Choosing the right individual or institution to manage your wealth can feel like a daunting task, but it’s good to understand the basics and figure out your personal priorities.
This is a question we hear time and time again – perhaps you have an existing team or manager, but you don’t know if they are a good match for you, or maybe you have inherited or built up a large nest egg but don’t know where to start.

Everyone’s journey to finding their perfect asset manager will be different.

Where Can I Find the Best Asset Manager to Suit Me?

Banks are the traditional place to turn to for asset management services: the size of the institution (in terms of AUM, i.e. Assets Under Management) is an indication of its standing, although size is not everything in this industry.

The largest banks with wealth management services include UBS, Credit Suisse, Morgan Stanley, Bank of America/Merrill Lynch, JP Morgan, and Goldman Sachs.

These are well-known and well-respected institutions, and their size does come with certain advantages: first access to new products such as funds or bonds, special pricing for products and technical knowledge, and expertise due to the size of the teams. Many banks have analysts who cover individual sectors and can give the most up-to-date advice. These large institutions are far more structured, which means an asset manager will be less well-placed to make dedicated conviction calls compared to an independent manager, but the structure also means that they have more information to work with. For example, Credit Suisse utilizes its “HOLT” system, and UBS and Julius Baer have well-tested frameworks and methodologies.

There are also smaller dedicated private wealth management banks: these normally have a smaller number of employees but focus exclusively on wealth management services. They may have a more personal service than a larger bank, but they have fewer resources to research a broader spectrum of products. Having the right individual asset managers and analysts becomes critical for achieving outperformance.

Then there are independent asset managers, typically one- to five-person offices with an asset manager and some analysts. These offices hold accounts with larger banking institutions but work independently, therefore offering more tailor-made solutions.

What Products Can My Asset Manager Provide?

Depending on the institution the asset manager works for, they will be able to provide access to different products. For example, a large bank might gain early access or be notified about products due to being a bookrunner, but they might also have less freedom to offer products provided by other banks. Banks can also make larger investments: this is vital for the primary bond market, where the book interest is high and final allocations can be substantially lower (or nothing at all). An independent manager may not be aware of these products before they launch, or might not have the size to gain an allocation if the book is oversubscribed.

Pricing is another factor to consider: pricing is usually carried out on a case-by-case basis, but most asset managers will use a percentage. For very high-value accounts there can be an “all-in” fee as low as 40 basis points per annum. On the other hand, an independent asset manager might be able to offer a lower management fee, but they will also be subject to holding/account fees with their respective banks.

What Works for Me?

Choosing an asset manager is not just about products and fees. The right asset manager is an individual or team you trust, so everyone must understand what the goals are for your portfolio.

Why do you want to invest? For capital protection and to keep pace with inflation? Or do you wish to hit a particular target return? Do you want access to your money in the short term, or are you looking toward intergenerational wealth management or philanthropy? Or is it a mix of all of the above? Whatever the case, you and your investment manager need to be aware of your goals and requirements from the beginning.

Then there are non-financial considerations. Do you want to invest in specific companies you have an affinity for because you truly believe in their ethos or products? Do you want to invest in sustainable companies that might have a slightly lower return, but have a positive impact on the world? Are there any no-gos? These might be specific companies or sectors that you believe compromise your moral or ethical values. All of this should be communicated in discussions with a potential asset manager. If investing in ESG1 companies is important to you, then you will want to ensure that your asset manager has experience in or feels comfortable in this field. Or, if you have an interest in holding a largely fixed-income portfolio, then you will want to find someone specializing in this area.

If there is an existing structure in place for your wealth management, you will need to make your future asset manager aware of any restrictions and confirm with the trustees that the location and identity of the asset manager conform to the rules of the trust or structure. Any restrictions based on resident status also need to be communicated and discussed, and these restrictions (such as for Resident Non-Domicile status) should also be included in the Investment Policy Statement drawn up.

What Is the Best Way of Diversifying?

Adequate diversification reduces risk and increases returns in the long run. In the many ways to achieve a diversified portfolio, a common trap is having money managed by multiple asset managers or banks. While it seems a good idea on the surface, this may be detrimental because many banks have similar recommendations for core products or stocks, therefore by splitting your wealth, you may end up being less diversified than by having separate accounts with the same manager.

Another advantage of keeping your money with only one or two banks is that they will probably be able to offer you a wider range of products or more personalized services.

Most banks have tiers or thresholds based on portfolio value that would allow for more customization and a more personal experience; some also come with lower fees. So if you have e.g. $50 million to invest, it would be better to place $25 million with two banks than to put $5m in 10 banks: the service you will receive across two banks will be far superior, and the asset managers will have access to a greater range of products.

Questions to Ask Yourself

  • Who are your trusted advisors?
  • What are your current projects?
  • Do you feel confident making financial decisions?
  • What are the three biggest priorities in your life?
  • Do you have specific values you would like to uphold?
  • Would you compromise a value to make money?
  • How much involvement do you want in your asset management process?

Questions to Ask a Potential Asset Manager

  • How long have they been working as an asset manager?
  • What fees do they charge and what does this include? Will there be additional charges?
  • What products are available to them?
  • Are values important to them, do they feel comfortable working with particular investment restrictions?
  • How do they choose new investments?
  • What time horizon do they use to look at investments?
  • What are the dangers and opportunities they see in the market at the moment? What steps would they take to harness these?
  • How do they deal with volatile markets?

Questions to Ask an Existing Manager

  • How do they view their performance over the past 6 months, 2 years, or 5 years?
  • What is their strategy? Do they have a system, or is it more of a gut instinct?
  • What do they believe their specialism is? Do they think they have any weaknesses?
  • Are they happy with the freedom they have to manage the portfolio or feel constrained?
  • Are they invested in any products with high annual fees, and are these profitable?

In the next blog, we will look at how to assess the performance of an asset manager, what tools are available to you now, and where there could be better insights. Check out our other blogs on asset management.