Why Private Bankers And Ifas Are Not The Same-chompoo araya

UnCategorized But for UK private banks the interest lies in the differences between themselves and IFAs. And in a world where the ability to offer more holistic wealth management services rather than basic private banking counts, private banks are looking to high-end IFAs to boost their own skills base. David Cox, head of financial planning at Coutts explains. When I first joined Coutts 34 years ago the private bankers were pure relationship managers. That has changed in accordance with client demand and regulation – all are now FSA registered – but the principle of being able to access specialist financial planners, creditor, trust and estate planners, taxation experts and the like has not changed. And this is where IFAs .e in. Not as investment managers or even relationship managers but bringing their perceived ability to structure wealth and provide the essential yet often overlooked initial building blocks to the whole wealth management process. Nick Tucker, market leader for the UK & Ireland, Merrill Lynch Global Wealth Management .ments: Recruiting IFAs is something that makes perfect sense to us. Good IFAs challenge their clients beliefs and provide the technical knowledge to have the right building blocks in place. Investments .e later." Mr Tucker identifies three stages of the wealth management process: The initial one is making sure that all the structures are right in order to meet the clients end objectives, the second is the philosophical process in getting the client to understand his or her objectives and understanding that the road ahead can be bumpy. The third area, picking the investments, is the one where private banks already excel. The first two areas are where IFAs excel and if done properly can make the third step much easier and potentially less painful along the way. Both private banks and clients have tended to skip straight to the third step and this is a mistake,he says. "These three steps are at the core of the way we have developed our private wealth management offering, which is why IFAs are potentially a good fit as part of our teams working high net worth and ultra high net worth clients." John Williamson, chief executive at EFG Private Bank is more specific. Clients that have a UK tax planning base need the services of good high-end IFAs. They have key capability as regards the tax planning situation in the UK and the correct initial structuring in this regard is absolutely key he says. He adds that the market penetration of IFAs in the high net worth segment is much higher than thought for precisely their ability to get the initial structures right and make sure, via a close relationship, that the client understands what has been suggested and why, plus the likely out.e. Good and deep relationships are based on the provision of objective independent and full scale tax planning services and that remains vital to the financial success or otherwise of a wealthy individual, he says. For IFAs too, the prospect of expanding their reach by joining forces with a private bank can be a big pull. Indeed, although IFAs do tend to be very good when it .es to having relationships with other local specialist players there is simply no way that the IFA industry can offer a .parable service, as they are largely small enterprises. Tracy Maeter, director, wealth management and investment group at HSBC Private Bank .ments: The scale aspect is central to the whole debate about how best to manage wealth. Individuals now increasingly need tax and structuring advice, corporate finance services, .plex lending, and other specialist services. The way in which an organisation can leverage internally to be able to offer a whole portfolio of services is key to attracting clients in the first place and then being able to retain them as their needs change over time." Scale also affords private banks to group together similar groups of clients and offer a more tailored response to their needs. This is one area where a big distinction between IFAs and private banks can be made. IFAs do not tend to have a client base that lends itself to client segregation but private banks will have enough clients to be able to offer specialist groupings such as professional services, sportsmen and women, international clients and landowners. Offering indirectly related services is also a key pull for clients. Services such as financial education for an entire family or philanthropic services are also highly valued and again, something that the average IFA does not .e across in quite enough volume to be able to offer in-house or via an established link with a third party. But are private banks actually recruiting from IFAs or even acquiring IFA firms in their entirety? Despite it clearly making sense to do so there have been no recent announcements. Lesley McCloud, director of .munications at the British Bankers Association thinks that although this may well be going on, that private banks are loathe to admit that they lack experience in any of the areas that IFAs routinely deal with. Private banks would say they already have enough breadth and depth and certainly on the day-to-day banking and investment side that is true. But when it .es to insurance issues, especially life insurance products and possibly the mortgage side of things then it would make very good business sense to acquire an IFAs expertise,she says. Both EFG and Merrill Lynch are openly doing so though, although deals do seem to be few and far between. But that is not for lack of trying. Both EFGs Williamson and Merrill Lynchs Tucker say that there is an enormous amount of work involved in finding possible firms or individuals and that wooing them is not a straightforward process. Mr Tucker .ments: We have hired a few IFAs and we do that only by employing people not by association. At ML they then be.e wealth structurers and work as part of a team of experts with the relationship manager. We are very selective about who we recruit and when we do have a suitable candidate we work hard to demonstrate the advantages of joining us." Mr Williamson says EFGs experience has also shown that full rather than partial integration works best; EFG has made three acquisitions: in October 2003 Platts Fellow in Birmingham, in 2004 Planning for Financial Independence and lastly Ashby which has not long been .pleted. All three now prefix their names by EFG but have essentially kept their own brand. There is no right answer on how to integrate IFAs,he says. Either they can be.e private bankers, who fulfil the full financial planning capability, or they can link up to the private banks platform to get a wrap service, execution and custody, or they can pass clients on to the private bankers when they have fulfilled their tax part of the relationship. The advantage of doing all of the above when you own the IFA is that effectively you own all of the value chain, Mr Williamson says. But as private banks be.e better at the initial structuring process, however that .es about, will high-end IFAs find it difficult to .pete on the investment allocation side of things? One potential solution to this is an association with an investment managers platform to gain access to a broader array of investments. Wrap platforms work well for both parties with the wrap platform owner getting a slice of the fee as well. Firms such as Raymond James are well established in this area. The basic deal is that wrap platforms increase the value of an advisors business as it allows them to carry out investment management and discretionary portfolio management, says Cynthia Poole, director of relationship management at Raymond James Investment Services. She explains that the platform basically provides best execution and then all the custody and administration to go with that. Advisors basically need a means to pool clients assets and the platform does that too,she says. 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