This is the second half of a feature setting out the case of a wealth management client who was able to push for constant improvements in performance.

“Client A” may be relatively new to wealth management, yet his investment managers are getting anything but an easy ride. Here, in the second section of a two-part feature, he tells WealthBriefing how he constantly pushes for better performance – and why. (To see the first half of this feature, click here.)

Client A has worked extensively with his institution to arrive at a reporting model which delivers the required level of detail and explanatory content to convince him that his managers aren’t getting complacent.

As he is quick to point out, however, his wealth manager has bent over backwards to accommodate his requirements: it has created real granularity over costs by adding line items such as pro-rated custody fees for non-UK equities over an assumed period (and then again over the actual holding period), along with a similar level of detail on his net to-date and projected gains.

While some clients may happily factor a service premium into what they pay for their wealth management services, Client A is certainly not one of them. As he drily (and quite rightly) notes, great service should be a given when tens of thousands of pounds in fees are changing hands each year.

Instead, he had a clear message for his managers, which was to remind them that for him their sole raison d'être is to create a greater economic return than a passive strategy, net of all costs. In his words: “They need to perform better than an iShare or this is all just a waste of time.”

“I don’t trust them”
For an industry that prides itself on the trusted relationships it holds out to clients, it may well sting to know that the foundation of Client A’s rationale runs starkly against this notion: “I don’t trust them, and other investors shouldn’t either. I know from my professional experience that that’s always the best way to manage people”. Wealth managers are only human, he continued, and as such they want clients who are low-maintenance and happy to pay higher fees.

To his mind, all too often investors put up with lacklustre returns “because unfortunately most clients just aren’t that sensitive to performance and so institutions know they don’t have to worry”.

Client A is undeniably sceptical of the notion that all institutions are doing their utmost for all of their clients, all of the time. Yet he also clearly has faith that the professionals can add significant value at a reasonable cost, just as long as clients continually question whether they are really getting value for money and keep pushing their provider to deliver more.

Of course, the reality is that not all clients will have the weight (in terms of assets) to be quite as demanding as Client A. This is something he readily acknowledges and leads him to reason that some clients should favour being what might be called a big fish in a small pond. “It’s the same with all organisations,” he said. “If you’re big you matter; if you’re small you don’t.” Client A also recognises that relatively few individuals will want to go as far as he has to push for better value and investment performance, since many clients engage a wealth manager precisely to have someone else entirely shoulder the burden of monitoring and managing their portfolio. Indeed, today around 80 per cent of findaWEALTHMANAGER.com’s users are looking for a discretionary relationship.

That said, it is hard to deny that Client A’s approach is working and so his story should give even the most hands-off clients pause for thought. It is now several quarters after the deployment of his funds and his investment manager is performing in line with his high expectations, delivering “very competitive, risk-adjusted returns for an aggressive multi-asset portfolio, at a TER of less than 1.25 per cent annually, inclusive of all costs and fees”. Furthermore, Client A estimates that he has saved a hefty £20,000 ($30,131) a year in fees by taking the trouble to negotiate with a variety of providers.

Those are all figures to conjure with, but they are also the result of some very hard work on both sides of the table. Each individual firm has to decide where to draw the line on customisation when cost-to-serve remains a prime concern. However, it seems clear that many clients are developing a real taste for transparency and pleading costs is likely to cut very little ice with individuals like Client A, who will insist on having the customisation and personal attention that wealth managers’ marketing materials never fail to promise.

This new breed of savvy clients want to be able to see very clearly how much value their wealth manager is adding, and they want the institution itself to facilitate this rather than having to cobble together their own spreadsheets to do so (which is still a surprisingly common necessity).

Wealth managers might not be geared up for ultimate transparency as yet, but this – according to Client A – is emphatically the institution’s problem and shouldn’t stop clients asking difficult questions since it is their money that’s being managed after all. “All I’m really asking for is to be able to make sure I’m getting what I thought I bought in terms of time and attention and performance,” he concluded. It would surely be very difficult for any wealth manager to argue with that.