Wealth management and private banking services have one of the most intransparent pricing policies one can imagine. In spite of the large sums of money changing hands (respectively accounts) you hardly will find any price list, fee comparisons or info on rooms for negotiations. In fact the wealth managers of this world work hard to keep it not transparent: They make prices look like small, insignificant numbers; position themselves as adviser and not sales man; do not disclose the hidden costs of a client´s  portfolio and make sure clients do not talk much to each other about their fees. Or have you ever seen a client forum on a wealth manager´s website?

Time to speak up! Tell us how much you pay for your wealth management, if you could negotiate the fees and if your adviser disclosed the kickbacks he generates from your portfolio. Please participate in our survey about your costs of wealth management!

Our survey is anonymous, takes a couple of minutes and of course you will receive an exclusive report on the results for free. Find out what other pay and let´s work together on taking out the hot, expensive air in the wealth management market and getting down to facts and figures. Click here to start survey.

In the light of the cut of Net Jets Europe flight crew by 30% the recent commercial with Roger Federer offers a good idea for managers and VIPs for reducing their costs (and the jealousy of coach fliers…) of private jets travels: Do the taxi yourself and give a hand to get the plane started…

Yesterday Credit Suisse reported its second quarter results. Overall the results are above expectations. Surprisingly the wealth management business reported a pre-tax profit of CHF 662 mio, down only 20% from the prior year period. The decrease was caused mainly by lower recurring fees due to substantially lower assets under management. Transaction fees, however, were up significantly and cushioned the fall in profits. It seems that the private bankers of Credit Suisse could convince their clients to engage in more transactions.

This seems a common pattern which we have seen recently from quite a few wealth management units: As assets under managements fall, bankers push for more  fee generating transactions. MyPrivateBanking is right now in the middle of a study to investigate this. We will keep you posted.

Lehman Brothers paraphernalia are now on sale at eBay. Would you like the NEW Lehman Brothers Herrington Teddy Bear - Boy (USD 15)? Or may be you prefer the the NEW Lehman Brothers Nike Dri-Fit Golf Shirt - XXL (USD 24.99)?

We are wondering if this is the ultimate sign that the crash is over. Well, we don’t know yet. But the prices are certainly competititive. All sales proceeds go to those poor souls who have been advised by their bankers to invest in Lehman structured products, bought Lehman bonds or have other claims for what is left of Lehman.

One of the last developments of the crazy tech stocks boom in 2000 was that banks started to launch very exotic funds on internet stocks. After stocks in traditional markets already went up tenfold and more a new “story” had to be invented: That of still “undervalued” tech stocks in “undervalued” regions. Shortly after the world of triple digit price/earnings-valuations collapsed these funds vanished for almost a decade.

However, just in time for the ten year anniversary of the dot.com-bubble Deutsche Bank launched last week an ETF on Chinese internet stocks. It is correct that neither internet stocks nor China are for investors a foreign territory as they used to be 10 years ago. Because of this familiarity with internet stocks investors nowadays do not accept missing of business models. Consequently, the upside of internet stocks is limited in many cases anyways. But unlike in 2000 this fund is launched in the middle of one of the world’s worst economic crises and not at the end of a bubble.

What does this tell me? Stock markets show cycles and these are about to be repeated. I cannot predict when and in which area the next bubble will build up, but I sure will look out carefully for the launch of funds on “Vietnamese e-commerce stocks”, “Bolivian coffee farms” or “Namibian solar parks”…

PS: With an annual 1.5% management fee the Chinese internet ETF is very expensive. Looks like the bankers thought an exotic ETF can demand an exotic pricing as well. Anohter indication that ETF does not automatically mean low fees.

Here are two extremely interesting pieces about the risk of inflation, what it can do to your portfolio and what you might do about it:

John T. Reed writes about “The financial numbers that show the US are going off a cliff”. Reed hast written 31 books, mostly on real estate, and is a very successful real estate investor himself. He is not an economist, but the numbers he presents are nevertheless very scary.

Usually I am not into personal finance columns. Many are just hype and superficial. But Jane Bryant Quinn is an exception and she has done an excellent piece on commodity investing. It is mostly written for a US audience as she gives also some tax background but her general advice is useful for everybody. As you know: commodities are often seen as a hedge in inflationary times.

Interesting piece on the health care debate in the US, and why Obama thinks that the rich should pay for it. I doubt if this additional tax on the top 0.5% earners can pony up enough for the gigantic plans the Democrats have for government health care.

And there is also the point of fairness: IRS data shows that in 2004, the wealthiest 50% of the taxpayers paid 96.7% of total income taxes. From 1986 to 2004, the share paid by the wealthies half grew from 93.5% to 96.7%, and the share paid by the richest 1% surged from 25.75% to 36.89%. Pretty impressive numbers…

In last weeks print edition of Germany´s most popular weekly magazine “Der Spiegel” a great feature described the sad, but insightful story of how Deutsche Bank “managed” the fortune of an older lady in Hamburg.

In 1989 she inherited from her father a portfolio of about 19 European blue chips stocks (Royal Dutch, Siemens, Phillips, BASF etc.) worth about 3.7 Million Deutsche Mark (about Euro 1.9 million). After her husband died in 1994 she felt uncertain on if the investment is are safe enough to last. She has never dealt in money issues ever before in her life and how the Spiegel put it: “She had not clue how rich she was”. With her concerns she talked to an adviser at the Deutsche Bank and in the next 12 years he turned her portfolio upside down.

In the first phase he sold all stocks and instead bought funds. Of course all issued by the DWS, the fond subsidiary of Deutsche Bank and all with a heavy front load. In the second phase he increased the level of  transactions to an absurd level. In some years the turn-over was 150% of the total assets, generating huge transaction fees. Finally all funds were gone as well and instead the portfolio was completely comprised by certificates of all nature: Bonus, Express, Absolute Return, Multi-Opportunity etc. You name it. The full list of highly expensive structured products, again mainly issued by the Deutsche Bank.

The result: If the lady in her aim for full security would have invested her heritage in German government bonds her portfolio would have more than doubled. However, as result of the advice of Deutsche Bank she lost overall Euro 1.9 million (not counting the presents her adviser asked for himself such as Mercedes Convertible)! And all she asked for was advice for a secure investment.

This story might be a singular case, but the way on how wealth management is defined by many banks is certainly not: Selling products instead of offering advice; generating fees instead of performance. The daughter of the lady considers suing Deutsche Bank based on a recent judgement by the German Federal Court, that clients can sue their bank for bad advice for a period up to 30 years ago. I really hope she does it and will keep you updated.

As we predicted a few days ago: There is a very high likelyhood of a government-negotiated settlement in the UBS case. Today the federal judge granted a stay and both governments have until August 3rd to find a solution.

Basically, we see four options for a possible outcome:

Option 1: The UBS will pay a substantial fine to the IRS. No customer data are handed over.

Option 2: The UBS will handover a limited number of customer data where there is tax fraud involved. This would, at least de jure, take the Swiss Law in consideration which permits the breaking of the bank secrecy only when active fraud is involved but not for simple tax evasion.

Option 3: The UBS will transfer all or a big portion of the customer data. This could be an option if the new double taxation treaty between the US and Switzerland would be retroactive (which we do not know yet). If this were the case not only tax fraud but also simple tax evasion would be a reason to disclose customer information to a foreign government.

Option 4: No settlement. The UBS could then finally lose the case. In this instance an all out financial war between the US and Switzerland could break out. The UBS in the US could lose its bank license and the Swiss government could retaliate and freeze US assets in Switzerland.

We believe that scenario 1 is not very likely, scenario 4 is also unlikely, scenarios 2 and 3 or a combination of them are the most likeliest outcome.

Another important point is that we believe that the UBS is working very actively with all affected customers to disclose information voluntarily to the US authorities and take advantage of a partial tax amnesty. We believe that in this way a very substantial part of those targeted by the IRS will be known by the IRS and settle their tax issues individually defusing the conflict partially. Those customers willing to disclose voluntarily face a deadline in September when the IRS amnesty offer will expire.  We will keep you posted…

Take some time on the upcoming weekend and watch what tech-entrepreneur and billionaire Marc Andreesen has to say about the future of the Venture Capital industry. Andreesen has just started a USD 300m venture fund to hunt for the big wins. Given the extremely difficult situation of the whole private equity industry that in itself is a big achievement. Andreesen aims for the big winners in the tech industry, i.e. entrepreneurs who come up with strong and innovative new  products. He also predicts that hundreds of other VC funds will vanish. His strategy is simple: Only 15 new companies per year will reach revenues of USD 100m. Find them, invest in them, and make a handsome profit when you sell them.

A totally different story  is about the trend of agricultural investing. It is probably the total opposite of tech investments. Can goats deliver a 12% return per year and farmland even 16%? Read for yourself and have a good weekend!