Asian institutional and private clients tend to be particularly price-sensitive, say private bankers, and transparency of what they are being charged for is also very important.
“Fee discussions in Asia are certainly tougher than in other regions of the world, and there is a certain adjustment we may have to do for each market,” confirms Rudolf Hauser, global fiduciary manager of the Pictet Family Office in Geneva. “You have to explain very well the reason for a certain fee arrangement – and that's fair enough.”
Of course, good performance from a professionally managed portfolio “doesn't come for free”, Hauser told AsianInvestor during a trip to Asia. He is confident the firm can charge a market fee for an outsourced chief investment officer setup, which is core part of what he advises clients on on behalf of Swiss private bank Pictet.
And he cautions against taking an “isolated view” on fees. “[Cost] is not the only thing [clients] should focus on. What counts is the net performance after fees.
“If you have an isolated view of fees, you may negotiate and get great price on mandates or custody,” notes Hauser, but you may well end up with a lot of hidden costs as a result of structured products or heavy trading."
So what are the key questions Asian families ask about the fiduciary model? Hauser says the discussion starts around the situation the family is in, and focuses on whether they need a family office in the first place, and if so, what kind of FO.
It could then develop into how Pictet can support them in running the office, assuming they want to take an institutional approach in line with professional investors such as endowment funds.
Asked what might be a typical breakdown of Asian client portfolios by asset class, Hauser says it depends on what stage they are at in terms of their family business or whether they are moving towards a more financially focused office.
If the family is still fully involved in its operating business and has high returns coming from that, the liquid portfolio part of the assets should be relatively conservative and focused on wealth preservation.
If, however, the family has become more focused on its financial assets, they can look for higher returns and should be able to take more volatility and a longer-term time horizon. In such cases, a typical portfolio might comprise one-third equities, one-third fixed income and one-third alternative investments.
Family offices often want relationships with private banks with access to an investment bank within the same group. How does Pictet respond to FOs with such preferences?
Hauser concedes that some families want a full-service global bank. But “the tricky thing about that is the potential conflict of interest,” he says. “Those that work with us know we're focused on asset and wealth management and asset administration, and nothing else. We don’t have an IB arm creating products we are pushing to clients.”