SEPTEMBER 2010                                                                                                                    Download PDF Version

Wealth Management — All Change Please                                              


An article contributed to the Autumn edition of Family Office Global magazine

The financial crisis of 2008/2009 has placed a magnifying glass over traditional investment and wealth management. The ‘establishment’, consisting of the world’s most prestigious private banks, has been tested on performance, fees, independence and service; unfortunately a great number of them have been found wanting. These underlying problems were not caused by the recent financial turmoil, however, they became much more obvious because of it.

Clients only start questioning fees and who is managing their money after both performance and service has collapsed. This is exactly what happened during the financial crisis. Since then clients have found themselves confronted by some unpalatable truths: their private banks could not deliver absolute returns, could not deliver personal service but could still mange to charge substantial fees.

Partner or Counterparty?

Banks have traditionally seen people falling into two categories: counterparties and partners. A counterparty is someone they traded against, who usually lost money when they made money, and vice versa. Whereas a partner is someone on their side of the table, who would make or lose money with them. It is now becoming clear to clients that a number of private banks have been acting as counterparties rather than partners.

At the other end of the wealth management spectrum are the Independent Financial Advisors (IFAs). Their clients may also have suffered during the financial crisis, however, in general IFAs have been able to maintain the level of service to their clients. The IFA network is facing massive upheaval from the new Retail Distribution Review (RDR) regulations, which are due to hit the sector in 2012.

For the dispossessed wealthy who are unhappy with how their money has been managed there is no obvious place go. They are stuck in a wealth management gap.

The one true Partner

Only Family Offices can truly justify the claim to be in partnership with their clients. Family Offices were established by wealthy families who realised that they needed a new kind of advisor who could work to preserve their wealth in the long term without conflict and in full alignment with family’s interests and beliefs.

Family Offices are structurally unable to charge hidden fees, nor are they under any incentive to deploy funds should remaining in cash be a better option. Also, anecdotally (as actual figures are hard to come by) they seem to have come through the recent crisis in better shape.

Unfortunately for the dispossessed wealthy the entry ticket for establishing a family office is now estimated to be about US$150m and there are very few family offices who are seeking ‘smaller’ partners in the US$1-US$25m range.

Founding of Clarmond

It was against this backdrop that I founded Clarmond Advisors in early 2010. The mission was simple: never be a counterparty, always be a partner. The client must come first and everything that the company does must be done in the client’s best interest rather than purely as a way of generating fees. This philosophy runs through the my founding principles for the business:

  1. Independence
    We receive a flat fee from clients and rebate any retrocessions directly to the client.

  2. Continuity
    Clarmond has not been set up in order to be sold in ten years time and its employees are committed to stay with the firm.

  3. Service
    We prioritise personal service and clear reporting.

  4. Focus
    Since we are free from sales-related pressures we can focus more on understanding the investment environment.

  5. Security
    The way we separate custody and administration from investment services leads to greater security for the client.

Clarmond offer three distinct services.

1. The ‘Virtual Family Office’

For the dispossessed wealthy with assets of US$1-US$25m Clarmond will provide a ‘Virtual Family Office’.

This unique service has been specifically designed to provide all of the benefits and services usually only available to clients with significantly more assets. These will include custody, administration, tax and trust advice, generational planning, accountancy and investment management.

Should the client wish it then Clarmond can initiate the formal structures of managing family wealth, including periodical family board meetings, portfolios reporting and general reviews.

2. The ‘Firewall’ Service

For clients with substantial assets in excess of $50m whose portfolios may be run by a number of financial institutions, we can provide a ‘firewall’ between the client and their various managers and advisors. This service will enable clients to have a clearer picture of their position whilst being shielded from ‘unwanted traffic’.

We also help clients to rationalise their portfolio, optimise service providers and even search and select new investment managers, all without any obligation.

3. The IFA Service

Clarmond is currently working with a number of IFAs as they strive to continue to serve their clients in the face of the coming RDR regulations. For those IFAs who may be seeking to move their clients before the 2012 deadline, Clarmond provides a suitable home. We have a rigorous investment and monitoring process and should be able to provide the IFAs with comfort that their clients will be looked after professionally and with a similarly high level of service. 

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