Private Client Wealth Management An FT Money Guide

How advisers are responding to regulation and technology Page 7

FT Graphic: LloydThatcher Risk Passing it on High charges The challenge of low returns Helping future generations Increasing cost of investing Pages 2 & 3 Page 4 Page 10 2 FINANCIAL TIMES SATURDAY JUNE 21 2014 FINANCIAL TIMES SATURDAY JUNE 21 2014 3 Money guide: Private client wealth management Money guide: Private client wealth management

supply over the past few the property market, partic- years,” said Mr Maltin. ularly in London, has begun “The ultimate test later to cool. Havens lose their appeal as prices fall this decade will be to pro- Commercial property tect clients’ wealth against prices did not recover so Gold is the ravages of inflation gen- quickly from the financial significantly thought that the 30-year and high-yield bonds – ments are relatively illiquid strategy at RBC Wealth has been priced in, he adds. erated by ultra-loose mone- crisis as residential ones, lower in Risk bull market in government which are currently trading and do not offer enough Management. Gains have also been dis- tary policies,” says Tom and some believe it offers a price than debt was drawing to a close. at a very low premium to reward for the level of risk “Risks are being artifi- proportionately concen- Becket, chief investment reasonable balance of risk before the Gold in particular But the bull is dying a slow government bonds, notes that they carry. cially injected into portfo- trated among small and officer at PSigma. and reward. recession death – yields on govern- James Maltin, investment Greater tolerance for risk lios to shift towards divi- mid-cap shares, which are While this insurance Aviva Investors recently Bloomberg is down almost a ment bonds (which move director at Rathbones. is exemplified by record low dend-paying equities, which riskier than large-caps. comes at a price – final increased its 2014-18 fore- third since 2011, inversely to prices) have He believes these invest- average yields on contin- have a fundamentally dif- In this climate, investors returns are guaranteed to cast annual average return fallen so far this year. gent convertible bank ferent risk profile [to fixed- concerned primarily with be below RPI – Mr Maltin from commercial real estate writes Adam Palin While UK benchmark 10- bonds, or “cocos”, which income investments].” capital preservation would notes that different people to 8.9 per cent from 6.5 per year bonds yields remain can be converted to equity Although stock markets appear to have few options. have their own rate of infla- cent, on the basis of strong As returns on low-risk well below 3 per cent, or be written down alto- have delivered stellar share But one option that is often tion, depending upon their international demand and a investments have continued Dutch government debt gether when a bank’s capi- price returns for investors overlooked, says Mr Maltin, lifestyle. For many inves- recovering UK economy. to fall, the role of the yields are at their lowest tal position is judged to be over the past five years – is index-linked bonds, tors, therefore, index-linked Many managers highlight wealth manager looking since 1617. too low. the FTSE 100 is up by which theoretically offer bonds will be more attrac- the attractiveness of infra- to preserve wealth has “It’s difficult to own cash “We are slightly fearful about 50 per cent – equities investors no credit risk. tive than others. structure funds, which tend become even more challeng- or low-yield bonds when the that yields offered on these are often seen as too vola- While yields on UK index- For risk-averse investors to deliver stable inflation- ing, with many increasingly returns are so low – even bonds are getting so low tile for many risk-averse linked 10-year government who also require an income linked returns in line with forced into riskier or less below controlled inflation,” that they appear lower risk investors. bonds are currently less from their portfolio, there the long-term contracts of liquid asset classes. says Chris Kenny, invest- to investors,” says Justin They have also become than the retail prices index are even fewer options. the underlying assets. With cash interest rates ment management partner ‘There is potential Oliver, investment director relatively expensive, – the chosen measure of Property is a traditional The appeal of listed infra- at persistently low levels at Smith & Williamson. “It for inflationary at Canaccord Genuity according to many manag- inflation – real returns are port of call for investors structure funds has led to and gold prices almost a can stop being low risk to Wealth Management. ers. “Of concern is what has protected from any rises in looking to invest in “real” significant premiums in third down on their 2011 become a certain net loss.” risks because of Investors concerned with driven increases in share inflation. assets with a degree of their share prices, however. peak, many traditional safe Investors hungry for the increase in chasing income often do not prices over the past year – “Although few think that inflation protection, and Two of the largest listed havens have either lost inflation-beating returns fully understand the risks it is not earnings growth,” inflation is set to take indeed UK property – par- funds, 3i Infrastructure and their appeal or look too have been moving towards money supply’ that their investments are says Mr Kenny. As price- off . . . there is potential for ticularly residential – has HICL Infrastructure, are expensive. more risky investments exposed to, says George to-earnings ratios have inflationary risks because delivered strong returns trading at more than 10 per James Maltin, Rathbones At the start of 2014, many such as corporate bonds King, UK head of portfolio risen, all future growth of the increase in money over the past couple of cent higher than their years. respective net asset values. Investment allocation But some question the Above all, the consensus housing market’s seeming among managers is that the Current asset allocation of the average balanced portfolio invested on behalf of UK private clients (%) Current asset allocation of the average capital growth portfolio invested on behalf of UK private clients (%) invulnerability. “There is safest approach to preserve Organisation Cash Equities Bonds: Bonds: Property Private Hedge Commodities Other Cash Equities Bonds: Bonds: Property Private Hedge Commodities Other the pervasive impression wealth is to diversify Corporate Government Equity Funds Corporate Government Equity Funds that over time [property] portfolios. Adam Investment Management 2531217300 01329500300 00 will always go up because “The only safe haven Arbuthnot Latham 1 74.5 9 0 0 0 12.5 0 3 1 86 0 0 0 0 10 0 3 of the ‘scarcity effect’,” says approach is to diversify Ashcourt Rowan 2 45 18 10 5 0 20 0 0 2 67 11 4 4 0 12 0 0 Mr King. “This mindset pre- your investments and to Barclays Wealth 34811154 01450 3598 8 6 01060 vails regardless of market ensure that aggressive bets Berry Asset Management 4600 91000 31428005600 34 fundamentals.” are kept to a minimum in Brewin Dolphin 2 35.5 9.5 39 2.5 0 0 0 11.5 2.5 77 5 9 2.5 0 0 0 4 There has recently been uncertain conditions,” says Brooks Macdonald Asset Management 542250609 013362150406 010 evidence that the top end of Mr Becket. Brown Shipley 5.56 62.78 8.75 10.83 3.49 0 8.15 0.44 0 8.04 74.49 4.16 3.85 2.19 0 6.65 0.62 0 C Hoare & Co. 2.8 59.7 0 23.5 4.2 0 0 0 9.8 3 76.4 0 9.8 2.5 0 0 0 8.3 What worries managers Canaccord Genuity Wealth Management 4.5 70.6 5.3 12.6 0 0 2.1 1.4 3.5 4.4 79.9 0 7.8 0 0 1.9 1.3 4.7 Cazenove Capital Management 85012850100787062208 04 Last year and this, we as a concern, as has Charles Stanley Group 08864000 20 asked wealth managers inflation following falls in Citi Private Bank 050500000 00070300000 00 what they thought posed the headline rates of price Duncan Lawrie Private Bank 062220500 011076140300 07 the biggest risks to clients’ growth in the UK. Equilibrium Asset Management 7471302500 0877200130008 portfolios in the coming Two things have shot up GAM 5 53 22 0 0 0 14 0 6 3.8 74.7 0 0 0 0 8.6 0 12.9 year, writes Jonathan Eley. the risk agenda. GHC Capital Markets 0301535200 0 00 065250100 0 00 Last year’s research was One is geopolitics, with 176150000 0829800000 00 Greystone Financial Services conducted just as the then- renewed instability in Iraq 17608 4317 0088230520 00 Heartwood chairman of the Federal following a spring of 4.5561036.500 11957361500 010 Ingenious Asset Management Reserve, Ben Bernanke, was upheaval on Europe’s 6 41 7 31 7.5 0 5.5 0 2 3 67 5 11.5 5.5 0 4 2 2 Investec Wealth and Investment thinking out loud about eastern fringes. 5701010500 0007585800 04 Investment Quorum reducing the Fed’s The other is China, as 3.5 56.5 11 19 0 0 0 0 10 1.5 78.5 6 7.5000 06.5 James Brearley & Sons purchases of Treasuries and the authorities in the James Hambro & Partners 555250307 50570150505 00 mortgage-backed securities. world’s most populous JM Finn No surprise, then, that nation fight to rein in the Julius Baer International 2 53.2 5.2 20.1 2.2 0 2.5 0 14.8 5.1 73.6 0 1 2.8 0 4.5 0 13 “tapering” was among the excesses of a huge stimulus Killik & Co 075180004 0309000034 03 chief concerns, although operation while embarking Kleinwort Benson 4601415700 0047884600 00 more problems in the on a plan to switch the London & Capital 040055000 5006004000000 eurozone was cited by even economic emphasis from McInroy 18001900000 more advisers. exports to domestic Nutmeg 160360300 00182130400 00 Europe has fallen sharply consumption. PSigma Investment Management 7.5 46.5 25 5 0 0 0 5 11 2.5 57 17.5 5000 612 Rathbones Investment Management 28433008 00 What are wealth managers concerned about? 2.4 35.2 7.5 18.9 3.2 0 10.4 2.4 20 2.6 45 3.7 12.4 3.4 0 11.6 2.5 18.8 RBC Wealth Management Share of respondents* (%) 2014 Redmayne-Bentley 6 82.8 7.6 0 0 0 0 0 3.6 2013 9 65 0 11 0 0 10.5 4 0.5 5.3 74 0 4 0 0 12 4 0.7 Rothschild Wealth Management Sharp slowdown in China/ Ruffer 846027001414 other emerging markets Saunderson House Limited 11.5 49.5 19.5 8.5 11 0 0 0 0 3 66 11 6 14 0 0 0 0 Geopolitical events Smith & Williamson 2671410500 0228442000 08 SGPB Hambros 1.5 54 24 0 4.98 0 8.02 0 7.5 3 75 5 0 0 0 17 0 0 Withdrawal of central bank support Standard Life 10601515000 00575101000000 Stanhope Capital 12 42.5 19 0 0 0 17.5 3 6 6 60 9 0 0 7 10 3 5 More eurozone problems Tilney Bestinvest 3.5 41 32.2 0 8.5 0 11.5 3.3 0 2 63 17.5 0 2.5 0 12 3 0 Increasing taxation of the rich/ clampdowns on avoidance UBS Wealth Management 5.78 52.22 18.3 23.7 0 0 0 0 0 5.19 71.47 10.17 13.17 0 0 0 0 0 Vestra Wealth 7.1 60 15 5 7.5 0 5.4 0 0 5.85 68.08 13.7 0 4.04 0 8.33 0 0 A resurgence of inflation Waverton Investment Management 351111150105426879205 52 Other

I’d rather not say Average 4.4 55.5 14.1 11.1 4.1 0.0 4.4 1.2 5.2 3.1 73 7.0 4.8 3.0 0.3 3.9 0.9 3.6 Max 17 88 50 55 25 1 20 5 20 8.0 98 30 40 14 7 17 6 19 0 102030405060 Min 03000000 000450 0000 00 Source: Ledbury Research * Respondents can answer more than once Source; Ledbury Research 4 FINANCIAL TIMES SATURDAY JUNE 21 2014 FINANCIAL TIMES SATURDAY JUNE 21 2014 5 Money guide: Private client wealth management Money guide: Private client wealth management

Hawkins, financial plan- proposals to scrap the tax ning director of Rathbones. charge of 55 per cent on He added that reduced lump sum death payouts on Pass it on – generational planning Opportunity lifetime and annual pension crystallised pension funds contribution allowances for those over 75, possibly mean planners and clients reducing it to the same Inheritance One of the greatest trans- ing property values and a Capital Management, says: According to a study by must think carefully about level as inheritance tax fers of wealth in history is desire from clients to make “The trick of passing assets Merrill Lynch, however, for managers other allowances, such as (currently 40 per cent). This under way as baby boomers sure that wealth is trans- to the children is one thing. family wealth frequently the higher tax-free limit may act as an incentive for Making wealth last – defined in the UK as those ferred and managed effec- Second is a desire to protect fails to outlive the genera- on individual savings clients to retain their assets for generations to born between 1946 and 1964 tively. Most wealthy indi- the bloodline. The third tion following the one that accounts. within the tax-favourable – begin to pass on wealth to viduals want to make their concern is your children’s created it. This is partly “In the earlier years cli- pension environment. come is possible their children. money last for generations children. An element of because many people have as pension ents may require a varying “Of course, estate plan- but challenging, Wealth managers report a to come. control 20-30 years after unrealistic notions about income or lump sums to ning advice often overlaps strong increase in “genera- David Austin, managing your death is not impossi- what constitutes a sustaina- repay debt or to fund a with retirement planning, writes Moira O’Neill tional” wealth manage- director and head of finan- ble to achieve. We call this ble spending strategy more active lifestyle or to and this will allow clients ment, fuelled in part by ris- cial planning at Cazenove generational planning.” should they want their reforms loom assist children. Later in the an opportunity to consider wealth to last for several Pension reforms will come into force in April 2015 Alamy retirement cycle clients how best to pass funds on generations. Two out of five may need more certainty tax efficiently to depend- people surveyed by Merrill and guarantees and will ants and consequently, help Lynch believed a portfolio sweeping reforms which rate. This is expected to they shape their working therefore look at more determine how they should could last forever with an Retirement will usher in an era of flexi- transform the way Britons lives. We expect to see cli- secure pension arrange- be managed from an invest- annual distribution rate of 6 bility and choice for mil- think about retirement sav- ent outcomes made up of a ments, possibly an annuity- ment perspective,” says per cent or more. In reality, Greater flexibility lions of pension savers. ings and how they will number of ‘product deci- based vehicle.” Steve Wood, a wealth data suggest that even for Family fortunes: making The ability to take lump draw on their income. sions’ at a number of advice Mr Hawkins feels that adviser at Canaccord Genu- the wealthiest families, true wealth last could create fresh sums from pension funds, While pension investors points throughout the typi- annuities will still be right ity Wealth Management. wealth sustainability may demand for without punitive tax in flexible drawdown have cal retirement life cycle.” for some clients, especially The reforms prompted a require an average distribu- charges, is currently had the choice to take their Dovetailing pension those who want some level big swing away from annui- tion rate as low as 2 per trustees to control how the guidance, writes restricted to the wealthiest, entire pot as cash, wealth arrangements with other of certainty over part of ties as tens of thousands cent per year. investments are managed Josephine Cumbo who are eligible for flexible managers expect the investment vehicles could their retirement income. approaching retirement The simplest way to pass and paid to beneficiaries,” drawdown, and those with reforms to prompt changes become a more prominent The business model of a wait for next April to take on assets is to gift them to says Mr Gartland. “The smaller pension pots, who in their approach to retire- part of discussions with cli- wealth manager provides advantage of their new children during your life- trust could perhaps only Wealth managers are adapt- qualify for “trivial commu- ment planning. ents, say wealth advisers. advice to clients as they freedoms. This shift is time, using exemptions allow children access to a ing their business models tation”. “We will see a more flexi- “Pensions will be seen as need it. But changes to tax expected to open frontiers under inheritance tax rules. certain level of income and following a shake-up of pen- Under Mr Osborne’s ble, bespoke approach to another form of savings rules, announced in tandem for wealth managers, as But wealth managers say capital until it is felt they sion rules that is expected changes, anyone aged 55 retirement,” says Chris vehicle, alongside individ- with the Budget reforms, savers with more modest parents worry about the rel- can have full access to the to lead to big changes in the and over will be able to Aitken, head of financial ual savings accounts, but are also expected to funds may also be looking atively high incidence of monies.” way savers approach their access savings built up in a planning with Investec with both tax-relievable increase the role of wealth to access drawdown, poten- divorce and the potential Trusts can continue for retirement planning. defined contribution pen- Wealth and Investment. contributions and growth managers in holistic plan- tially lowering the cost of for gifted assets to form many years and over sev- In March, chancellor sion as cash, with the lump “This will reflect the evolv- within a highly tax efficient ning for clients. entry as it becomes a mass part of a divorce settlement. eral generations. They have George Osborne announced sum taxed at their marginal ing needs of the retiree as wrapper,” says Matt Among the changes are market option. Nick Gartland, senior a perpetuity period of 125 financial planning director years. Mr Austin says: “You at Investec Wealth & Invest- can write specific rules for ment, says: “When it comes the trust – the more explicit to passing on money and the better, and choose who investments to children, the trustees are. You could particularly during a per- also write an expression of son’s lifetime, one key con- wishes.” Parents could set up an arrangement where the cap- ‘You can write ital is preserved for future specific rules for generations, but they still enjoy a regular income the discretionary from the investments. How- trust – the more ever, many prefer to do it the other way around: for- explicit the better’ sake the future growth and income from the capital, while keeping access to the original money. cern is that the children A trust can also be set may spend it quickly and in up to lend money to the ways that the parents may next generation. If a family not fully approve of.” member gets divorced, the One way around this is to trust then calls the money place assets into trust. The back. most basic trust is the abso- Mr Austin says that Fam- lute or bare trust. But as ily Investment Companies the child becomes abso- (FICs) are becoming much lutely entitled to the assets more prevalent in genera- in the trust at age 18 or 21, tional planning. this is not suitable for par- This vehicle is simply a ents who are concerned private company whose their children will inherit shareholders are members too much too young. of the same family, and Baby boomers who want whose memorandum and to leave a longer lasting leg- articles of association can acy can use the annual be drafted to suit the fam- stakeholder pension allow- ily’s needs. FICs can be ance of £3,600 to pay into an more tax efficient than arrangement for each child trusts – for example, they or grandchild. The contribu- do not suffer the six per tion will enjoy basic rate cent 10-yearly inheritance income tax relief, meaning tax “periodic charges” a net cost of just £2,880. But applicable to trusts. under current pension rules “If we go into a high infla- the child or grandchild will tionary environment they not be able to access the are really good on indexa- pension until age 55. tion relief,” says Mr Austin. A structure that affords more control is the discre- Moira O’Neill is personal tionary trust. “This can finance editor at Investors allow parents and other Chronicle 6 FINANCIAL TIMES SATURDAY JUNE 21 2014 FINANCIAL TIMES SATURDAY JUNE 21 2014 7 Money guide: Private client wealth management Money guide: Private client wealth management

What are wealth managers’ business priorities? Improved service comes ataprice From oak-panel o ces to apps 2014 share of respondents* (%) Attracting new clients, or new types of client clients. But what do clients of results from 2013 and been able to do o‡ate is towards advisers, which cent, and 12 per cent for clients. It’s not just about you need to cut costs absorbing them or merging Improving customer service Client survey really think of them? 2014, shows that the mini- meaningfully impress its rose noticeably in 2014, with portfolios of £3m. Advisers amounts invested–they’re and innovate,” he says. with other Šrms to spread Improving relationships We have drawn on the mum level of assets for clients. 66 per cent (62 per cent) of While improved invest- drilling down into what The personal touch helps Šxed costs across clients. with intermediaries Wealth managers results of our annual sur- advisory services has risen More advisers. After the clients now satisŠed with ment performance has Regulation and other products they have justify wealth managers’ That seems to be prompt- Launching new products or services vey of 500 wealthy individu- by an average of 14 per falls seen last year, there their main contacts. made these rises more pal- and looking at ‘share of fees, which have risen ing restlessness among cli- Exiting less profitable are performing als who useawealth man- cent, and for discretionary has been a like-for-like Better investment per- atable, higher fees have technology change wallet’,” he says. despite the use of clean ents; the Scorpio study areas of business activity better but charging ager to assess their recep- by6per cent. increase of 9 per cent in the formance. HNWIs were gen- been noticed by some cli- the industry, writes The chastening experi- share classes that do not found that while most Expansion in new geographic areas tion among UK high net While potentially disrup- number of advisers this erally pleased by the indus- ents. Our research Šnds ence of the banking crisis, pay ongoing commissions. wealthy clients thought more, reports worth individuals (HNWIs). tive to affected individuals, year. This is good news try’s performance in the that increases and changes Jonathan Eley when the value of many RDR has resulted in RDR had been beneŠcial, 22 Reducing costs to clients Stuart Rutherford Changing service models. this has not materially from the perspective of past year. When asked what to fee structures have managed portfolios fell higher compliance costs, per cent had thought about 0 20 40 60 80 In the wake of regulation soured relations between wealthy clients, particularly impressed them, Šnancial become more ofaconcern sharply, also made many but so far managers have changing their wealth man- Source: Ledbury Research Respondents can answer more than once This year’s survey reveals a and cost pressures, numer- wealthy investors and the when adviser numbers are gain was the clear leader. among disillusioned clients, The worst banking crisis in smaller operators in partic- passed these on rather than ager during 2013. * very different wealth man- ous providers have changed industry. Our tracking of growing faster than client Rising fees. The industry especially the most wealthy living memory, followed by ular re-evaluate where they agement industry from last their required levels of cli- key disappointments among numbers, since it allows is charging clients more for individuals. the kind of regulatory can add the most value. year’s. Many changes, ent wealth, and adapted HNWIs over the past year them to spend more time its services. The fee tariff upheaval not seen since the “Many advisers realise whether led by regulators service models to make shows levels have remained with clients. This invest- for discretionary services Stuart Rutherford is “Big Bang” of the 1980s, has they haven’t got the exper- or management, have been more commercial sense. static. Having said that, ment helps account for the for portfolios worth £500,000 research director at Ledbury forced wealth managers to tise and are focusing on sold as in the interests of A like-for-like comparison what the industry has not improved client satisfaction is up on average by 7 per Research adapt their strategies and Šnancial planning instead. business models. But in Investment has got more some ways, what has not complex and if you’ve got Performance changed is as notable as independent [as opposed to what has. restricted] status it’salot of Returns on averaged balanced portfolio (%) Returns on average growth portfolio (%) Perhaps the most obvious work. It’s easier to out- Wealth manager Over 1 year Over 3 years Over 5 years ARC measure ARC verifi ed Over 1 year Over 3 years Over 5 years (cum) ARC measure ARC verifi ed consequence of the credit source,” says Mr Power, (cum) (cum) (cum) crunch and the retail distri- notingabig increase in the bution review (RDR) has use of risk-weighted model Adam Investment Management 12.03 23.2 61.76 X X 19 30.1 92.5 X X been the withdrawal of high portfolios. Arbuthnot Latham 17.65 19.79 19.94 20.78 73.85 street banks from the Perhaps inevitably, in an Ashcourt Rowan 11.3 17 X X 15.7 20.8 X X wealth management space. industry of venerable Barclays Wealth 10.11 15.41 53.6 13.59 16.87 60.59 Most talk of product offer- names, there has been no Berry Asset Management 11.4 19.7 54.5 X X 15.9 X X ings for the “mass af‡uent” rush to adopt new technol- Brewin Dolphin has ceased, with HSBC, ogy; wealth management is Santander and Lloyds Šned still largely conducted face Brooks Macdonald Asset Management 10.4 17.9 50.9 X 12.8 18.2 57.3 X X for giving unsuitable advice to face. “Discretionary Brown Shipley 10.39 16.95 50.2 X 12.12 16.1 56.05 X to investors via branch- wealth management is still C Hoare & Co. 10.49 17.83 53.01 X X 15.16 23.11 65.24 X X based advisers. While Bar- a very personal business Canaccord Genuity Wealth Management 10.92 20.61 X 16.95 19.44 X clays, Lloyds, Royal Bank and we do like to meet our Cazenove Capital Management 11.2 20.5 49.6 X X 14 24.1 62.8 X X of Scotland and HSBC have clients at the outset and at Charles Stanley Group 39 26 private banking operations, least once a year,” says they typically cater to Citi Private Bank 5.92 15.13 54.47 X 7.39 14.83 63.71 X much wealthier clients. Duncan Lawrie Private Bank 10.66 19.43 50.96 X X 11.85 19.48 59.68 X X This year, Barclays said it 22% Equilibrium Asset Management 13.5 21.7 58 X 14.9 20.2 X would no longer offer full- GAM 13.85 19.52 49.33 19.87 26.22 59.09 service private banking to of clients thought of GHC Capital Markets 6.16 9.91 32.85 X X 9.25 7.97 50.11 ** X clients with less than changing wealth manager Greystone Financial Services 11.5 19.6 62.8 X 14 17.4 78.8 X £500,000. During 2013 it scaled back international Charlotte Black, head of Heartwood 14.1 18.8 57.6 X 20.1 22.7 76.4 X exposure and made about a corporate affairs at Brewin Ingenious Asset Management 6.7 12.6 44.9 X X 8.4 14.7 57.2 X X third oŠts UK private Dolphin. “However, our cli- Investec Wealth and Investment 11.9 19.9 59.3 X X 15.4 22.9 68.1 X X banking roles redundant. ents are increasingly keen Investment Quorum 15.54 18.98 65.39 19.78 26.51 71.54 X Traditional stock broking to get information such as James Brearley & Sons 12.06 21.15 51.04 X 16.36 25.69 X has also changed, increas- valuations online.” James Hambro & Partners 13.37 19.66 X X 15.37 22.55 X ingly polarising into discre- That chimes witharecent tionary and execution-only survey of wealthy investors JM Finn 15.3 24.6 73.6 15.4 20.9 72 services, with fewer Šrms by Scorpio Partnership; it Julius Baer International 10.7 18.1 53.2 X 16.6 22.6 72.5 X now offering advisory brok- found that even tech-savvy Killik & Co ing (where the broker gives under-45s still wantedaper- Kleinwort Benson 9.99 17.58 X X 11.87 16.2 X X advice, but the Šnal deci- sonal relationship, but with London & Capital 14.5 38.6 21.6 53.6 sion on trading is taken by clever technology too. “The McInroy 11.4 21.8 75.4 X the client). Both Brewin younger generation expects Dolphin and Rathbones a wealth manager’s technol- Nutmeg 14.5 X 18.31 X have largely ceased to offer ogy to support the relation- PSigma Investment Management 10.84 16.23 46.31 X X 14.75 20.41 57.9 X X it, while Charles Stanley ship . ..providing better Rathbones Investment Management 11.69 20.77 56.98 X 14.93 23.95 72.37 X increasingly sees it as access to products, improv- RBC Wealth Management 9.83 16.57 46.16 X X 13.02 19.52 57.99 X X “more specialist; offered to ing information about mar- Redmayne-Bentley 17.79 32.39 73.03 relatively sophisticated kets and enhanced record Rothschild Wealth Management 12.69 18.14 53.19 X 15.63 19.91 65.62 X investors”. keeping.” “It is our perception that The study noted that Ruer 11.1 17.7 53.1 * X the Financial Conduct technology has largely been Saunderson House Limited 11.8 19.7 53.6 X X 16.4 23.6 68.8 X X Authority’s preference is regarded asa“back ofŠce” Smith & Williamson 8.49 17.47 55.3 X X 16.59 27.3 82.72 X X for regulated Šrms either to function for wealth manag- SGPB Hambros 4.65 14.57 54.99 7.5 18.6 60.25 look after client assets on a ers. However, that could be Standard Life 9.14 15.15 45.7 X X 17.42 22.82 66.55 X X managed basis or via an about to change; of the Stanhope Capital execution-only service. This Šrms surveyed by Ledbury seems to be a trend across Research for the FT this Tilney Bestinvest 10.2 17 55.7 X X 13.4 18.8 62.3 X X wealth management Šrms year, almost half (48 per UBS Wealth Management X X and is one that we cannot cent) said they would be Vestra Wealth 14 19.4 X 14.99 19.79 X X see reversing in the future.” making further investments Waverton Investment Management 11.41 14.61 48.76 X X 14.68 18.16 61.75 X X Andrew Power, partner at in web-based services in the accounting and consultancy coming year. However, Average 11.3 19.6 53.2 14.9 21.6 66.5 group Deloitte, agrees that only 11 per cent said they the lower end of the market would be investing in Max 17.8 39 73.6 21.6 53.6 92.5 has polarised into discre- mobile apps. Min 4.65 9.91 26 7.39 7.97 50.11 tionary, advisory and exe- Mr Power points out that Notes cution only. “Wealth man- technological innovation at * Only the 1-year returns are on the ARC measure ** Only the 1 and 3 year returns on the ARC measure. In order to make the portfolio data collected even more robust and comparable, respondents had the option this year of agers have got better at seg- the bottom end is partly having fi gures for balanced and capital growth portfolios verifi ed by ARC, a leading investment consulting practice. Where they agreed to this, and the numbers were subsequently verifi ed by ARC, this is indicated in the ‘ARC veri- fi ed’ column. A blank cell means the company declined to provide a fi gure. Averages are calculated based on the total responses given. This year, we defi ned the indicative volatility ranges (calculated on a 3 year annualised basis) mentation, in terms of supply driven. “You just of the average balanced and capital growth portfolios, these ranges are 4 per cent to 6.5 per cent for the balanced and 6.5 per cent to 9 per cent for growth. Source: Ledbury Research knowing which are their cannot provide advice in most and least proŠtable the traditional manner, so 8 FINANCIAL TIMES SATURDAY JUNE 21 2014 FINANCIAL TIMES SATURDAY JUNE 21 2014 9 Money guide: Private client wealth management Money guide: Private client wealth management

Services Wealth advice and the ‘squeezed middle’

class budgets in recent not least because younger found that 42 per cent of 25- those with £10m or more. research found its clients Financial planning years has coincided with a clients are not as quick to to 34-year-olds say paying To capture future middle- aged 35 and under expect to regulatory upheaval in the rush into the arms of a upfront fees puts them off class clientele, some compa- be contacted on a more fre- Pressure on incomes industry, which has pushed wealth manager as their seeking professional advice, nies envisage having to quent basis than their older up the cost of money man- parents might once have while 28 per cent think serve up no-frills wealth counterparts – with almost is affecting agement and forced clients been. Growing numbers of financial advice is only for management, possibly scal- 40 per cent wanting to be spending choices, and providers alike to think young people are just as the “wealthy”. Separate ing right back to basic emailed every week. twice about whether it can likely to seek help from research from Oracle Capi- financial planning to make writes Katie Morley be justified. family, colleagues and the tal Group suggests their services affordable. Katie Morley is a personal ces Mr Cowburn increasingly internet instead. that 55 per cent of people But others disagree; JPMor- finance writer at Investors The squeezed middle. The thinks not. “A number of A survey by NFU Mutual think the term applies to gan Wealth Management Chronicle Organisation UK offi advisors Number of joining in 2013 Advisers individual clients Active (£m) AuM Advisory of Value (£m) AuM Discretionary of Value used products/services Investment Management Investment Discretionary Management Investment Advisory Brokerage Equity Private Funds) of (including Fund Funds Hedge Commodities Planning Tax Planning & Estate Trust Planning & Retirement Pensions Planning Philanthropic Insurance Banking Mortgages Other lending services Charity services Offshore Concierge cost-of-living crisis. The firms take on people with 5 14 0 1,400 0 1200 XXXX XX XX Adam Investment Management Entire market X cling-ons. Whatever term as little as £100,000 to Arbuthnot Latham 3 38 11 4,600 200 528 Entire market X XXXXXXXX XXX XX one chooses to apply, life is invest, but I struggle to see tough for Britain’s middle how that would be worth- Ashcourt Rowan 17 75 10 11,000 3000 2300 Selected universe X XXXX class. Whether they are while. We only take on port- Barclays Wealth 28 449 0 40,000 13000 Selected universe X XXXXX XXXXXXXXXX having palpitations over folios of £250,000 or more, private school fees or get- because there’s a significant Berry Asset Management 1 6 0 756 2 799 Entire market X XX ting red-faced over retire- risk that the cost would Brewin Dolphin 30 493 10 70,000 6000 22700 Selected universe X XXXXXXX ment, many would agree outweigh the benefit with they are more in need of less.” Brooks Macdonald Asset Management 10 125 21 13,995 4543 Entire market X XX XX wealth advice than before. He adds that the “cost-to- Brown Shipley 5 59 4 5,870 326 2656 Entire market X X XXXXX XXXX Clever financial planning serve” ratio across the and proper investment industry has ballooned by C Hoare & Co. 2 9 0 1,360 1050 Entire market X XXXX XX X management can offset the at least a quarter over the Canaccord Genuity Wealth Management 4 118 6 12,900 3900 7000 Entire market X XX XXXXX XX escalating cost of affluent past two years, largely as a lifestyles, but many find result of tighter regulation Cazenove Capital Management 7 87 0 5,414 818 20022 Entire market X X XXXXXXX XXXXX their financial circum- which has forced companies stances mean they are una- to spend on extra technol- Charles Stanley Group 33 550 40 95,000 5510 8020 Entire market X XX XXX ble to do some of things ogy, training and staff. Citi Private Bank 7 88 11 16,497 2810 16400 Entire market X XXXXX X XX X they would like, particu- Soaring house prices may larly helping children and offer at least some hope for Duncan Lawrie Private Bank 4 23 0 3,000 30 715 Entire market X XXX XXX grandchildren. both the squeezed middle – Equilibrium Asset Management 1 6 1 613 71 272 Entire market X XXXXXX Anecdotal evidence sug- especially at the younger gests this accounts for up to end – and the wealth man- GAM 1 6 1 355 1224 46 Entire market X XX a third of withdrawals from agement industry. GHC Capital Markets 2 9 0 3,000 46 334 Entire market X XX managed wealth portfolios. According to HSBC But middle-class parents research, one in five 20- and Greystone Financial Services 2 20 1 4,300 761 227 Entire market X XXXX and grandparents are 30-year-olds is likely to Heartwood 2 26 6 1,847 51 1622 Selected universe X XXXX X increasingly being warned inherit more than £250,000. 1 13 0 1,000 0 1440 XX that they might not be able That is enough to put them Ingenious Asset Management X to afford to help younger on the radar of more firms. Investec Wealth and Investment 15 378 21 55,000 6048 17948 Entire market X XXXXX generations. Many who inherit invest- Laura Lambie, senior ment portfolios choose to 1 4 1 721 23 134 X XXXX X XXX Investment Quorum Entire market X investment director at keep them going rather James Brearley & Sons 5 7 0 10,000 157 34 Entire market X XXXX XX Investec Wealth Manage- than liquidate them, notes ment, says: “People who James Maltin, investment 1 15 3 1,813 465 773 XXXXXX James Hambro & Partners Entire market X consider themselves to be director at Rathbones. JM Finn 6 98 1 23,000 2157 4998 Entire market X X in the ‘squeezed middle’ “The freedom of renting often have pensions as a and having money invested 2750 XXXXXXXX XX X Julius Baer International Entire market X number one concern. If they in equities appeals to the Killik & Co 9 80 9 22,000 2729 688 Entire market X XX XXXX XXXX want to buy their child a majority of my young cli- house, they have to be care- ents. The obsession with Kleinwort Benson 6367 Entire market X X XXX XXX XX XX ful they don’t compromise home ownership seems to London & Capital 1 25 5 600 2500 Entire market X XX XXX XX their retirement plans.” be dying down,” he says. Seth Cowburn, head of “These days, young people McInroy 2 9 0 600 1000 In-house only X wealth management at seem to prefer the freedom Nutmeg 100Entire market X Duncan Lawrie Private of renting – especially when Banking, admits: “We are they can afford a nice apart- PSigma Investment Management 3 18 4 3,169 2140 Entire market X having more conversations ment. Their young age also Rathbones Investment Management 14 220 7 30,689 1200 19000 Entire market X XXXXXX than ever with parents and allows them to take risks in grandparents, in which we their portfolio, which RBC Wealth Management 6 99 8 2,060 2272 1632 Entire market X X XXXXXXX XXXXX warn them that their means they can grow their wishes to help younger gen- wealth slowly but surely.” Redmayne-Bentley 38 88 11 62,525 571 779 Entire market X XX X erations may be unsuitable However, relying on Rothschild Wealth Management 2 39 4 1,427 1174 4141 Entire market X X XXX X XXXXX within the context of their younger people mopping up wider financial plan. This wealth from older genera- Ruffer 2 28 2 5,265 0 5640 Entire market X can come as a big shock.” tions is a risky business Saunderson House 1 40 0 1,400 2746 0 Entire market XXXXXX The pressure on middle- strategy for the industry, Smith & Williamson 6 145 11 16,000 2800 9802 Entire market X XXXXXXXXX X XXX SGPB Hambros 8 98 12 5,616 0 0 Entire market X XXXXXXXXX XXXXXX Standard Life 6 53 30 4,500 0 5800 Entire market X XX Stanhope Capital 1 18 2 145 2800 3000 Entire market X X Tilney Bestinvest 39 140 7 70,000 1561 5779 Entire market X XXXXXXXX XXXX UBS Wealth Management 7 220 Selected universe X XXXXXXXXXXXX XX Vestra Wealth 2 42 11 4,500 668 2274 Entire market X XXXXXXXXX XX Waverton Investment Management 1 22 1 2,478 0 3688 Selected universe X X

Totals 350 45 33 16 14 17 17 24 30 29 18 6 15 13 11 31 29 3 % offering services 98% 72% 35% 30% 37% 37% 52% 65% 63% 39% 13% 33% 28% 24% 67% 63% 7% Source; Ledbury Research Feeling the pinch: affluent lifestyles come at a price Alamy 10 FINANCIAL TIMES SATURDAY JUNE 21 2014 FINANCIAL TIMES SATURDAY JUNE 21 2014 11 Money guide: Private client wealth management Money guide: Private client wealth management

ETFs and index trackers Clients, assets and fees Passives popularity increases Min. portfolio Traditional index tracking managed products is size £k Annual fee tariff (%) unit trusts follow an index reduced. The iShares MSCI record high. Wealth manag- Growth of index tracking tations. Mr Becket points up or down, are priced daily Emerging Markets ETF Investing ers have increasingly Assets under management out that in low-volatility, and can be bought via fund charges 0.68 per cent a warmed to index trackers (£bn) rangebound market condi- brokers with no dealing year, against 0.1 per cent Will flat markets and ETFs, especially in 80 tions such as those that costs (though there are for the Core FTSE100 expose trackers’ markets such as the US have prevailed for much of platform fees of 0.25 per product. where fund managers strug- 70 2014, active management cent and more to consider), Since conventional limitations? Emma gle to beat benchmark indi- sometimes has more appeal. writes Emma Dunkley. passives track an index, ces. 60 “We think the time has ETFs similarly track an understanding the index’s Dunkley reports “There is no doubt that come for change and there index, but trade on the construction is vital. For the past five years have 50 will be greater divergence stock market like shares, so instance, the FTSE 100 is Organisation funds discretionary % of funds in in-house invested Advisory Discretionary £100,000 £250,000 £500,000 £1m £3m £5m (£) Minimum fee classes? share Clean commissions? trail Rebate disclosed) (where costs Dealing or custody 'platform' Separate charge? structers? fee alternative Any Notes Low-cost passive products been the time to use passive at a stock level, as we have are continuously priced. skewed towards banks and Adam Investment Management 0 0 500 1.25 1.25 1.25 1.12 0.87 0.72 2000 Y N Actual cost N N Tiered structure; 1.25% down to 0.5% above £10m 40 have risen to prominence vehicles, as the primary seen this year.” This is attractive to resources companies. Arbuthnot Latham 0 50 250 1.25 1.25 1.25 1.25 0.96 0.88 3,000 na Y None NY since the financial crisis, as investment decision has 30 “We believe that some managers, although buying MSCI’s Emerging Markets investors became disillu- been to own the market markets, such as the UK ETFs incurs dealing costs. index is biased towards Ashcourt Rowan 0 150 1.5 1.5 1.38 1.18 0.9 0.83 1,500 Y na 0.5%-0.75% N N sioned with higher-charging rather than owning individ- 20 and US, might not make One attraction of passives financials and electronics. Barclays Wealth 3 500 1.25 1.25 1.25 1.25 1.08 0.92-0.5 Yna NN funds run by managers who ual stocks,” says Tom much headway at a head- for wealth managers is the Most indices are weighted 0 250 250 1 1 1 1 0.75 0.57 3,000 fail to beat the market, but Becket, chief investment 10 line level, but we believe low charge to access a towards bigger companies, Berry Asset Management YY NY some believe that flat officer at PSigma Invest- 2004 06 08 10 12 14* there are plenty of idiosyn- range of markets, sectors so investors are in effect Brewin Dolphin 0 500 150 0.75 0.75 0.75 0.6 0.38 Enquire 250 per Y na 0.50%-1.25% N Y markets will expose their ment Management. As of end-April cratic opportunities to and asset classes, from buying shares that have quarter Source: IMA * limitations. Andrew Summers, head exploit,” he adds. frontier markets to UK blue- already risen the most. The Brooks Macdonald Asset Management 2.7 200 200 Y Y 0.11%-1% N N Depends on mandate, starts at 0.75% Index trackers were of fund research at Investec But Mr Becket points out The ETF industry in par- chips. indices may also be Brown Shipley 5.3 500 500 1.25 1.25 0.82 0.73 YN N Y Fee only tariff inclusive of dealing and transaction charges launched in the 1970s, but Wealth & Investment, that ETFs in particular can ticular has sought to The cheapest index inefficient, a genuine have surged in popularity believes they are also useful play a useful satellite role. address these issues via the trackers include Fidelity’s concern in fixed-income C Hoare & Co. 0 500 1.5 1.25 1 0.90- YY NY 0.60 over the past few years, due where the active fund man- “With the excellent devel- development of so-called UK index fund, which has markets. “Fixed interest 2.7 100 0 1.5 1.5 1.5 1.5 1.25 1.25 to their low headline agement industry tends to opment of increasingly “smart beta” products. an ongoing charge of 0.09 markets are weighted Canaccord Genuity Wealth Management N N Enquire YY charges and relatively cer- be structurally underweight niche passive investments, Instead of providing expo- per cent, while BlackRock’s towards the most indebted Cazenove Capital Management 15 1000 1000 0.75 0.75 0.50 Y N 0.25%-1.00% N N Tiered; 0.75% on 1st £3m, dropping to 0.5% above £5m tain returns. in a market segment. wealth managers have the sure to traditional indices, iShares Core S&P 500 countries or companies, so 1.5 80 80 Figures from the Invest- For example, nearly all ability to express short- almost all of which are Ucits ETF has a total are generally something to Charles Stanley Group YY Y Y Variable 0.5%-1% depending on size. Min £600 ment Management Associa- active UK equity managers term views on a market weighted by market capital- expense ratio of 0.07 per be avoided in our view,” Citi Private Bank 0 1000 1000 na Y N Depends on mandate; enquire tion show trackers have are structurally under- without doing enormous isation, these ETFs track cent. Increasing competition said Mr Becket. Duncan Lawrie Private Bank 0 250 1 1 1 1 0.66 0.5-1.0 Y na Variable N Y Tiered; 1.0%-£1m, ).5% after £77bn in assets under man- weight in the FTSE 100, pre- amounts of due diligence on indices with alternative has recently placed The advent of “smart agement, accounting for 9.8 ferring in recent years to active funds – and poten- weightings. pressure on providers to beta”, or index strategies Equilibrium Asset Management 0 100 100 1.5 1.5 1.5 1 1 0.8 2,500 YY YY per cent of UK retail funds. concentrate on mid-caps. tially missing an invest- Isabelle Bourcier, of ETF cut fees. that do not use market GAM 36 6 6 0.5 0.5 0.40 Y N None N N Charities charged 0.25% That does not include That provides an opportu- ment opportunity,” says Mr provider Ossiam, says By comparison, the capitalisation to weight assets held in exchange nity to invest in blue-chip Becket. There are ETFs that smart beta provides a way typical ongoing charge for stocks, should help address GHC Capital Markets 12 100 20 0.75 0.75 0.75 0.32 0.32 Enquire 200 Yna nana traded funds (ETFs). stocks. “In this instance track Sharia-compliant to overcome the “limita- an actively managed equity such deficiencies in the Greystone Financial Services 23 100 1000 0.75 0.75 0.75 0.75 0.75 0.75 Yn NN Launched in the UK in 2000, you can use a FTSE 100 stocks, consumer growth tions” of the market cap- fund, even one that does underlying benchmark, Heartwood 62 500 1.25 1.25 0.75- Y Y Included N Y Tiered; 1.25%-1.0%. May incur initial/ongoing advice fees they became popular among tracker to increase your companies and infrastruc- weighted approach. not pay commissions to although passives generally 1.25 individuals after the credit large-cap exposure,” says ture, although liquidity “Alternatively-weighted, distributors and advisers, is might not always be the Ingenious Asset Management 1 250 1.25 1.25 1.25 1.25 0.75 Enquire Y na £25 per trade N N Tiered; 1.25% down to 0.5% over £10m crunch in 2007, thanks to Mr Summers. may be more of a challenge or smart beta, funds don’t about 0.75 per cent. appropriate vehicle to tap a their liquidity and transpar- The traditional use of a than in more mainstream aim to replace market cap Charges tend to rise for market. As the passive Investec Wealth and Investment 0 100 100 1.25 1.25 1.25 1.25 1,500 Y na £35 per trade N Y Tiered; 1.25% down to 0.75% over £2.5m ent pricing. passive investment has sectors and charges can be benchmarks, but used in less liquid markets and for market evolves, investors Investment Quorum 0 100 100 1 1 1 1 0.75 0.75 1,000 Y na Y Y Financial planning charged separately ETFGI, a consultancy been for the “core” of a higher. combination with them, more esoteric asset classes, can benefit from a wider group, says the European portfolio, with high-convic- Nonetheless, wealth man- they can help investors to which can mean the cost tool box for core and James Brearley & Sons 0 50 50 1 1 1 1 1 Enquire 250 Y na 1% N N £1m or more by negotiation ETFs market had grown to tion active management agers acknowledge passive build more solid and resil- advantage over actively satellite portfolio holdings. James Hambro & Partners 1.9 1000 1000 1.15 1.15 Enquire YnaAt cost N Y $459bn at the end of May, a providing the “satellite”. investments have their limi- ient portfolios,” she says. JM Finn 0.7 0 0 0.75 0.75 0.75 250 na N Included N N Min commission £40 Julius Baer International 0 750 750 Yna YN Killik & Co 0 0 100 1 1 0.75 0.6 0.6 Enquire 500 Y Y 0.5%-1% N N Tiered; 1% up to £500k, dropping to 0.6% above £1m to an average of 0.41 per would cost £5,475 a year on an annual basis, there’s no Kleinwort Benson 17 1000 1000 Y na N N Sliding scale from 1.05% cent a year, Ms Miller adds. a portfolio of £120,000. The chance of understanding London & Capital 750 1.25 1 1.00>0.8 Y N None na N Management That takes the total to an Hargreaves Lansdown Port- it,” she says. average 3.65 per cent a year folio Management Service Wealth managers say McInroy 74 10 1.2 1.2 1.2 1.2 1.2 Y na At cost N N Discounted to 0.2% +VAT in own unit trusts. Tiered above – compared to an average charges £1,462 a year. they are working towards a £2m real annual return on equi- St James’s Place pointed model of greater transpar- Nutmeg 0 1 0.6 0.5 0.3 0.3 0.3 0.3 Yna NN fees are high ties of 5.2 per cent. out that the charge includes ency. Last year, Rathbones PSigma Investment Management 0 250 1.25 1.25 1.25 1.17 YN N N Tiered; 1.25% up to £2m, drops to 0.5% over £10m Transaction charges vary the initial and ongoing cost and Quilter Cheviot joined 2.4 100 100 1 1 1 1 0.5 0.5 widely; some groups of advice, which is not typi- forces to create a standard Rathbones Investment Management Y Y £20 per trade N N include them in the overall cally included in figures methodology for calculating RBC Wealth Management 9.7 2000 2000 5,000 Y N None for funds N N Tiered; 1.25% up to £1m, drops to 0.7% over £5m cost of management, others from other wealth manag- total account costs, and still rising Redmayne-Bentley 0 50 50 0.85 0.85 0.85 0.85 0.85 0.85 450 Y N 0.45%-1.65%, min NY charge them at a flat-rate ers. The figure also expressed as an annual £17.50 cost, such as £25 or £35, oth- accounts for the charge for percentage. And European Rothschild Wealth Management 9 5000 5000 From 1.0 Y na Included NY tors over the cost of finan- ers charge a percentage exiting the investment in regulation coming into 43 250 1 1 1 1 1 1 Charges cial advice. transaction fee (which can the first year, which few force in the next few Ruffer YY At cost N N One wealth manager’s be as high as 1.65 per cent) investors would do. years should drive wealth Saunderson House Limited 750 Y Y At cost N N Advisory only; charged per hour failures were so egregious and there are often “settle- Nonetheless, the research managers towards improv- Wealth managers’ Smith & Williamson 6.5 0 0 0.8 0.8 0.8 0.8 0.65 0.53 Y na 0.4%-0.6%, min Y Y Custody charges apply: 0.15%-0.2% fee structures remain that it will probably be ment” or “compliance” by Numis and others ing their overall charging £40 referred to the watchdog’s Gina Miller: campaign for charges on top. reveals the wide discrep- structures. SGPB Hambros 11.8 500 500 1.5 1.5 1.5 1.5 1.25 1.00 7,500 na na YY opaque, writes enforcement division. transparent fees Upfront charges can Aside from the lack of Standard Life 12 0 500 1.37 1.37 1.37 1.37 1.37 1.375 Y Y None N N Discounts may apply Yet, although more inves- inflate that still further in ‘Unless there’s a fees transparency, investors Emma Dunkley tors are starting to pay fee, which investors argue the early years. Research are also concerned that Stanhope Capital 0 8000 8000 1 na Y Enquire na N 0.3% over £70m more attention to charges, is a more transparent by Numis Securities reveals charges are rising, rather standard method 18.8 100 50 1.25 1.25 1.25 1.26 0.86 0.68 few wealth managers are charging structure. that wealth managers than coming down. Tilney Bestinvest YY YY Despite mounting pressure taking decisive action to Gina Miller, founding charge as much as 7.5 per [of charging] there’s “We’ve noticed that a UBS Wealth Management 10 1000 500 0 YY YY on the financial services clarify or reduce them. partner of SCM Private, cent a year in some cases. number of people are pay- no chance of Vestra Wealth 0 500 500 1 1 1 1 1 1 na Y None inhouse N Y industry for greater trans- Most firms still apply ad who spearheads the True An investor with £120,000 ing very high annual fees parency over fees and lower valorem charges, levying a and Fair Campaign on fees, invested across funds, understanding it’ via discretionary invest- Waverton Investment Management 8 0 500 1.2 1.2 0.93 0.88 na na NN costs for investing, the fee based on a percentage of says about 70 per cent of an shares, investment trusts ment services,” says Justin Source; Ledbury Research charging structures of assets under management, investor’s real return can and exchange traded funds, Modray, founder of finan- many wealth managers are which means that costs be eaten by charges. split across a pension, ancy in fees and how diffi- cial advice site Candid still far from clear. increase as the value of The average wealth man- investment account and cult they are to ascertain. Money. The UK’s watchdog, the assets under management agement charge, including individual savings account, Ms Miller says investors Investors typically pay Financial Conduct Author- grows. Some offset the the cost of the investments, could pay up to £8,970 in often believe the “annual more than 1 per cent for the For the latest news and comment on Get the FT when you want it, optimised Find trading ideas and advice about ity, recently unveiled a impact with tiered fee struc- amounts to 3.24 per cent a fees to St James’s Place in management charge” repre- wealth manager’s service personal finance issues, download the for your iOS, Android, BlackBerry or about how to get started at damning report uncovering tures, whereby the level of year. But transaction costs the first year, according to sents the total cost. “Unless plus fees for the underlying weekly FT Money podcast at Windows device. Download your app at FT.com/personal-finance/ “widespread” failings over the ad valorem charge incurred by the wealth firm Numis. there’s a standard method funds of about 2 per cent a FT.com/moneyshow apps.ft.com trading-hub fee disclosure, which it said reduces as assets rise, but and fund managers, which The same portfolio at Bar- with all the explicit and year – often on hundreds of could mislead many inves- few firms apply a flat, fixed are often undisclosed, come clays Wealth Advisory implicit charges updated on thousands of pounds. 12 FINANCIAL TIMES SATURDAY JUNE 21 2014