18May2024
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The Wealthy Client’s Dilemma: Choosing Between Banks and Independent Wealth Managers 🏦💼

Disclaimer: The views and opinions expressed in the vapa Swiss independent wealth management blog posts featured on this page are solely my own and do not necessarily represent the views of any institutions or organisations I may be associated with. These posts are intended to share personal insights and perspectives and should not be interpreted as official statements or positions of any affiliated entities.

For wealthy clients, banks offer essential operational functions, including access to a range of in-house products and online banking, with portfolios monitored according to investment profiles.

Wealthy clients often seek to diversify their bankable assets across multiple banks, adhering to the wisdom of not putting all eggs in one basket. However, this approach introduces logistical challenges. Dealing with multiple bankers without a consolidated asset view elevates the risk of inconsistent risk assessments not aligning with the investment profile. Furthermore, having multiple bank relationships can lead to being no longer viewed as a ‘key client’ by any institution, possibly resulting in a shift to a different department or relationship manager.

Contrastingly, the complexity diminishes when served by an independent wealth manager. Wealth management companies typically hold several client accounts at the same leading private bank, making the wealth manager a significant counterparty of the financial institution. This status often includes preferential fee terms and leverage access for the client.

Wealth managers can open accounts for the same client at different banks and monitor these portfolios through a sophisticated multi-banking system with data interfaces to the custodian banks. This enables consolidated reporting and investment risk monitoring. Additionally, independent wealth managers have the freedom to choose competing products from different banks, ensuring the best fit for the client’s portfolio and carefully selecting specific private banks that meet particular needs.

This example highlights why relationship managers and their wealthy clients often opt for an independent wealth management firm. To answer the initial question: A wealthy client needs a bank for custody of securities and transaction execution. However, the personal relationship manager can be independent, serving as a ‘quarterback’ for risk-mitigating multi-bank asset allocations for high-net-worth and ultra-high-net-worth individuals.

Source: Linkedin

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An illustrative contrast between the traditional banking sector and independent wealth managers, highlighting the decision-making process for clients in the wealth management landscape.

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