When it comes to wealthy Asians, the role of private banks is inevitable. But according to Chief Investment Officer (CIO) Karim Mrani-Alaoui at IBBM, a single-family office based in Singapore, Asian families should not focus entirely on private banks when it comes to managing their wealth. Instead, they should focus on independent and competent entities, for which the family pays exclusively, to avoid any conflict of interest.
Mrani-Alaoui said, “Private banks can take on many roles, primarily that of a custodian, but also product distributor, portfolio manager, trust company, etcetera. One has to be diligent in ensuring whether, for each of these services, the interests of the bank are fully aligned with the interest of the clients. Raising this point is partly answering the question.”
Mrani-Alaoui also stated that it is mainly an issue of governance. If there is no proper alignment between the clients’ interests and those of the bank’s, then clients bear two kinds of costs. First, the clients’ money may be invested in overpriced assets with back-end commissions and hidden fees. Second, banks are likely to push for investments suiting their needs instead of those of the investors. This could result in investment portfolios that consist of several unwanted risks including volatile stocks, products with complex structures and junk bonds.
NQ International Founder, Noor Quek, said that family offices should understand techniques of using private banks in meeting their specific needs. She also remarked that Asia’s wealthy families need independent advice on issues such as generational wealth transfer, the global economic state and private bankers’ movement amidst consolidation in the industry.NQ International is a family office advisory company based in Singapore. Quek said, “There’s a lot of confusion going on that wealthy families have to grapple with.”
Furthermore, the April 2015 Asia Family Enterprise Study report, released by J.P. Morgan Private Bank, shows that about 88% of Asian families were somewhat, if at all, prepared for the transitioning of family businesses or wealth.