff, respectively, make it clear to clients that able to attain this shortly, also fee-based businesses. Option 2: 0.75% annual fee on the fi rst £10,000 plus commission of 0.85%; 0.40% thereafter how wealth managers are they describe their advice – are “RDR-ready”. their advice is “restricted”. says executive chairman Chris Macdonald, chief Coutts 3,000,000 250,000 1.00% plus fund charges X paid, and how “independ- choosing to declare their However, some have fur- Of the 56 firms that took Jamie Matheson. executive of Brooks Mac- Deutsche Bank Private Wealth Management 1,000,000 250,000 Varies depending on portfolio value X ent” their advice is, must be range of services as either ther to go. According to fig- part in the FT’s survey, 17 The company has already donald, says: “Transpar- provided from January 2013 “restricted” or “independ- ures disclosed to the Finan- said they would be in this reviewed its charging struc- ency is a good thing and I Duncan Lawrie Private Bank 250,000 250,000 1.00% on the fi rst £1m, 0.50% thereafter X – but not all firms are yet ent”. Advisers will also cial Times, Collins Stewart category – including Smith ture, though, and moved to do believe that clients will EFG Harris Allday No minimum No minimum Commission if transactional service is still provided as main service. Fee-based services available on request X ready for the changes. have to attain a minimum Wealth Management has & Williamson and Rath- a transparent pricing pol- benefit from this. However, Equilibrium Asset Management LLP 100,000 100,000 1.50% on the fi rst £1m; 1.00% thereafter, but reducing on a sliding scale for portfolios of more than £3m. Maximum £10,000 X From next year, the professional qualification to only 50 per cent of its advis- bones. icy. Clients of Brewin with the further raising of GHC Capital Markets Ltd 20,000 20,000 0.75% on the fi rst £1m, by negotiation thereafter. Minimum £750. Dealing commissions 0.75%. Minimum commission £30. Bargain charge £5 X Financial Services Author- deal with clients. ers qualified to the mini- A smaller number – just Dolphin now pay 0.75 per professional standards, Greystone Financial Services 75,000 1,000,000 N/D X ity (FSA) will ban all finan- With the countdown mum standard, while Berry 10 – said they would pro- cent for the first £1m advice costs are bound to Heartwood N/A 500,000 1.25% on the fi rst £1m; 1.00% on the next £2.5m; 0.75% thereafter, plus VAT where applicable X cial advisers from receiving under way, many wealth Asset Management has 57 vide independent advice, invested, which drops to 0.6 increase.” HSBC Bank N/A 150,000 Varies depending on services and size of account. X HSBC Private Bank UK Ltd 2,000,000 2,000,000 1.00% on fi rst £3m, minimum £12,500; 0.75% on next £2m, minimum £30,000; 0.60% on next £5m, minimum £37,500; 0.50% thereafter, X minimum £60,000 Investec Wealth and Investment 100,000 100,000 1.00% on the fi rst £500,000, 0.75% on the next £500,000, 0.50% thereafter. Minimum £1,000 plus VAT. £25 bargain administration charge per X transaction Investment Quorum Ltd 100,000 100,000 1.25% on fi rst £1m; 1.00% on next £4m; 0.80% thereafter X James Brearley & Sons 50,000 50,000 0.50% plus VAT. X J O Hambro Investment Management N/A 1,000,000 1.20% on the fi rst £1m; 0.80% thereafter X JP Morgan Private Bank N/A N/A N/A Jupiter Private Clients & Charities 500,000 500,000 1.00% on the fi rst £2m; 0.75% thereafter X Killik & Co No minimum 100,000 1.00% on the fi rst £250,000; 0.75% on the next £250,000; 0.50% on the next £500,000; negotiable thereafter X Lloyds TSB Private Banking N/A 250,000 0.60-1.00% + VAT depending on portfolio size, plus fund management charges X McInroy & Wood Ltd N/A 10,000 1.00% plus VAT Newton Investment Management Ltd N/A 1,000,000 1.00% on the fi rst £5m; 0.50% on the next £5m; fi xed percentage rate thereafter depending on portfolio size Pictet 5,000,000 2,000,000 N/A X Principal Investment Management Ltd N/A 50,000 1.25% on the fi rst £500,000; 1.00% thereafter, plus VAT X PSigma Investment Management N/A 100,000 1.00% on the fi rst £2m; 0.75% on the next £2m; 0.65% on the next £1m; negotiable thereafter X Quilter 200,000 200,000 Option 1: fl at fee based on value of portfolio with no additional dealing/custody charges X Option 2: fee plus dealing commission RadcliffesLeBrasseur N/A N/A N/A X Rathbone Investment Management 100,000 100,000 1.00% on the fi rst £1m; 0.5% thereafter, plus £100 fi xed charge on all accounts (not applicable for funds valued at below £15,000), plus £20 X fi xed charge on each transaction RBC Wealth Management 1,000,000 500,000 1.25% on the fi rst £1m, 1.00% on the next £2m, 0.85% on next £2m, 0.70% on the next £5m, negotiable thereafter. Minimum £5,000 X Redmayne-Bentley 50,000 50,000 0.85% X RMG Wealth Management 500,000 10,000 1.00%. X Rothschild Wealth Management 5,000,000 5,000,000 From 1.00% X Ruffer LLP N/A 250,000 N/A Seven Investment Management N/A 200,000 0.90% discretionary fund charge applied to fund itself plus fee of 0.25% + VAT on the fi rst £500,000, 0.10% + VAT on the next £500,000, nil thereafter Smith & Williamson No minimum No minimum 1.00% on the fi rst £2m; 0.50% thereafter** 0.4% commission on fi xed interest stock other than convertible and preference stock ; 0.6% commis- X sion on all other investments Société Générale Private Banking Hambros 500,000 500,000 Option 1 (wrapped, ie inclusive of dealing fees): 1.50% on the fi rst £500,000; 1.25% on the next £1.5m; 1.00% thereafter. Minimum £5,000 X Option 2 (unwrapped, ie dealing fees charged separately ): 1.00% on the fi rst £500,000. 0.75% on the next £500,000; 0.50% thereafter. Mini- mum £3,000 Stonehage Group 600,000 600,000 0.75-1.25%. X Taylor Young Investment Management Ltd 300,000 300,000 Option 1 (mix of management fees and transaction commissions): 1.00% on the fi rst £1m; 0.50% on the next £4m; by arrangement on the next X £5m . Minimum fee £5,000. Transaction commissions of 1% on UK equities & funds, 0.5% on gilts, UK fi xed interest and hedge funds (all per bargain) Option 2 (clean fee)***: 1.25% on the fi rst £1m; 0.75% on the next £2m; 0.50% on the next £2m; by arrangement on the next £5m. Minimum £5,000 Thurleigh Investment Managers N/A 500,000 1.25% on the fi rst £5m; 1.00% thereafter X Towry N/A 100,000 2.00% on the fi rst £200,000; 1.15% on the next £300,000; 0.90% on the next £500,000; 0.75% thereafter (inclusive of VAT) X UBS Wealth Management 1,000,000 500,000 N/D Veritas Asset Management N/A 1,000,000 1.00% on the fi rst £2m; 0.75% on the next £8m; 0.60% thereafter**** Vestra Wealth 500,000 500,000 N/A X Walker Crips Group 50,000 50,000 Tiered annual management fee starting at 1.00%. Tiered dealing commissions X W H Ireland Ltd N/A N/A 1% X Williams de Broë 250,000 250,000 Option 1: 1.00% on the fi rst £500,000; 0.75% thereafter. Minimum £1,000. Transactional charge £35 plus dealing commission of 1.00% on the X fi rst £15,000; 0.75% thereafter Option 2: 1.25% on the fi rst £1m; 1.00% on the next £1.5m; 0.75% thereafter. Miminum £1,500. Flat transaction charge of £35 Notes: N/D=not disclosed. * with any trail commission rebated against the fee for discretionary management. ** Amounts held outside individual savings accounts (Isas). *** If clean fee selected, broker commissions, if applicable, will be charged. For overseas securities additional charges may apply. Qualifying family portfolios may be aggregated for calculating management fees. **** No fee on top of fees for in-house funds and no Veritas dealing commission. † Restricted to discretionary investment management. NA=Not applicable or available 12 FINANCIAL TIMES SATURDAY JUNE 16 2012 Money Guide: Private Client Wealth Management Lehman legacy haunts managers

hitherto moved in their own assets deliver unusually surprised to see the recent Correlation directions were all moving large negative returns, they fall in gold,” says Lampel. the same way. tend to become significantly “Once you switch into it as Collapse of US “It is difficult now to find more positively correlated a speculative commodity bank scuppered the an area that isn’t corre- with other risk assets, with rather than as a refuge, a lated,” admits Rob Morgan, which they may not nor- hedge against risk, the cor- investment theory an analyst at brokers Har- mally have a strong rela- relation will increase.” of diversification, greaves Lansdown. “That tionship,” says Edward An eventual end to the even seems to be happening Smith, Global Strategist at financial crisis could see writes Nick Louth with gold.” Collins Stewart Wealth Man- correlations among risk As a result, wealth manag- agement. assets diminish. But with For wealth managers, finan- ers who profited from sell- Gold’s recent performance more liquid ways to access cial advisers and hedge fund ing the benefits of diversifi- – moving in line with shares obscure markets, a return to managers, the collapse of cation found themselves and weak economy bonds – the pre-Lehman days Lehman Brothers in 2008 struggling. Many put client illustrates this. “I was not appears unlikely. Lehman collapse: a turning point for asset managers Getty was a disaster in more ways portfolios into unfamiliar than one. Not only did it trades or investment niches send shockwaves through that were supposed not to be global financial markets, it correlated. They didn’t also demolished a crucial work. Even Yale and Har- underpinning of asset man- vard, exponents of diversifi- agement: the idea that diver- cation, lost almost 30 per sification reduces risk. cent in 2008/2009. Until that point, modern “The difficulties arise portfolio theory held that, when people claim that by diversifying a portfolio some assets are inherently across assets and securities uncorrelated,” argues Pro- whose prices did not move fessor Joseph Lampel of the together, or “correlate”, you Cass Business School. could reap the rewards, but “It is an illusion . . . the offset market risk. collapse in 1998 of [hedge Its practical application fund] Long Term Capital had been demonstrated in management, with all those the stellar performance of Nobel Prize winners aboard, endowment funds run by should have been a warn- Ivy League US universities ing.” LTCM relied on the Yale and Harvard. In the relationships between asset years to 2008, they had class pricing staying the achieved mid-double digit same – something that Lam- returns over sustained peri- pel says could never be ods by diversifying into pri- relied upon. vate equity and hedge fund Opinions differ over why assets. Wealth managers correlations have changed. sought to do the same for “Some suggest that it is a their clients. But, after the natural state of the capital financial crisis of 2008, this asset pricing model,” says asset allocation theory Williams, “that ultimately stopped working. “If you look before the Lehman crisis, correlations ‘Before the Lehman among equities and bonds crisis, correlations were actually very low,” says Stacy Williams, head among equities and of FX Quantitative Strategy bonds were at HSBC. “After Lehman, they actually very low’ surged to very high levels and have generally stayed very high since.” there is only one risk pre- For almost four years mium out there and it sits now, wealth managers have within all markets.” found themselves experienc- That is in line with a sec- ing only two kinds of price ond theory – that increased movement: risk-on, when access to markets that were the prices of riskier assets previously obscure or illi- rise, and risk-off, where quid, and the greater use of investors flee to safe havens. derivatives and leverage, These changes have been have exposed more assets to charted by HSBC in a set of sentiment. Once an “correlation matrices”, on exchange-traded fund (ETF) which asset classes whose can access a market, inves- prices that move in line tors can move in and out at with each other show up as a keystroke – so, in periods red, and assets that move in of nervousness, strong an unrelated way show downward correlations can up as blue – effectively dis- easily assert themselves. playing correlations as a For example, a rational “heat map”. investor, faced with a mar- In 2005, there were two gin call on a derivative, will heat spots of high correla- seek to withdraw cash from tion, one primarily centred markets that are not among the equity markets, affected by the same fears and one among government that drove the margin call. bonds, amid a cool blue sea But if a previously uncorre- of uncorrelated commodity, lated market offers the best currency and other markets. chance of extracting cash By 2012, these spots had without price penalty, this expanded to enormous red builds in a behavioural cor- suns, with a hot corona relation on the downside. showing how commodities “As the credit crunch and currencies that had demonstrated, when risk