News

Press release – how the richest people in the world are advised to spend their money and invest

The Citywealthmag.com survey © Karen Jones, Citywealth

300 wealth managers and intermediaries from out database were sent an email survey and asked some questions as a story idea for Citywealthmag.com weekly newsletter. The survey is too small to use as a representative study: thirty replies (1%) but they came from those at the top of the wealth management and private client profession and from Switzerland, UK mainland, France, USA, Isle of Man and the Channel Islands. In our view it will be more an interesting conversation piece for the industry to have a look at and can lead to more in depth studies in future. Most respondents came from the Channel Islands, UK and USA. We had banks of top four calibre and global leading private client intermediaries respond.

Client size. The smallest client on wealth managers and professional adviser books was £100 million with the biggest rising to $65billion. The majority of clients were in the £1-20billion range but on the offshore islands IOM scored the highest with an £800million client. The upper end multi billionaire clients were Middle Eastern. One London investment manager said “our client is a family office of substantial wealth but we do not wish to reveal its size.”

Lifestyle purchases for clients and themselves

Of the top auction houses we asked, who do you favour Christies or Bonhams? Christies were the outright leader by a long margin. Although one US attorney commented “they are better for higher priced items.” Suggesting Bonhams would be chosen for lesser priced items.

We then focused on cars and said would you or your client choose a Bentley or a Rolls Royce? Bentley got double the votes of Rolls Royce. Although the intermediaries who voted for Rolls Royce did so with more passion. The UK voted for Rolls Royce more than other country. One USA ( Los Angeles) banker commented “Bentley is less flashy”. Although Aston Martin wasn’t offered as an option, Aston Martin was suggested readily as the car of choice by many.

Of London hotels we asked: Claridges or the Dorchester? Claridges won hands down. Although one British lawyer/attorney said “We know both the owners so I would have to put a vote in for both.”

Next we asked modern or classical art? Although these categories were more or less neck and neck. The classical art just won the day by one respondent.

Will wealth managers and advisers be space tourists? The answer was a resounding “no” but one London lawyer did comment “maybe if the prices come down.”

Airlines favoured: British Airways won by a long margin with Singapore Airlines second. American Airlines came tops for Americans. One Swiss trust professional swore by Easyjet and another EVA Air. “ Eva Air is a privately owned Taiwanese airline which combines air freight with high quality private passenger accommodation at very reasonable prices.”

Credit cards: American Express won with comments about whether it should be plain or black.

Visa was next, then Mastercard. The Channel Islands favour visa.

Financial decisions

Of jurisdictions favoured, there were differences in custody to asset protection but we asked simply “which top three do you put the most client money in?” Those who voted for their home jurisdiction had that ‘goal’ removed from the final figures. Cayman won as the jurisdiction of choice, whatever county intermediaries or bankers were in. Although one UK lawyer commented - who was an exception to the general rule - “we always buy British and only use Jersey and Guernsey.” USA and the Channel Islands favoured Cayman particularly. Switzerland, Guernsey and Jersey were in the next tier of favoured jurisdictions whatever the country the professionals were in. The UK favours Switzerland, Guernsey and Jersey. Both the Brits and Americans favour the Channel Islands. Bahamas, Bermuda, BVI were next. Bahamas was favoured by the Americans more. Liechtenstein was favoured as a bubbling up jurisdiction because of law changes.

Following this were New Zealand, Singapore, IOM and Delaware. One strange surprise was the IOM was favoured by the American market. Apparently because their Statute of Elizabeth which sits well with them for asset protection.

Unusual jurisdictions mentioned were: Malta and Zug. One Jersey Managing Director commented “ Malta is overlooked, but it is both offshore and yet it is part of the EU, so it is able to have Funds registered that can be sold in the EU. Malta N M Rothschilds had all their Unit Trusts in Malta before buyout and consequent move to Luxembourg.” A London consultant commented: “ Zug is reported to be the richest place in Switzerland and is famous for low taxes. It is said to be the preferred home of mega billionaires involved with commodities such as Marc Rich an oil trader.”

On this topic oneUSA advisor commented “We use Cook Islands and Nevis for asset protection trusts. Switzerland for custody. USA”

As hedge funds and private equity are the talk of the moment I asked respondents what their views were and which they favoured. Private equity won with a margin but hedge funds weren’t far behind. Some respondents were not convinced by either. Others felt both were important in a balanced portfolio.

Additional survey question

Question? When choosing hedge funds and private equity: have you a view on both or either? Can you let me know how you advise uhnw clients to proceed with regard to these areas of investment?

“What is the difference from a hedge fund with average performance and an index tracker ?  Answer, one charges a small fee.” Managing Director, Jersey

“Hedge funds are now pretty much an integral part of the investment allocation, the only Q seems to be how much should be allocated.  PE on the other hand is still an ’additional’ asset class that not all investment managers would use or have access to or recommend.” Managing Director, Jersey

“PE is better because it actually creates wealth from the ground up and manages a business cycle of growth. They do not simply play the market and bet each way. They seek returns of 30% IRR per annum and so can in reality deliver great returns especially in Africa.” Consultant, UK

“No recommendations, but both should form part of a good portfolio, so long as they are run by top notch managers - avoid listed PE funds, as these have structural problems, or buy them at a significant discount to listing.” Chairman, Jersey.

“PE potentially very good but I think we probably have better routes into more consistent hedge fund returns.”  Chairman, Jersey

“Limited exposure... usually PE options are client driven...” Partner, Jersey

“I don't like the risk profile of either at the moment, but there are always exceptions to the rule. Managing Director, Switzerland

“I don't usually advise my clients on investments, but I like the liquidity of hedge funds. Partner, USA

“Horses for courses - hedge funds describe a multitude of possibilities of risk and return. They are usually used with equities for a wider strategy, essentially to provide some absolute returns rather than relative returns.” Partner, Isle of Man

“Private equity as I do not believe there are any decent hedge funds left offering value for money and appreciable return. And I am always suspicious of those declared to be "closed" which are then re-opened for a "special" client” Partner, London.

“PE/ Hedge - leave selection to them on discretionary mandates.” Jersey

Additional survey commentary

Africa: Nigeria is where the real money is and all major South African companies are desperate but scared stiff about entering Nigeria, South Africa remains a key location for new entrants to Africa.

One US attorney offered his client nationality split: 60% Latin American 40% UK and Continental European clients.

Additional notes

Laurence Jarvis

Managing Director,
JPC
Main Office: +44 (0) 20 7495 1697
Fax:  +44 (0) 207 760 6371

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