Themes in wealth management 2009: Part 2
To mark the start of 2009, Wealth-Bulletin will be running a series of insights from leading wealth practitioners on their thoughts of the likely big trends in wealth management during the course of the year.
Yesterday, we heard the views of Alexander Hoare, managing partner of C. Hoare & Co. Today, Nicolas Sarkis, managing partner of London-based multi-family office, AlphaOne Partners, gives his thoughts.
The shake out that hit banks in 2008, as well as the severe underperformance of ultra-high net worth portfolios managed by large financial institutions, have started to create and will continue to generate opportunities for boutique firms that boast independent, conflict-of-interest free investment advisory services as more and more of the very wealthy are likely to switch providers.
Europe’s very wealthy are likely to become more like their US peers: they will switch providers with higher velocity and their “tolerance for underperformance” will become less and less important.
Independent advisers offering innovative business models might win new clients but firstly, they need to retain their existing business.
Despite the move towards boutiques, the very wealthy are likely to be less patience with smaller firms that turn out to be underperformers than they did with the bigger financial institutions – so boutiques might be winning business now but that doesn’t mean they will continue to do so when conditions improve.
The big providers of wealth management services will continue to retain the lion’s share of the investment advisory market for Ultra-HNWIs, despite the growth of the multi-family office.
The “hedge fund fairytale” will become increasingly harder for the very rich to believe. They will probably prefer easy-to-understand investment strategies without leverage or complex products, offering liquidity and aiming at achieving high-single-digit, low double-digit returns.
This will be supported by the low interest rate environment that is set to last for a considerable period of time and that will make cash particularly unattractive.
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