MyPrivateBanking.com - Cut the Costs of Wealth Management

Independent Advice to Get More out of Your Wealth Manager

Cut the Costs of Wealth Managementby Christian Nolterieke, Managing Director

1. SummaryThe total cost of wealth management is the single biggest lever you as a client can influence to radically boost the performance of your portfolio. If you can cut the cost by only one percentage point a year, a USD 1 million investment will easily return an additional USD 450k after 20 years. There are a lot of ways to cut costs without hurting your performance. However, because of lack of knowledge or inattention, you probably will not fully explore them all. The main reasons are: Cost Drivers and Pricing Models are many, and not transparent. You are often not aware of various indirect costs, easily doubling the direct costs of managing a portfolio. Indirect costs are hidden in many products and transactions, and in most cases you are not informed about them by your wealth manager. This is because he/ she can make a lot of extra profit on your portfolio through kickbacks and in-house products.

You should not pay more than 1% per year of your total assets for wealth management. You can take control over your costs by rather simple measures: Choose a strategy and wealth manager best for your investment type and amount. Push you wealth manager for full transparency, the use of cost-effective products, and full disclosure and payback of all kickbacks and commissions. Opt out of all services provided by your wealth manager that you do not require, or you can get somewhere else at a cheaper rate.

Finally, and most important: Negotiate! There is plenty of room for fee reductions. Educate yourself about the market and communicate precise and determined requirements; and within minutes you can save a lot of money. Please use this guide as a basis to calculate your own costs of wealth management and to determine your levers to cut costs. Due to its wide variance, the research estimates of direct and indirect costs can only be average numbers and ranges. Please ask your wealth manager for the specific details about your portfolio.

www.MyPrivateBanking.com The Wealth Guide Series Page 1


2. Small Numbers Have A Big Impact On Your WealthThe costs that wealth managers show their existing or potential clients have always one thing in common: They look small. All-In-Fees usually range between 0.8% to 1.6% per year, and clients who want to be charged by transaction have to pay fees mostly as part of a thousand per transaction. These are small numbers that seem to be insignificant. But in fact they have a huge impact on your wealth and consequently, your life: Why is this so?

Costs Add Up Enormously Over TimeThe success of wealth management can only be determined in the long run. Apparently small fees can add up immensely over time, and via compounded interests will reduce your returns significantly. The absolute costs grow pro-rata with the increase of the assets. The following table shows how a Total Cost of Wealth Management Rate of 3% p.a. will generate compound costs of about USD 450k after 10 years (Based on an initial investment of USD 1 million with an average return of 7% p.a.):

Figure 1: Costs can add-up enormously over timeExample: Investment amount 1 million USD, 7% performance p.a., 3 % Costs p.a. Year 1 Year 3 Year 5 Year 7 Year 9 Year 10 524k 454k400

USD (in 1`000)

600

328k 218k 122k 38k

Profit200 0

-32k-200

103k

185k

.

-103k -185k

278k 384k 444k

Costs-400 -600

-278kCompound Profit after Costs Compound Costs

-384k -444k

Compound Profis vs. Compound Costs (in USD 1`000)

A yearly growth of your assets by 7% will not only grow the total assets significantly, but also the yearly cost of wealth management. 3% p.a. will eat up almost half of the gross profit. How annual costs can go up to 3% per year even if clients think they pay only 1% for an All-in-fee will be analyzed in Chapter 3.

Costs Take A Lot Of Your Performance AwayWhile costs figures of 2% to 3% look rather small in absolute terms, they are very high in relation to the average yearly performance of 3% to 7% you are most likely to achieve. (Forwww.MyPrivateBanking.com The Wealth Guide Series Page 2


details on the average performance of various asset classes, please check our Guide Making the Right Asset Allocation on www.myprivatebanking.com). The following table shows how much you lose depending on your total costs p.a.:

Investment amount: 1 million USD Performance p.a.: 7% Lost Profit after Total Costs of Wealth Management Total Profit Costs p.a.: before Costs 1% 10 years 15 years 20 years 967k 1.759k 2.870k -148k -269k -439k Costs p.a.: 2% -296k -538k -877k Costs p.a.: 3% -444k -807k -1.316k Costs p.a.: 4% -591k -1.076k -1.755k

Table 1: Lost Profit with different Total Costs of Wealth Management After 20 years, a very common figure of 3 percentage points for the total costs will reduce a gross profit of about USD 2.9 million by a stunning USD 1.3 million (based on an initial investment of USD 1 million and average return of 7% p.a.). If the investor in this example can cut his costs by only 1 percentage point per year, he will gain up to USD 450k after 20 years and unlike the returns promised by the wealth manager, this gain is for sure and can be influenced by the client.

Never forget inflationIt seems obvious, but often wealth managers as well as clients forget to take inflation into account. When assessing the performance and determining the investment strategy to achieve a specific income per year, you should always work with the real performance (Gross profit minus Total Costs of Wealth Management minus inflation). Inflation usually ranges from 2% in mature economies and up to 10% or more in emerging markets. In the 1970s and 80s, inflation had reached double digits even in developed countries. You should always calculate the performance targets by not only taking the total costs of wealth management in account, but also the average inflation you have to expect for the main currency of your portfolio.



3. Costs you can see and costs not shown to youIn many cases, wealth managers have internal performance targets per managed client portfolio, of 2% - 4% p.a. Since the communicated costs to the client are normally significantly lower, it is important to understand the other costs you are paying and how the various cost drivers play together.

Cost Drivers in Wealth ManagementClients have to pay for four major cost drivers in wealth management, directly or indirectly: Management: A wealth manager charges his clients for the pure management of his portfolio, not including cost for third parties. A management fee is charged per year, calculated as a certain percentage of the total assets under management. The majority of wealth managers will charge between 0.8% to 1.2% per year. Banking: Depending on the extent that banking services are used for managing a client portfolio, various costs will occur. Banks usually charge a custodian-fee, based on the total asset volume placed at the bank. However, the main cost driver is the number of transactions, such as buying and selling stocks, bonds, funds, etc. These costs also include fees that will be charged by the bank, but actually go to the government, such as stamp tax. However, banks sometimes introduce fees that sound official, but nonetheless are pocketed by the banks themselves, such as Ticket Fees. Products: For all investments in managed products e.g., mutual funds, hedge funds and structured products, the client has to pay for one-time or on-going costs. He is charged mainly through front-loads (issue surcharges), management-fees and wide spreads between buying and selling price. The number of managed products in the portfolio and the amount of direct and hidden costs for each product drives the total costs of products. Performance: When the clients portfolio performs well, his total assets will grow. If the client has opted for a performance fee to pay his wealth manager (completely or partly), his fee will grow through the increasing returns on his assets. Even if he has chosen not to pay based on performance, but rather an annual management-fee or per transaction, his absolute costs will increase. Through the growth of his assets, the basis for calculating the management-fee as well the average transaction size will grow.



Figure 2: Many Costs Cut your Profit

Gross ProfitManagement-Costs Management-Fees All-In Fees Performance-Fees Finding Fees

Product-Costs Front-Loads Fund-Management-Fees Performance-Fees Commissions & Kickbacks

Banking-Costs Transaction-Fees Custodian-Fees

Structured Products Costs Back-Loads

Ticket-Fees Limit-/Stop-Loss Fees Spreads (Buy/Sell) Comissions & Kickbacks

Pricing models only report the direct costsIf you do not manage your portfolio yourself and instead entrust it to a wealth manager, you will be offered one or more of the following pricing models. Each of them is based on different drivers (number of transactions, performance, total assets under management), but have one factor in common; they only take the direct costs into account: Transaction fees: The central element of this pricing model is the individual billing of every single transaction to the client. Usually he will pay a percentage of the transaction volume every time he buys or sells an asset. Independent of the transaction volume is a ticket fee, which is often charged as a fixed sum every time a transaction occurs. This pricing model is advantageous for clients with a limited and foreseeable number of transactions. They should also be able to keep a close look on their portfolio, to monitor whether unnecessary transactions are executed. Performance fees. Performance-fees are based on the profit the wealth manager generates of your portfolio, and are calculated as a percentage of the overall performance. He will often receive kickbacks on top of the performance-fees. Often a high water mark is introduced, requiring that performance fees will only be charged after losses of preceding years are recovered. The advantage for the client is that he only pays the wealth manager once a positive return over a certain threshold has been reached. The problem is to distinguish between the performance of the wealth manager and the overall development of the markets.



The main risk of a performance-fee model is that the wealth manager takes on too risky investments and potentially violates the long term objectives of the client. Flat-fee: This pricing model offers a flat-fee which either covers all costs for the management of the portfolio or for all transactions or both. Usually, flat-fees are calculated as a yearly percentage of the total investment amount. Pricing models offering a comprehensive flat-fee, covering the management of the portfolio and all costs for custody and transactions, are usually labeled all-infees. Normally not included are ticket-fees and various hidden costs, such as the whole range of product-fees. These all-in-fees can vary significantly, as the wide variance in all-in fees offered by twenty private banks based in Switzerland shows. (For more details please check our study Insufficient Client Focus A Survey of European Private Banks on www.myprivatebanking.com).Figure 3: Flat Fees show wide Variance% of Wealth Managers offering certain flat fee (n=19)

21% 16%

21%

Average 1.25% Flat Fee:

16% 11%.

5%

5%

5%

0.8%

1,0%

1,2%

1,3%

1,4%

1,5%

1,9%

2,0%

All-In Fees p.a. (not negotiated)Source: Survey of European Private Banks, Report by MyPrivateBanking 2009

In practice, the above outlined basic pricing models are in many cases mixed. Banks often offer the above outlined all-in-fee models to cover management and as well transactions costs at a fixed rate. For independent wealth managers, it is s very common to separately report the management fee of the wealth manager himself and the transactions fess of the custodian. While at the first glance this mixed model looks transparent, the client has to be aware that in many cases the wealth manager receives kickbacks from the depository bank and as well as from the product issuers.



Hidden Costs come in many products and transactionsNo matter what pricing model you choose, they have all one thing in common: You only see the direct costs such as transactions costs, flat- or performance-fees. What you do not see, but pay as well, are the hidden fees and costs for the various investment products in your portfolio. These costs are called hidden, because most of the times neither the banks nor the wealth managers communicate them clearly to the client. It is not only products that have hidden costs. On the transaction level, various hidden costs can occur too. The most obvious method to generate additional costs in a transaction-fee model is the execution of unnecessary transactions. But even in an all-in-fee model transactions can cost additional money. For instance, this may happen by calculating buying or selling prices in a manner unfavorable to the client. The various hidden costs can easily add up to 3% of your investment amount p.a. Clients would be far more upset if they had to write a check for them each quarter. The wealth manager can avoid this direct bill by calculating and showing the performance numbers after costs. Following is a summary of the hidden costs generated by the main product groups: Mutual funds: When investing in a mutual fund the client has to pay an annual management fee (deducted from the invested assets), and often also a front-load fee, for buying the fund. Some funds charge an additional performance fee. A first indication about the costs of a fund is given with the Total Expense Ratio (TER) as published in the fund prospect. On average, the TER of a mutual fund is between 1% to 2% a year. The one-time front load surcharge can run up to 5% of the initial investment amount. Hedge funds: Hedge funds have a lot of freedom in investment decisions, and also for calculating their costs. Usually the management fee is between 1.5% to 2.5% per year, significantly higher than for mutual funds. Additionally, hedge funds often charge a performance fee of on average 15% to 20% on the yearly returns as long as the performance is above the highest performance ever achieved in previous years (High Water Mark). Many times the wealth managers offer their clients Funds of hedge funds to diversify their risk. However, for this vehicle the client has to pay additional management fees and performance fees to the manager of the fund of funds. Hereby Funds of hedge funds can cost the client up to 5% and more per year. This is charged on top of all other fees. Structured products: In recent years, structured products have been heavily pushed by their issuers and wealth managers. Firstly, because the issuer can usually combine a direct investment in an asset class with a derivative, and then set the price himself. This makes it very difficult for an outsider to calculate the margin



and easy for the issuer to hide high costs. Secondly, because investors are easily lured by the promise of achieving above average returns at a lower risk than with direct investments. However, research shows that this is not the case overall. Rather, simple structured products still have total costs in the range of 2%-3% per year. These can easily go up to 4% and more annually when some extra features are added to the product. Exchange traded funds (ETFs): ETFs and other index-based funds are mutual funds that are not actively managed and simply reflect a certain index of an asset class one-to-one. ETFs are very cost effective since no active fund manager has to be paid and transactions only occur when the composition of the index changes. Accordingly, the yearly costs are relatively low, ranging from 0.15% to 0.5% per year. It is not only the choice of investment products that adds hidden costs on top of the direct fees you pay. Extra costs can also be generated through the process of portfolio management: Unnecessary transactions: In a pricing model based on transaction-fees, the total cost of wealth management obviously depends on the amount of transactions executed within the clients portfolio. However, not all transactions are required. As long as you are not a trader, a high churn-rate in your portfolio is not only generating transaction fees but in fact can hurt your performance. If your wealth manager is not one of the rare successful stock pickers, you should invest in an ETF rather than investing in many single stocks. High spreads: The price for buying or selling a stock, bond, fund, currency etc. will always differ. The difference mainly depends on how liquid the market is, meaning how many buyers and sellers exist for the asset at a given moment. The difference between the price for buying and selling is called spread, and high spreads will cause extra costs of up to 3% of the transaction volume. Wealth managers can reduce these costs by trading in liquid markets (exchanges with a lot of buying/ selling volume) dealing in liquid products. They can also bundle transactions, such as combining currency exchanges from various clients. In this way, a wealth manager can get a better rate from the bank.



Figure 4: Hidden Costs easily higher than Direct CostsExample: 1 million USD Investment; Balanced Portfolio (Stocks 40% / Bonds 40% / Hedgefunds 10% / Cash 10%) Pricing Model Management-Fee Transaction-Fees Investment (USD) 1.000.000X X

Fees* 0.8% p.a. 1.0% per Trade = =

Total Direct Costs (USD) 8.000 7.500 15.500 USD

750.000 Assumed: 30 Trades of ea 25.000 USD Tradevolume Total Direct Costs of Portfolio

Investment Products Funds (Stocks & Bonds) Structured Products

Investment (USD) 400.000 200.000 100.000 100.000 100.000 100.000X X X X X X

Fees p.a.* 2% 2% 4% 0,3% 0% 0% = = = = = =

Total Hidden Costs (USD) 8.000 4.000 4.000 300 0 0 16.300 USD

+

Hedgefunds ETFs Single Stocks & Bonds Cash

Total Hidden Costs of Portfolio

=

Total Costs of Wealth Management

31.800 USD = 3,2% p.a.

Note: * Average Fees; other hidden costs like spreads and front-loads not included

Kickbacks the way to pay your wealth manager twiceAs a client, you not only pay a substantial direct fee for your wealth management, but also indirectly for various hidden costs of products and services. However, while product issuers and banks charge these costs, they actually do not keep them entirely. They give back a huge chunk to the middlemen and the investors to encourage them to choose their products. These middlemen are usually wealth managers. Consequently, besides their role to advise their clients on investment decisions, they often develop a second, often conflicting role, and source of income: selling bank services and investment products. And for performing these sales functions, wealth managers receive kickbacks and fees from banks and product issuers. Kickbacks by banks: These kickbacks are in particular relevant for independent wealth managers who do not work for a bank. Often, they can choose the bank for their client, and banks are willing to provide incentives to the wealth manager through kickbacks, so that his choice is influenced. As a result, every time the wealth manager buys/ sells stocks, funds, bonds, currencies etc. in the name of the client, not only will the bank gain (from the transaction-fees) but also the wealth manager. The more transactions are performed, the more money the bank makes, and the more kickbacks go to the wealth managers. These are paid in addition to the kickbacks from the custodian fees he usually receives in any case. Overall, these kickbacks to the wealth manager can make up to 50% of what the client pays to the bank. Additionally, for a first time client a wealth manager directs to a bank, he often receives up to 1% of the investment amount as one time Finders fee.



Kickbacks by product issuers: A multitude of financial products are competing for investors. To make sure they find their way into the portfolio of an investor, product issuers depend on the recommendation of wealth managers. They not only have to persuade the client to invest in managed vehicles instead of directly investing in stocks, ETFs, etc., but also to pick the right product for them. These recommendations are worth a lot to the issuers of mutual funds, hedge funds and structured products. Consequently, they pay kickbacks to the wealth manager for recommending their product. Normally, 90% to 100% of the front load goes into pockets of the wealth manager. Additionally, up to 50% of the money a client pays the issuers through management fees, and pricing of funds and structured products, goes back to the wealth manager. As rule of thumb, the more complex a product is, the more money the issuers make with it - and so more kickbacks are paid.

Figure 5: Wealth Managers receive huge KickbacksProduct / ServicesCustodian Fees Transaction Fees Management-Fees Funds Front Load Structured Products ETFs Single Stocks Single Bonds

Avg. Kickback in % from Client Fees40% - 50% 40% - 50% 40% - 50% 90% - 100% 40% - 50% 0% 0% 0%

Source: MyPrivateBanking Expert Interviews

If you are a client of a bank rather than of an independent wealth manager, you might not be affected by these specific kickbacks. However, banks, in their mixed role as client adviser and also product issuer, have various other levers to make extra money from your portfolio. This happens mainly by selling in-house products to the client. By first issuing and managing a mutual fund or structured product, and secondly, by recommending them to their clients, the bank can charge the same investment sum twice: First, through fees for the individual products, and second, as part of the all-in-fee. If clients are not lucky, they pay a third time through missed gains, since most in-house funds perform worse than their benchmark.



Kickbacks costly, not transparent and increasingly illegalThe vast majority of wealth managers receive commissions from banks and funds for recommending their products to the clients. Surprisingly, for a long time, neither clients and media, nor the regulatory bodies, seemed to be offended by this obvious conflict of interest. However, over the course of the last few years, we are seeing an increasing number of clients demanding more transparency from their wealth managers. Laws and courts have stepped in to end the practice of kickbacks, or at least make them transparent to the client: For the 30 member states of the European Economic Area (EEA) the Markets in Financial Instruments Directive (MiFID) provides a harmonized regulatory regime for investment services since 2007. The main objective is an increased transparency of financial markets and a better protection of client interests. Among other rules, wealth managers are now required to disclose to the clients all the kickbacks that they receive from third parties. The financial authorities of all member states had to incorporate MiFID in their rules and regulations. In Germany, the largest member of the EEA, the Federal High Court decided already in 2006 that wealth managers have to disclose all kickbacks and also inform their clients about the amount. Current cases take the regulation even further. Higher Regional Courts have decided that a client does not only have the right to get the kickbacks back, but also to get compensated for losses. The reasoning was that the client would not have chosen the wealth manager if he had known that there was a conflict of interests. Therefore, the court has shifted the burden of proof whether the client knew about any kickbacks on to the bank. In Switzerland, arguably the global center of wealth management, the High Court decided, in 2006, that kickbacks belong to the clients. They can require a full disclosure and also return of all kickbacks the wealth manager received from third parties for managing their portfolio for the last ten years of their client relationship. In the USA the financial regulator SEC recommended in 2004 that brokers be required to disclose all commissions they receive, as well as fees their clients can expect to pay for a mutual fund. This was a reaction after the SEC found out that 14 out of 15 examined brokers got secret kickbacks from certain mutual funds for pointing clients to their funds. The proposed rules would also require the wealth manager to provide clearer disclosures on their fees and expenses and on any conflicts of interest before an investor purchased shares in a fund. Since then various brokerages have been paid millions in fines for receiving mutual funds kickbacks. There is an ongoing criminal probe of kickbacks that companies allegedly paid to manage the Ney York State pension fund. Nevertheless, while the legal enforcement against kickbacks shows promising first steps, most of the wealth managers still dont feel the need (or are forced) to disclose their kickbacks. One reason is the lack of awareness and also neglect on the client side - not asking for disclosures or even signing often legally worthless clauses that they give up their right for disclosure. Secondly, the legal changes take a long time to go through the court system. Many times, wealth adviser threatened by legal actions from their clients settle out of court instead of facing public trial.



4. How much you should payThe amount you should pay for your wealth management is determined by your ability to analyze the various cost factors and your willingness to pressurize your wealth manager. Research shows that your total costs of wealth management in most cases should not exceed 1% of your total assets per year. It is time well spent to understand each cost driver, because you find out what levers you have and how you can cut costs without hurting performance. This self-training is even more important since the market is not very transparent. Without a deeper knowledge of the different pricing models as well as hidden costs, it will be very difficult for you to compare offers and select the best one for your needs. For the overall rules on how to choose your wealth manager, please see our Guide Selecting the Right Wealth Manager on www.MyPrivateBanking.com. To optimize your total costs of wealth management, you should follow six major steps no matter whether you are a first time investor with your wealth manager, or already have a wealth manager and want to check and renegotiate the fees.

Step 1: Choose the right strategySuccessful wealth management requires a long term perspective both with regard to returns and costs. Consequently every client should carefully analyze his needs, restraints and abilities in respect to wealth management to choose an investment strategy best for him and his wealth. However, while individual strategies might differ, a few essential points should be part of every strategy: see yourself as an investor and not trader; avoid a high turnover; do not try to time the market and only buy products you fully understand. Please see our Guide Making the Right Asset Allocation on www.MyPrivateBanking.com for the basic rules of a successful investor and to do a comprehensive Self-Assessment.

Step 2: Choose a wealth management best for your investment typeAfter determining your type of investor and right strategy, choose the type of wealth management best for you and consequently, for your costs. Option 1: Do it yourself and safe costs: If you feel you know what you are doing and want to manage your portfolio completely yourself, a simple account with a good online broker will be sufficient. This will be the most cost effective way to manage your wealth. Option 2: Take advice and control costs: If you feel competent, but still would like to take advice and suggestions, the advisory mandate could work best for you. You can check if you like the products and control the turnover in your portfolio. After



a certain number of transactions, it might be advantageous to move from a transaction-based to flat-fee model. Option 3: Outsource and watch your hidden costs: All-in-fee models most likely fit best the inexperienced investor who would like to entirely outsource his wealth management. However, while the all-in-fee protects you from the unforeseeable costs of high turnovers, a full outsourcing of your wealth management opens the door for products with high hidden costs.

Step 3: Choose a price-competitive wealth managerOnce you decide on your investment strategy and preferred form of wealth management, do your research to get to a list of wealth managers you would like to meet. Talk to each of them, ask for a proposal and determine a short list. There is no empirical evidence that a higher fee of a wealth manager goes with a higher performance. Nonetheless, not only the costs, but also the competency of the wealth manager has to be taken into account.

Step 4: Gain transparency and choose cost-effective productsYou can only determine your total cost of wealth management once you know all the cost drivers. Most wealth managers are not very keen to disclose the hidden costs upfront, and have them put in small-print (or not mentioned at all). From wealth managers, demand a full disclosure of all kickbacks received from third parties. From banks, demand the disclosure of the total costs of in-house products. Understand if and how much they profit from high turnovers and the use of certain products. If the wealth manager aims for a long term clientrelation and a win-win-situation, he will tell you. Once you have collected all the information, decide what products and strategies your wealth manager should and shouldnt not use.

Step 5: Take out extra services you do not requireMany times wealth managers offer a wide range of services beyond the pure management of your assets. These can be legal advice, tax consulting, financial planning and fiduciary services. Of course, you have to pay for it, either on a per-use basis or as part of an All-infee. Check carefully which services you really need from your wealth manager. For the services you require, check if a third party might be better equipped and more cost effective than the wealth manager. Take out the services you do not need and consequently, ask for a reduction of fees.

Step 6: Negotiate, negotiate, negotiate!While the majority of the wealth management clients will negotiate when buying a new car, only the minority negotiate with their wealth manager in spite of the far higher savings that can be achieved by reducing the costs of wealth management. Analysis shows that less



than one-third of clients negotiate. While, in fact, they can negotiate down the stated fees by 10% to 20% without any difficulties.

Figure 6: Big Potential for NegotiationsInvestment Amount (USD) Average decrease in % from stated fees Little or no difficulty obtaining fee reductions

$1m to $5m $5m to $10m $10m + TOTAL

11.2% 21.4% 31.1% 20.9%

91.2% 100% 100% 96.7%

n = 263 affluent US-Investors in 2007 Source: Prince & Associates

Fees of wealth managers leave enough room for win-win-situations even after cutting the fees. However, the success of the negotiation depends on three main factors: Be informed: Ask for offers from various wealth managers, and if possible, talk to other clients of wealth managers to get a feel for the market, and to be able to argue with data. Understand the differences in fees, check if they are caused by different levels of hidden costs, and know if and what kickbacks the wealth manager receives. Be precise: Wealth management is complex and has a variety of cost drivers. Be clear on the cost drivers you want to reduce, to avoid paying a decrease in direct fees through higher hidden costs. Be precise on the percentages of the fees you are willing to pay and communicate them clearly. Be determined: As in every negotiation, the success is determined by your willingness to walk away. Based on your research and desire to work with this specific wealth manager, determine the fee structure you favor and the maximum you are willing to pay. Then stick to your bottom line. After all, wealth management is a buyers market.



5. Appendix:Catalog of questions to your wealth manager on fees and costs: o o o What is included and not included in fee of the wealth manager? To the adviser, directly: How is your personal remuneration determined? How high are the custodian and transaction fees charged by the custodian bank? o o o o o o o o How many transactions do you expect per year? How high are the total costs of the chosen/ recommended products? Are there any other hidden costs? Will kickbacks from banks be reimbursed to the client? Will kickbacks from products issuer be reimbursed to the client? Will all costs and fees be displayed separately? How is the performance of my portfolio calculated? How much do I have to pay for extra services, e.g., tax statements, legal advice? o o What levers do I have to reduce the costs? Will you take on costs for the transfer of my asset portfolio that my current wealth manager might charge? o What is your best offer?


Independent Advice to Get More out of Your Wealth ManagerNot Investment Advice The content in this report is provided by MyPrivateBanking GmbH of Switzerland for your personal information only, and is not intended for investment purposes. Content in this report is not appropriate for the purposes of making a decision to carry out a transaction or trade. Nor does it provide any form of advice (investment, tax, legal) amounting to investment advice, or make any recommendations regarding particular financial instruments, investments or products. This report is not an offer to sell or solicitation of an offer to buy any security in any jurisdiction. It does not constitute a general or personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual investors.

Disclaimers There are no warranties, expressed or implied, as to the accuracy, completeness, or results obtained from any information set forth in this report. MyPrivateBanking GmbH will not be liable to you or anyone else for any loss or injury resulting directly or indirectly from the use of the information contained in this report, caused in whole or in part by its negligence in compiling, interpreting, reporting or delivering the content in this report. MyPrivateBanking GmbH 2009. All rights reserved.MyPrivateBanking GmbH Weinbergstrasse 9 CH-8280 Kreuzlingen Switzerland

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MyPrivateBanking.com - Cut the Costs of Wealth Management