New Guide: How Clients Can Cut Costs of Wealth Management

PRLog (Press Release) - Sep 28, 2009 -
Zurich, 28.09.2009. With rather simple measures clients of wealth managers can reduce their costs of wealth management significantly. Overall clients should not pay more than 1% per year of their total assets for wealth management. This is a main result of the new MyPrivateBanking.com guide “Cut the Costs of Wealth Management”. Based on in-depth research and analysis of cost structures of clients portfolio and pricing schemes of wealth managers this free guide details various ways on how clients can cut their costs.

The main recommendation is that clients have to understand the costs drivers and pricing models better to be able to cut costs. However, the pricing models offered by most wealth managers are often intransparent and only report the direct costs either as a “flat-fee”, “transaction fee” or “performance fee”. Many clients are not aware of various indirect costs, hidden in many products and services, easily doubling the direct costs of managing a portfolio.

“Widely used vehicles to hide costs are funds and structured products which can cost up to 5% per year”, explains Christian Nolterieke, Research Director of MyPrivateBanking.com. “In a pricing model based on transaction-fees a higher-churn of the portfolio generates extra costs and often not all transactions are required respectively beneficial to the investor.”

Most of the clients are not aware that a huge chunk of the hidden costs charged by und providers are actually returned to the wealth managers as a reward for “encouraging” investors to choose their products. Overall, these kickbacks to the wealth manager can make up to 50% of what the client pays to the bank.

By rather simple measures, detailed in the MyPrivateBanking.com guide, clients can gain transparency and take control over costs:

1) Choosing a strategy and a particular wealth manager best for their investment personality and amount.

2) Pushing the wealth manager for full transparency, the use of cost-effective products, and full disclosure and payback of all kickbacks and commissions.

3) Choosing a price-competitive wealth manager by meeting various wealth managers, assessing their competence and requesting an offer.

4) Opting out of all services provided by the wealth manager that are not required, or that can be done somewhere else at a cheaper rate.

Finally, and very important: Clients should negotiate. As Steffen Binder, MyPrivateBanking.com Managing Director points out: “There is plenty of room for fee reductions. Clients should educate themselves about the market and communicate precise and determined their requirements; and within minutes they can save a lot of money.”