WEALTH MANAGERS FIND A NEW FORMULA
Privatebanks once conjured up images of Chesterfield sofas, cigars and the occasional stock tip exchanged in a wood-panelled office.The bursting of the stock market bubble changed that. Seven years on, private banks have emerged with a solid focus on investment performance and a new mantra: asset allocation.
Wealth managers – as private banks are increasingly called – have shifted away from the brokerage model of selling a range of products in return for commissions. Instead they are trying to be allocators of assets, advising clients on the range of their portfolio including their exposure to share options, property, hedge funds, private equity and other assets.
John Skjervem, chief investment officer for Northern Trust's personal financial services business, says the bear market was the catalyst for a big change in attitudes towards performance.
“The shift was from predominantly closed architecture and proprietary solutions to blended or open architecture solutions,” he says.
“But more important was a painfully learned, newfound appreciation for diversification.”
Private banks have long prided themselves on discretion and tailor-made financial management for the very wealthy. For the clients, quality of service is what has distinguished one provider from another.
Where does investment performance fit in?
When IBM Business Consulting Services asked private clients why they picked their provider, investment performance ranked below quality of service; confidentiality and security; quality of investment advice; image and reputation; and referrals from existing clients.
But when a private bank tripped up on performance, clients had a different perspective. IBM's European Wealth and Private Banking Industry Survey 2005 found that poor investment performance and advice were among the top three reasons clients changed their private banking provider.
Michael Cembalest, chief investment officer for JPMorgan Private Bank, says one reason investment performance ranks higher when someone is dissatisfied is that when an investment adviser loses money, the client “looks under the hood”.
“People will fire you for investment performance when they think you have taken on unnecessary risk,” he says.
Mr Cembalest believes investment performance comes and goes in terms of where it ranks on the list depending on the market cycles.
“In 2001 and 2002 it was extremely important. People wanted to see proof that you were taking concrete steps to preserve their capital at the time that the markets were plunging,” he says.
But, he adds, performance matters more or less depending on the private bank's other services, which could include trust and estate planning, tax advice and philanthropy. For example, if a client is in a jurisdiction with no taxes, the chances are that investment performance will matter more, because less advice is needed around the other topics.
What constitutes performance?
“Some combination of beta , alpha and leverage are the components of everybody's portfolio,” says Mr Cembalest.
“As a non-believer in bet-the-ranch, I try to make sure that our strategies and portfolios have a little bit of everything.”
He believes it is “unnecessary bravado” for a private bank to have an investment approach that rests primarily on manager selection.
“Last year our manager selection was just OP. Almost all the managers on average were top quartile, but that didn't add a lot of value over the markets.
“Last year our value added was because we made some smart decisions in terms of a modestly weaker dollar and better performance in international equity markets than in the US.”
Performance is about more than the numbers.
“ performance counts, but so does the quarterback who advocates broad diversification and prudent asset allocation,” says Northern Trust's Mr Skjervem.
Christopher Wolfe, chief investment officer for Merrill Lynch's private banking and investment group, says the performance discussion has assumed “a greater depth and breadth” in recent years and should take place in the context of increasing a client's wealth after tax and inflation.
“That, by a lot of definitions, is success. But there are very few people who think in the real return space,” he says.
“ is not only about asset classes but the totality of how these things work together. It is not just about a number but about how you got there.”
Mr Wolfe believes after-tax performance will take on greater importance in the coming years.
“First, we are on the cusp of a massive wealth transfer over the next 15-20 years and how taxation is handled will be a factor,” he says.
“Second, tax regimes have started to bottom out. I'm not sure tax rates are headed much lower. Globally we've seen tax rates in some jurisdictions start to rise.
“Third, historically there has been a relationship between after-tax performance and market volatility. As market volatility rises, we will see a greater distinction between before and after tax performance from managers.”
Private bankers say some clients who have experienced a “liquidity event” – say, from the sale of their business – have unrealistic expectations for investment performance.
“We have seen a lot of entrepreneurial wealth being created through financial markets transactions – initial public offerings, buyouts and private equity deals,” says Mr Wolfe.
“This explosive wealth does set expectations that are often too high, and for those types there is a lot of time spent managing those expectations.”
Mr Cembalest agrees.
“A lot of clients generated compound returns of 30-50 per cent in the operating business they were in, so sometimes they have different expectations for what they are expecting out of an investments portfolio,” he says.
“We try to explain to them that we are not in a horse race between an operating company that has financial leverage and operating leverage and high failure rates. That is not what investment portfolios are designed to achieve.”
One of the more difficult aspects of choosing a private bank has always been evaluating investment performance. Because of the confidential nature of private banking, relative performance is tough to compare.
That is changing. Last year, London-based Private Banking Index, in conjunction with FTSE Group, launched a series of private banking benchmarks. Every month, 40 private banks based in Europe supply, in confidence, their asset allocation across seven asset classes, four currencies and three risk levels – for a total of 12 portfolios.
The result is the FTSE Private Banking Index Series, which provides a benchmarking tool for private banks' clients to measure the absolute and relative performance of their investments and of their wealth managers.
“Private banking was the only remaining bastion of financial services that didn't have its own index,” says Ariel Salama, PriBIL's chairman.
“Performance is becoming part of the strategy of private banks in terms of business expansion, and so in addition to good services and the wooden panels in their offices, they can now talk about performance.”
For now the index series is only available for European institutions, but a US version may be in the offing.
“The directional move for greater transparency on performance is a good thing,” says Mr Wolfe.
“The risk is that it becomes the only measure – a report card, if you will – that has the risk of facilitating performance-chasing by clients, which is a very expensive hobby.”
Mr Cembalest also welcomes transparency but cautions that risk cycles are not measured annually.
“If you looked back to 1987, 1994, 1997, 1998, 2001, 2002 and more recently 2007, you really needed to get a three to five-year look at someone to get a look at whether they were swimming with their trunks off.
“The private bank that posts the biggest return in a bull year will be the one everybody says, ‘Well, we should be working for them because in 200X they had the biggest return.'
“Whereas you have absolutely no way of knowing what risks they took to get there, unless you are going to look at something over a longer cycle.”
曾经，人们一想到私人银行，脑海中便会浮现出这样的景象：在一间配有大沙发的实木镶饰办公室中，人们抽着雪茄，不时交流一下炒股窍门。
股市泡沫的破裂改变了这种情况。7年后，私人银行开始着重关注投资业绩和一条新的箴言：资产配置。
财富管理公司——越来越多的人如此称呼私人银行——已放弃了以出售一系列产品来获取佣金的经纪模式。它们转而致力于成为资产配置顾问，就客户投资组合内的股票期权、房地产、对冲基金和私人股本等资产为其提供建议。
北方信托公司(Northern Trust)个人金融服务业务首席投资官约翰•谢文(John Skjervem)表示，熊市使私人银行在对待投资业绩的态度方面发生了重大转变。
他表示：“私人银行的模式从基本封闭的结构和专属解决方案，转变为混合性或开放式解决方案。”
“但更为重要的是，私人银行在经历了一个痛苦的过程后，对多元化有了新的认识。”
长期以来，私人银行一直以判断力和为富人量身定制金融管理服务为荣。对于客户而言，服务质量是区分私人银行的关键因素。
投资业绩的重要性何在？
当IBM商业咨询服务(IBM Business Consulting Services)询问私人客户选择私人银行的原因时，投资业绩排在服务质量、保密性和安全性、投资建议质量、形象和名誉，以及现有客户的推荐之后。
但当一家私人银行在投资业绩上表现糟糕时，客户的看法就不同了。IBM进行的《2005年欧洲财富和私人银行业调查》(European Wealth and Private Banking Industry Survey 2005)发现，客户更换私人银行的前三大原因包括不佳的投资业绩和投资建议。
摩根大通私人银行(JPMorgan Private Bank)首席投资官迈克尔•切巴莱斯特(Michael Cembalest)表示，在客户不满意时，投资业绩因素的排名较为靠前，原因是当投资顾问亏损时，客户“就会刨根问底”。
他表示：“如果客户认为你承担了不必要的风险，那么他们就会因为投资业绩不佳而炒掉你。”
切巴莱斯特认为，投资业绩因素的排名情况取决于市场周期。
他表示：“在2001年和2002年，投资业绩极为重要。在市场急剧下挫时，客户希望你能够证明你正采取有力举措，保护他们的资本。”
但他补充称，投资业绩重要性的高低还取决于私人银行的其它服务，其中可能包括信托和遗产规划、税务建议和慈善活动。举例来说，如果一位客户无须缴税，那么投资业绩的重要性可能会更高，因为客户在其它问题方面需要的建议较少。
投资业绩包括什么？
切巴莱斯特表示：“市场整体收益、超额收益（与市场趋势不相关的收益——财富管理公司获得的超过整体趋势的收益）和杠杆水平这三者不同程度的结合，是构成所有人投资组合的要素。”
“作为一个不会拿全部家当下注的人，我努力确保我们的投资策略和投资组合充分多元化。”
他认为，私人银行采取主要依赖于经理人挑选的投资方法是“不必要的莽撞行为”。
“去年，我们经理人挑选的资产表现平平。几乎所有经理人都处于平均水平的前25位，但这并未带来远高于市场整体水平的价值。”
“去年，我们的价值之所以增加，是因为我们预测美元将略微走软，以及国际股市表现将优于美国，因此做出了一些明智决定。”
投资业绩不仅仅表现在数字上。
北方信托的谢文表示：“（投资）业绩确实重要，但倡导广泛多元化和谨慎资产配置的领导人物也同样重要。”
美林(Merrill Lynch)私人银行和投资集团首席投资官克里斯多弗•沃尔夫(Christopher Wolfe)表示，最近几年，投资业绩讨论的“深度和广度已经加大”，人们应当在增加客户财富（除去纳税和通胀因素后）的背景下进行这种讨论。
他表示：“从许多方面而言，这是一种成功。但很少有人从实际回报的角度考虑问题。”
“（投资业绩）关注的不仅是资产类别，还有这些资产的协同效应。这不仅仅是个数字问题，投资业绩的实现方式也很重要。”
沃尔夫认为，未来数年，税后投资业绩将呈现出更高的重要性。
他表示：“首先，未来15年至20年间，我们会看到大量财富开始转移，如何处理纳税问题是其中一个关键因素。”
“第二，税率已开始接近谷底。我不确定，税率是否还会大幅降低。我们看到，在全球范围内，一些国家和地区已开始提高税率。”
“第三，从历史上看，税后投资业绩和市场波动性存在一定关联。随着市场波动性上升，我们将看到财富管理公司在税前和税后业绩方面会出现更大差异。”
私人银行家表示，一些经历过“流动性事件”的客户——例如出售他们的企业——对投资业绩有着不切实际的预期。
沃尔夫表示：“我们看到金融市场交易——首次公开发行(IPO)、收购和私人股本交易——为企业家创造了大量财富。”
“这种爆炸性的财富增长确实形成了往往过高的预期，就这些类型的（客户）而言，大量时间会用在处理他们的预期方面。”
切巴莱斯特同意这种说法。
他表示：“很多客户在他们经营的企业中实现了30%至50%的复合收益率，因此有时他们对投资组合的收益预期会有所不同。”
“我们努力向他们解释，一家运营的企业存在财务杠杆、营运杠杆和较高的破产率，我们的环境与它们不同。这不是投资组合的目标收益水平。”
在选择一家私人银行时，更为头疼的难题之一往往在于评估投资业绩。由于私人银行业务具有保密性，因此很难就相对投资业绩进行对比。
这种情况正在发生变化。去年，总部位于伦敦的私人银行业指数公司(Private Banking Index)与富时集团(FTSE Group)联合推出了一系列私人银行业基准指数。40家总部位于欧洲的私人银行每月会秘密提交它们在7个资产类别、4种货币和3种风险水平中的资产配置情况——共12个组合。
这两家公司的合作成果是富时私人银行系列指数(FTSE Private Banking Index Series)。该指数为私人银行客户衡量其投资和资产管理公司的绝对及相对业绩，提供了一种参照工具。
PriBIL董事长阿里尔•萨拉马 (Ariel Salama)表示：“私人银行业是唯一一项没有推出自己指数的金融服务。”
“投资业绩成为了私人银行业务扩张战略的一部分，因此，除了优质服务和办公室的实木镶饰之外，他们现在可以讨论一下投资业绩了。”
目前，私人银行系列指数仅适用于欧洲私人银行，但该指数的美国版可能即将推出。
沃尔夫表示：“以提高投资业绩透明度为方向的举措是一件好事。”
“风险在于，这可能会成为唯一的衡量工具（你不妨可以称之为成绩单），它可能会推动客户追逐投资业绩，而这是一项昂贵的爱好。”
切巴莱斯特也对提高透明度表示欢迎，但他警告称，无法每年都衡量风险周期。
“如果回顾一下1987年、1994年、1997年、1998年、2001年、2002年以及更近的2007年，你会发现，确实需要用3至5年的时间，来考察一家私人银行的风险状况。”
“对于在牛市年份中公布最高收益的私人银行，人们会说‘好吧，我们应该为他们工作，因为在某一年他们创造过最高收益。'”
“但你绝对无法了解他们为取得这样的业绩承担了何种风险，除非你在一个较长时间内进行观察。”
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