Back to basics in investments

The Straits Times
Nov 6, 2008 | 6:46 PM
Back to basics
Investors now want simpler and easier to understand financial products
By Gabriel Chen

The days of product pushing and convoluted investment strategies for the very wealthy are over for now.

Many private banking customers, sitting on wads of cash amid the financial turmoil, are looking for simpler and easier to understand financial products.

Security of principal and diversity of investments are foremost on the minds of ultra-high net worth families.

Those were key themes driven home by speakers addressing more than 100 private banking professionals at the annual Private Banker International wealth management summit held at the St Regis Hotel on Thursday.

If private banks want to excel in a climate in which advice is received warily at best, they must ensure that any advice they give to their clients is fair, objective and in the clients' best interests.

Mr Renato de Guzman, ING Asia Private Bank's chief executive for the Asia-Pacific, summed up the mood when he said that it is 'back to basics'.

Clients do not want hard-to-comprehend instruments to grow their wealth, while they are also minimising the use of debt in their investments - at least for now, said the Filipino, who is a Singaporean permanent resident.

One reason, understandly, is fear as the market turmoil has whipsawed their investment portfolios.

'What dominates investment is either fear or greed. And right now, it's fear,' another speaker, Northern Trust's senior vice president Kathleen Dugan explained.

'We hear from our clients who ask us: 'Is our money safe?' Clients have also asked us on many occasions to explain the strength of our balance sheet.'

In this climate, it is time for professional financial advisers to prove their worth, added global head of Standard Chartered Private Bank Peter Flavel.

Mr Flavel, speaking on the sidelines, said the wealth management industry needs to understand what clients need but clients also need to understand what they are purchasing.

Earlier, in the keynote address, Monetary Authority of Singapore executive director, Mr Ng Nam Sin, said that it was easy for financial institutions to keep clients happy in a bull market when investment returns were high. But in a bear market, this becomes challenging.

'It is crucial clients' needs are well understood and comes first, be it their risk appetite and liquidity preferences.'