So Much Wealth Management Choice, So Little Time – Crossinvest CEO

The CEO of an independent wealth manager in Asia – an expanding sector – gives his thoughts on the local market and the forces at work.

The following item, initially published by WEALTH, a network organisation and provider of commentary and interviews, features commentary from Rohit Bhuta, chief executive of Crossinvest, an independent wealth manager based in Singapore. Crossinvest is the kind of IWM which was the subject of a recent major report by this news organisation in conjunction with UBS.

The article is republished here with the author’s permission.

Are we spoilt for choice for wealth advisors in Asia?
At first glance, it appears that we are. Unfortunately though, while we are spoilt for choice, good quality advice is few and far between. This seeming abundance can be very confusing for someone trying to find the most appropriate private wealth advisor. We are inundated with buzzwords like wealth management, private banking, private wealth advice, financial planning and similar, words all used rather loosely.

In fact, we can generally divide the wealth advisory industry into two core categories. Execution and transaction only businesses: these are private wealth “advisory” businesses that “sell” investment products (sometimes their own investment products) to their clients. The wealth advisor under this scenario is typically evaluated on the total revenue or investment product sales he or she generates for the organisation. Under this scenario, the wealth advisor is working for the organisation.

Advisory-led businesses: these are independent businesses that offer you a tailor-made, independent, best of breed portfolio-based investment solution over a time horizon to best suit your investment objectives and risk appetite. The wealth advisor from such firms will not have a revenue or product target, and is primarily working for you (the client). Most IWMs, like Crossinvest, for example, are advisory-led businesses.

So how should you choose?
Each category caters to a different investor need, and it is important to understand which proposition would serve your underlying investment objectives best before you embark on selecting the wealth advisor that you are comfortable with.

The decision, however, must not be based on whether you have to pay an advisory fee. In the end, irrespective of which proposition you choose, you will be paying a fee. The only difference is that you know how much in fees you are paying under the advisory-led model. The fees that you pay in the transaction-led model are usually wrapped within the transaction charges, and/or a higher fee is charged at the product entry level, by the product manufacturer, in order to pay the advisor a commission for the sale.

Catering to changing needs
There is a clear and present need for both models as each caters to different preferences. For example, if you are satisfied with being sold investment products from time to time, and trade on ideas generated each day, or if you are satisfied with being sold the merits of leverage or investing in insurance-linked products, and have multiple advisors providing you access to investment ideas, then the execution and transaction only model would suit best. The fees you pay (and therefore the corresponding revenue for the wealth advisor) depends on the number of investment transactions you execute.

On the other hand, if you prefer an advisory relationship, where your independent advisor understands your investment objectives, risk appetite and has a complete line of sight of your underlying wealth (allowing the advisor to design, manage and monitor a diversified investment portfolio), then the advisory-led model is the most appropriate fit. There is typically an advisory fee attached to this service (similar to what you would likely pay your accountant or tax advisor). The level of fee is linked to the total assets being managed by the advisor.

Currently, there is an increasing number of clients in Asia who are recognising the need for robust, holistic and independent investment advice. Asian investors are now more likely than ever to seek out an independent wealth manager, like Crossinvest, to cater to their investment requirements.

The impact
If you are looking for a wealth advisor, you need to clearly understand your investment needs first. Only then can you ask the right questions when reviewing your options, in order to find out which wealth advisor can offer you the best value preposition. Whether you are paying an advisory or transaction fee should not be a factor in your decision-making process. In the end, you will have to pay fees anyway.