Felix Goltz Head of applied research at EDHEC-Risk Institute.
David Schröder Lecturer in finance at Birkbeck College, University of London.
Lin Tang Research analyst at EDHEC-Risk Institute.
This survey has been completed as part of the second year of the "Private Asset/Liability Management" research chair, a chair endowed by Ortec Finance.
This survey taken by EDHEC-Risk Institute draws on responses from 159 private wealth managers (PWMs), whose clients include the mass affluent (financial assets of less than $1 million) as well as so-called ultrahigh-net-worth individuals, or UHNWIs (those with financial assets of more than $30 million). The survey targeted PWMs in Europe; those based in Switzerland account for nearly half of all respondents, reflecting the prominence of private wealth management in the country. The 159 respondents are mainly senior investment professionals working in private banks, asset management firms, and family offices; more than half represent organisations managing more than €1 billion of clients' money.
The key findings of the survey can be summarised along three lines. First, private wealth managers see the relationships they forge with their clients as the principle source of the value they add. But they fail to exploit this close relationship to customise the services they offer their clients: when portfolios are designed for clients, market factors are taken into account more frequently than are the individual characteristics of the clients. Private wealth managers also fail, on the whole, to provide state-of-the art means of horizon-dependent asset allocation. In fact, when human capital, the time and state dependency of investment opportunities, and other causes of horizon effects are not recognised, one can conclude that horizon-based allocations are approximate rather than optimal. Finally, PWMs see the great potential of taking into account client-specific spending objectives, but only a small minority actually attempts to realise this potential.
Created on December 14, 2010
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