His words are particularly resonant today, when double-digit portfolio
returns are a distant memory and capital preservation is almost as
important as growth. Rothschild has re-organised accordingly, and its
private banking offices in Zurich, London, Paris and Guernsey are
devoting significant resources to determining clients’ risk tolerance
and asset allocation choices, as well as the optimal structuring of
investments in trusts or private open-ended investment companies.
Rival institutions
It is a similar story at arch-rival Cazenove. These old-style
private banks have now modernised and improved their investment
operations so they are almost unrecognisable. But they insist that
before clients are pushed towards multi-manager/best of breed or
internal investment expertise, the structure of assets has to be
correct.
Cazenove has talked about seeing clients defecting from rival
institutions where only investment returns were discussed, not the
vehicles in which assets were invested. In high tax areas such as Spain
or the UK, this could lead to losses of 40 per cent plus before returns
are even discussed.
JPMorgan Private Bank is investing substantially in its concept of
Family Wealth Centres, ensuring family members can create correct
structures to preserve both wealth and family unity.
Fifteen years ago, private banks in Luxembourg and Switzerland were
just beginning to come under scrutiny. The charge against them was that
they were not concentrating enough on selecting performing assets.
Today, many institutions are still struggling to find the Holy Grail
which matches service, performance and fiscal structure.
One way of achieving this is through partnership with a third party
such as an insurance company. Lombard International in Luxembourg, for
instance, has wrapped E4bn of investors’ assets in international life
policies – offering 100 per cent protection against bankruptcy and
fraud under Luxembourg law – which are particularly popular in Germany,
France and Belgium. The likes of Lombard can offer generational
planning, a tax shelter and admin help. Lombard has attracted
pan-European partners like Nordea, Pictet and Commerzbank. For private
clients, the choice of structure is fast becoming the primary concern,
before asset allocation or investment returns.
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Private banks must go back to basics
05 April, 2004
There’s more to investment than profit, as managers reeling from
single-digit returns concentrate on asset structure and supplementary
portfolio features.
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