How Asset Manager and clients get successful together in Wealth Management

As long as the chosen trading strategy runs well and profits flow in there is not much to discuss from the client with the asset manager. Making profits it is what you hire an asset manager for and you might not even be interested in what your asset manager is doing as long as the profit flows in and everything runs well.

But long term asset and wealth manager know that it is not that easy. Your client might not have listen to your strategy and not have read the risk disclosure because the client takes linear profit development for granted; and it is even the right of the client to take a linear profit for granted.

What is the number one rule to gain success; win the trust of your investor!

You can plan and plan for days, work hard on your strategy and do your preps for presentations but nothing will work till your client actually trusts you.

What can an asset manager do to win the investors trust?

There are plenty of things that you can start with when it comes to wining your investors trust.

The key to winning trust: Communication:

Most of the time, the reason behind everyone’s failure is lack of understanding the importance of communication. If you fail to communicate in an effective way with your investor, your strategy is not going to work no matter how good it is.

There is a huge number of wining funds that look poor if viewed using a prism of the actual dollar. People end up underperforming their investments. The loophole is referred as Behavior Gap and is rest of lack of communication by the asset manager.

1.Convince your client!

Asset managers, most of the time tries to get the investor involved in some investment strategies without giving them enough information which is important to convince them. This is the reason, most of the strategies either goes out of the favor or simply doesn’t work for the investor. Providing all the necessary information is what forms the convincing wall around the investor which makes it hard for him to look past it.

2.Research:

Doing proper research on the strategy you are about to pitch in is a way of telling your investor that you have done your homework and you know what are you going in for. Most of the times, asset managers get sloppy with time and they think since they have old working relation with their client, there is no need to do research. This is an absolutely wrong thinking which can end up you losing trust of your investor. Moreover, there is no better way of convincing your investor than letting him know you have researched well.

3.Be subtle:

Doing good research and being well prepared do not mean that you have to give away every inch of information you have. Most of the time giving away too much information at once can overwhelm your client which isn’t the best feeling to have. They might not be able to handle bundle of information at once and instead of convincing them you will end up confusing them which is not a way to win their trust.

4.Insurance Subsidiaries:

You must have heard most of the famous hedge fund managers launching insurance subsidiaries. Did you ever wonder why do they do that? Well the answer is permanent capital along with access to positive and constant inflows.

Most of fund manager suspects Warren Buffet’s ability to be wrong and not able to face market swings, with no redemptions and they drool over the prospect of the capital base. In post-crisis environment, it is unpalatable enforcing lockups or gating redemptions.

In float by Berkshire Hathaway, reinsurance premiums and inbound insurance that provides investment capital base of firm. This means that Buffet didn’t explain himself clearly to the investors who freak out by the short-term performances. According to Buffet’s understanding, there might be no gains at all for someone investing with the goal of limiting the drawdown’s. However, most of the investors or fund managers are unable to face these storms since they are answerable to their clients.

In 1998’s summer, there was a very short but sharp market that result in bringing down S&P 500 by 25%. The personal holdings of Berkshire Hathaway were declined by $6.2 billion from mid July to end of the August. However, the main question is, how much exactly did he end up losing? Well the answer is not even a single penny!

There were no calls from investors asking him to give their money back or blaming him for everything since he was not the one running funds or managing any account. There were plenty of shareholders but not even a single client. As the market recover, so did stock of Berkshire, Buffet didn’t sell single share. Moreover, he wasn’t a fool to jeopardize the future returns while there was chaos going on.

It is a truth that most of the asset managers are not in similar position like Buffet. They have to answer to allocators, consultants, board trustee, pension administrations, retail investors and family officers. It is one of the wisest things to prepare for this situation ahead of time. Investors that you are investing for are never complete insulate from the drawdown’s.

In case you are unable to fully insulate your client from risks of the drawdowns, the best thing to do in this situation is to be as clearer as you can be about the potential for underperformance. A clarification before allocating any money regarding what type of market environment will lead them to good or bad outcomes that a goes a long way. Educating your client by providing them with every single detail is not an optional thing; it should be a must thing to do. Asset managers can end up being lazing about updating their clients especially when the outcomes are good, however at the end of the day you will be answerable to your client for every good and bad thing that happens. It is very difficult to understand the mental toughness that an asset manager has to go through during the time when his strategy doesn’t work the way he plans it to.

It is a truth that most of the asset managers are not in similar position like Buffet. They have to answer to allocators, consultants, board trustee, pension administrations, retail investors and family officers. It is one of the wisest things to prepare for this situation ahead of time. Investors that you are investing for are never complete insulate from the drawdown’s.

It is a truth that most of the asset managers are not in similar position like Buffet. They have to answer to allocators, consultants, board trustee, pension administrations, retail investors and family officers. It is one of the wisest things to prepare for this situation ahead of time. Investors that you are investing for are never complete insulate from the drawdown’s.

Make sure your voice is heard and you make final verdict!

No matter how much you think you have won over your client, it is important to make sure that your voice is heard. Do not take your input lightly especially if there are more than one asset manager involved. It is important for you to make sure that you have a say in the final verdict else there are plenty of chances that your client might lose his interest in whatever you do or say.

Anyhow, a goodswiss asset manager should always voluntarily follow the Code of Professional Conduct. This code specifically refers to the importance to get to know the client and fully understand his needs and his points of view. Furthermore, it referrs to the mandatory character of fluent and swift client-manager communication. The code of conduct was developed by the PolyReg General Self-Regulatory Organisation. You can read the document here on our page or using the following link:PolyAsset Internet.

Our ProvenExpert Score speaks for itself. You can trust us. Need we say more?

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