Constructing, Running Portfolios In Volatile Times - Breakfast Briefing In Geneva

Tom Burroughes

24 April 2017

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 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."