Expert: Key Trends on Wealth Management

Investing

Expert: Key Trends on Wealth Management

We sit down with HP Wealth Management, Managing Partner and Founder, Urs Brutsch, to find out the top 3 trends for wealth management over the next 5 years.

Published on 24 January 2017

Hailing from Switzerland, Urs Brutsch, who had spent 32 years in private banking with major banks such as Credit Suisse and ABN Amro, decided to pursue his dream of being his own boss and started his own independent wealth management firm, HP Wealth Management, in 2009. Here, Urs shares his insights on the needs of wealthy investors in Asia, as well as his company’s business direction.

Urs’ Trends To Watch

1)   Financial markets are moving sideways.

I’m not very bullish on the industry. On one hand, the costs are going up for technology and regulatory compliance. At the same time, clients are becoming more sophisticated. They are asking more questions and they are becoming more sensitive about fees. They don’t want to be taken for a ride when the bank builds in 2 to 3% for a structured product.

2)   Traditional advisors are not very helpful.

Clients are also taking less risk so they are taking up less leverage and making less transactions. They are becoming disillusioned by the private banking world and many of them are saying they are making more money on investments in private equity and private debt.

3)   More investors will look to the private investment markets.

I foresee that clients will move assets away from the traditional Private Banks. Instead, they will invest more in private equity, private debt and private real estate because the returns will be higher than in the public market. The outlook for the public market is mixed: interest rates will go up and the valuations of the public equity markets are not that cheap. So we have to live with low returns for the next few years. The public market refers to the stock exchanges for equity and bond trading so there’s good liquidity and you can trade every day. Private equity refers to investments that are not listed on the stock exchange so liquidity is low but the returns are usually higher, but that comes with increased risk and low to no liquidity.

Urs Brutsch

Managing Partner and Founder, HP Wealth Management

Clients have to take a long-term view of 5 to 7 years when they invest in private equity. Clients have to be careful not to allocate too much of their assets into private equity as it is not very liquid.

The future of wealth management business

According to Urs, the best way for investors to take advantage of these trends is to re-think the way they work with their wealth advisors. The industry is in a state of flux and as clients become more knowledgeable and traditional wealth management businesses languish under increasing costs and limitations, a new type of wealth advisor is emerging. The business model of the Independent Asset Manager (IAM), like Urs’ company, HP Wealth Management, is the future of how affluent clients should interact with their wealth advisors.  Urs explains why.

Advantages Of Having An Independent Asset Manager

No hidden fees means aligned interests

Our clients pay us a management fee for managing their assets. We don’t get paid for any product fees and we are not paid by any investment funds. So we don’t benefit from any transactions made by the clients. By doing away with transaction-based fee, we won’t be incentivized and tempted to make transactions for the clients just to get more revenue. So our business model allows us to align ourselves with the clients’ interests. Unlike us, the private banks will recommend structured products and other investment products to the clients because they derive a fee from each transaction made by the client.

Deep expertise that cares about clients

The main difference is in our people. We have three partners here who have a combined industry experience spanning 80 years. I have spent the last 30 years in Singapore. We’ve been in Asia for a long time and so we know the region fairly well. We have long-standing relationships with our clients and they know we are here to stay for the long-term. Our clients trust us because we deliver in terms of our promise to only do what is right for them.

Focus on Asian clients

Over 90% of our clients are from Asia and a large proportion are from Singapore. But we also have clients from Malaysia, Hong Kong, Indonesia, Philippines, Thailand and Dubai. Most of our clients are high net worth individuals and families, for whom we provide family office services. (Generally, a family office requires standard wealth management services such as centralised management or oversight of investments, as well as tax, estate and philanthropic planning.) We have seen the biggest growth in the family office segment.

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