MyPrivateBanking Blog
Daily Comments on the World of Wealth Management

Archive for March, 2010

You Want to Change your Wealth Manager ? Determine your Investor Personality First !

Tuesday, March 30th, 2010

Following the feature on MyPrivateBanking in Bloomberg we got a fairly high number of questions from private banking clients on how to find the right wealth manager for their needs and assets. Unanimously they stated that the are unhappy with their current wealth manager, however, somehow feel “they all are the same” and do not know where to start when looking for a new one.

We have different guides providing a systematic approach to tackle these challenge, but I would emphasize in particular one measure every client (also the ones that do not want to switch providers) should take as a first step: Determining his/her financial personality.

Before shopping around for a wealth manager every client has to become clear on his/her investment goals, risk tolerance and ability to cope with uncertainty. A mandatory, but too often skipped first step (unfortunately also by most wealth managers).  Only after such an honest and thorough self-assessment one has the right parameters for the selection of a wealth manager and portfolio strategy.

For determining your financial personality you can take our questionnaire. For determining the subsequent steps please refer to our various guides on how to choose the right wealth manager, cut the wealth management costs and determine the best asset allocation.


Bloomberg on MyPrivateBanking

Thursday, March 25th, 2010

“Ninety percent of wealth-management clients are not aware of the costs they pay indirectly,” said Binder, 43, who in 2008 co-founded, a Kreuzlingen, Switzerland- based firm that provides research and analysis on the private- banking industry. “If they invest in relatively expensive alternative products it can be a huge amount.”

That’s from an exclusive story Bloomberg published yesterday on MyPrivateBanking and the wealth management industry in general.


Market: Trust Buffett More Than Obama

Monday, March 22nd, 2010

Bloomberg reports that it is safer to lend to Warren Buffett than to Barack Obama aka the US government:

“Two-year notes sold by the billionaire’s Berkshire Hathaway Inc. in February yield 3.5 basis points less than Treasuries of similar maturity, according to data compiled by Bloomberg.(…) Berkshire Hathaway’s 1.4 percent notes due February 2012 yielded 0.89 percent on March 18, 3.5 basis points, or 0.035 percentage point, less than Treasuries, composite prices compiled by Bloomberg show.”

When will Mr. Buffett announce his candidacy for president of the United States?


Foreign Account Tax Compliance Act (Fatca)

Thursday, March 18th, 2010

Just want to quickly post a link to the Swiss (German speaking) daily NZZ which today had an excellent analysis on the new Fatca act that was just signed by Obama. This law requires that foreign banks and other financial instiutions disclose all US account holders to the US tax authorities. The provisions include a 30 percent withholding tax on U.S. source payments to foreign financial institutions, foreign trusts, and foreign corporations that do not agree to disclose their U.S. account holders and owners to the IRS. We will follow up early next week with more analysis on our main site as this is a major and impotant development.


Reckless Negligence

Monday, March 8th, 2010

Last week we published a report about the privacy risks of Private Banking and Wealth Management websites. The bottom line was that almost two thirds of websites offering online communication through contact forms or email did not care to take even the most basic precautions in order to protect user privacy.


In the light of the recent data thefts affecting mostly European Wealth Managers we find this reckless and negligent. To be fair, there are many cases of banks with role model websites offering all sorts of preacautions and warnings for their users. Yet, it is still deeply unsettling that about 60% of  the analyzed banks across 17 markets have no clue or do not care about privacy. Especially since we are not talking about auto dealerships or mon-and-pap-grocery-stores. We are talking about an industry whose fate rests on a claim of trustworthiness and confidentiality. There is only one thing to do for the affected banks: Realize that you have arrived in the 21st century - a time where online conversations have become as normal as telephone or letter communication and should be protected accordingly.


Too Big To Fail

Friday, March 5th, 2010

I just finished the bestseller “Too big too fail”, delivering a behind-the scenes and moment-by-moment account of the months between the fire sale of Bear Sterns in spring 2008 and the announcement of the biggest bailout in history in October 2008. Drawing on hundreds of hours of interviews with the key players the Author Andrew Sorkin of the New York Times was able to write a kind of real-life thriller on the struggle of overpaid bankers and overwhelmed politicans to save the financial systems, there companies, jobs and even more so their egos. A gripping book one reads with disbelief on the lack of self-awareness and competence of main players, but also a lot of amusements on how the “big” world of finance and business comes down to surreal realities in the face of disaster.

One of these hard to belive events is a check over USD 9 billion! that literally saved Morgan Stanley and the jobs of its 45.000 employees in the very last minute. Hand delivered by a Japanese delegation and picked up by a banker wearing flip-flops….check


“For Nine Years I Was the S.E.C.’s Doormat”

Monday, March 1st, 2010

The New York Times Magazine has interviewed Harry Markopolos, an investment manager and math whizz who spent nine years to track the machinations of Bernie Maddoff’s hedge fund.  He concluded  early on that Madoff must be a fraud.  In November 2005 he sent a memo to SEC regulators titled  “The World’s Largest Hedge Fund  is a Fraud.” It described his suspicions about Madoff in more detail and asked the SEC to check his fraud theory.

In the NYT interview, Markopolos judgement of the SEC is a harsh one:

Q: “Why do you think the S.E.C. failed to wake up to Madoff’s $65 billion Ponzi scheme until he turned himself in?
A: “They weren’t even asleep at the switch; they were comatose. They didn’t respond to heat and light, much less evidence of wrongdoing. They were not engaged in the fight.”

The whole story is a great example how dysfunctional huge regulatory administrations have become in the financial industry. They are not even able to uncover a fraud scheme when someone else does the analysis for them.

Governments around the world are busy these days to develop grand schemes for new regulatory bodies and laws. No doubt, they will be even less functional. The dysfunctionality will most likely be proportional to the complexity of the law and the number of new bureaucrats hired.

Yet, ordinary investors should really take one learning from the Madoff story: Don’t trust the government to see the red flags and protect investors. It won’t happen. Or more precisely, it will happen but far too late. There is only one way for investors to protect themselves from fraudsters - do the critical analysis yourself,  and keep a very skeptical eye on the ocassional fund management Wunderkind.