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Private bank or fintech? Five key tips for managing your family’s wealth
Hopes of a world that looks like Back to the Future have faded – the lavish enthusiasm for flying cars and futuristic devices is gone. Instead, today’s modern families, and the next generation, are reshaping the world with complex international family structures, advanced financial education, demanding customisation needs, and greater expectations when it comes to responsible investment.
There are many economic challenges ahead – for modern families, sophisticated wealth management solutions are becoming ever more important. Indeed, many solutions are already available on the market to help families structure themselves efficiently, and to help them meet their investment objectives. Technology allows the creation of “family office”-like structures, which enable families to benefit from financial tools and gain access to data more easily than ever before.
How to choose the right partner?
When choosing a provider, families must conduct thorough research and consider five key elements of their wealth management needs:
1. Level of control and sophistication
This is the first point to consider when a family decides to internalise their investment management process. Does the platform need to offer a brokerage service or to route orders to their brokers of choice? Or is the family purely looking for a consolidation and reporting solution? Is the portfolio management process delegated? The more the family wants to be in active control, the more time they will need to invest in comprehensively defining their needs.
2. Security and confidentiality
While confidentiality and data security are important for all wealthy families, some might be especially demanding on this essential aspect of wealth management. Hence the architecture and DRP (Disaster Recovery Plan) of the provider must be thoroughly analysed, as should the employee awareness and the company culture towards confidentiality and data protection. International assurance standards, for instance ISAE-3402 and ISAE-3000 reports, have emerged over the last decade, providing a very good insight into a company’s internal controls, security and data protection. Some platforms host their data on public clouds. Others set up their own private clouds in data centres, or host their servers on their own premises – this is the case for most banks.
3. Wealth composition
The chosen platform must be able to integrate seamlessly with those banks that the family uses as custodians, and be geared to handle specific asset classes, such as real estate, private equity or collectibles, where they represent a reasonable weight in their asset allocation.
Read also: Why integrate private equity in your investments?
4. Geographical proximity
Family members are often spread across different countries. Local offices may facilitate the training and support of any family member involved in the wealth management process, whether on a daily or ad hoc basis.
5. Specific needs and areas of interests
If sustainable investing is of importance to the family, they will require a platform that smoothly integrates sustainable finance metrics and reports.
Does the family want to benefit from other asset services that could integrate into the platform? Centralising services with one institution (banking services and wealth consolidation) may help reduce the number of intermediaries, decrease the overall costs, and ease the client experience.
Choosing the right partner is crucial for modern families, to ensure that family wealth is well-protected and that growth is sustainable. Banks usually have extensive resources and networks to provide a wider range of services and solutions. They are also experienced in handling financial transactions and managing customer data, providing security and reliability. Fintech companies, on the other hand, tend to offer technological breakthroughs. The perfect wealth management solution provider should combine the best of both worlds. A true Swiss Army Knife.
Important information
This document is issued by Bank Lombard Odier & Co Ltd or an entity of the Group (hereinafter “Lombard Odier”). It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it aimed at any person or entity to whom it would be unlawful to address such a document. This document was not prepared by the Financial Research Department of Lombard Odier.
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