Investment industry practitioners gathered in Geneva recently to discuss some of the finer details of managing investments, explaining performance to clients, and finding sources of return in often challenging conditions.

Wealth management industry professionals from Switzerland recently argued about how clients's vaunted hunger for information about investments can be met by technology and other routes without making the error of blinding investors with too much data.

At a Breakfast Briefing in Geneva organised by this news service, the theme of the event was Eradicating Inefficiencies, Minimising Risks: Optimising Portfolio Construction and Management in a Fast-Moving World. The briefing was sponsored by SS&C Advent.

Speakers at the panel were Alain Forclaz, client portfolio manager, multi-asset group, at Lombard Odier Investment Managers; Luc Filip, head of wealth management investments at Banque SYZ; Nicholas Hochstadter, founder, IBO; Paul Bebber, regional sales manager, Switzerland, at SS&C Advent, and Xavier Ricbour, managing director, head of sales management, HSBC Private Bank. Your correspondent chaired the panel. 

"The industry needs to get a clear understanding of why it reports to clients because there is a tendency to churn out more and more detailed reports, a process that costs time and money, but there is evidence clients aren't using this information," Hochstadter said. Reporting nees to be "concise and clear," he said. "If you have a lot of information from a bank a client might worry that it might have something to hide," he said, suggesting a surfeit of data can make clients confused, even suspicious. The big challenge is to really understand what is your position as a bank and to understand why you are reporting. It comes down to trust - that's it," Hochstadter said.

Bebber said that as far as reporting is concerned, if a client and banker isn't seeing the "whole picture" around investments then wealth is not being protected. In the past, the approach would focus on tax incentives and liabilities - this has changed, he said. 

Filip, asked about the vexed question of knowing what is meant by "suitability" in judging investments and performance against objectives, said that among tests were those of looking at the experience that a client might have and the number of transactions that client is involved in. "For the market, there is no clear benchmark [of suitability and client sophistication].....you need to understand risk tolerances and the profile of clients," he said.

Ricbour addressed a question about the current focus on compliance around managing investments and advising clients. "To be compliant with cross-border regulation at the product and country level today is very difficult if it has to be put in place manually," he said, continuing that such matters proved the need for technology tools so that wealth managers can keep on top of the situation. There are different national rules affecting what sort of advice can be given to clients and clients do not always call from their country of residence - this makes for a complex landscape, he said. 

Forclaz was asked about the macro-economic situation and the concerns that, after more than three decades of a bond market rally, such a period might be under threat with a return to some kind of interest rate "normality" and amid continuing worries about levels of public debt in the West, and even further afield. A problem is that, at present, central banks own about 30 per cent of outstanding debt, and they are not behaving as "rational investors" in the way of a conventional asset manager, he said, which, together with the reduced capacity of market makers to maintain inventories, contributed to damaging the liquidity conditions in fixed income markets. In such an environment, yield-seeking portfolio allocations needed to focus on building quality portfolios that trade less, for example in the so-called crossover corporate bonds sector, he said. Real estate and infrastructure debt were also useful sources of yield this environment, he said. In terms of providing liquidity, Forclaz said the traditional use of government bonds for this purpose needed to be re-examined and that other instruments, such as multi-asset strategies, may be better suited for this outcome, in his view.

What happens in a country such as Switzerland where interest rates are negative? Forclaz was asked. "They come to us and ask: 'What we can do about it?'," he said, continuing that there is wider investor acceptance that they need to "widen their net" to obtain the benefits of bond investing in such an environment

Back on the subject of getting information to clients, Hochstadter said that with many clients, such as the smaller ones, they think - wrongly - that they have no rights to demand data about investment and related matters. "I have to say that bringing information to clients is becoming a commodity. Transparency should be for everyone," he said. Clients are not interested in the regulations affecting wealth managers - they want to see the end-results, he said.

Filip said that in the environment of low or even negative rates, the passive approach to bond investing is insufficient. "The problem is that in the past, it [government debt] was about a risk-free return - now it is about return-free risk," Filip said.

Forclaz, asked about investment philosophy, said the multi-asset group at Lombard Odier Investment Managers operates a "systematic" approach rather than adopt discretionary views based on macro-economics or sector themes. "We think about assets in terms of their contribution to risk....active management is active risk management. It is not about how much we want to make but how much we don't want to lose," he said.

On use of data, Bebber noted how a spreadsheet today might have 200 fields of data, up from, say, 15 a few years ago. "How you use data now is a competitive edge."

With data storage and tech, the world is moving to a situation where data is being managed and stored by outside providers. It is necessary for wealth managers to pick a provider that is around long enough to stop a client having a headache, he said.

Asked about the availability of real-time information on investments, HSBC's Xavier Ricbour said that in some cases, the availability of real-time data was not always particularly useful for a client; being able to anticipate moves in a market is sometimes more valuable, he said. In the case of Brexit, for example, the proper analysis of the possible outcomes beforehand was more helpful to clients than discussing it after the results, given the speed at which markets adjusted.  "Information without analysis is not really useful."