Jun 4, 2020

Private Offshore Banking: How an External Asset Manager Can Save You Money

When you make a seven-figure deposit with a bank, they are going to make some special offers to you that they do not normally make to less wealthy clients. Swiss banks in particular love their well-off customers and they can assign a bank officer to rich customers who will manage the assets that they keep with the bank on their behalf. This is a nice opportunity indeed: you can grow your wealth without spending too much time and intellectual effort. Naturally, this kind of special service is not free, even if you don’t get billed specifically for it.

However, not all of your assets will be bankable – and besides, if you have more than a few million dollars or euros, keeping all your money with a single bank would be unwise. This means that even if you are a privileged customer of a reputable Swiss bank, you will not be making the best of your investment options if you rely solely on your Relationship manager. (This is what they often call the bank officer who helps you manage the capital that you keep with the bank.)

What is an External Asset Manager?

We would like to bring to your consideration the possibility to hire an expert who is referred to as an ‘external asset manager’. An external asset management firm has several advantages over the private banking services provided by the banks.

·        First, the firm will offer you much more comprehensive asset management opportunities.

·        Second, hiring an external asset manager does not actually come at an additional cost. As a matter of fact, you can save more on the bank’s hidden fees than you will pay to your asset manager.

·        Third, the external asset management firm that you make an agreement with will be able to set up accounts with several banks for you and greatly facilitate your cooperation with them. Let us talk about the benefits of hiring an external asset manager in more detail.

Why you should use the services of an external asset manager

The technological advances that we are witnessing today are truly amazing. The banking sector is changing especially fast as more and more digitalized service types come into use. Do you remember when you last visited the bank office? Probably, you do not because you can do virtually everything online these days! If you want to make a bank transfer or a payment, you do not even have to be in front of your computer as you have a smartphone.

We may not be quite aware of it, but a large number of old ways of doing things have sunk or are sinking into oblivion. The private banking and wealth management industry in the globalized and digitalized world has very little in common with what it used to look like several decades ago. With it, bank clients are also changing: they demand more and more sophisticated services and are no longer content just to sit back and allow their private bankers to manage portfolios on a discretionary basis.

One of the service areas that have been in existence for some time is gaining greater popularity today. We are talking about external asset management services that have been a fast growing industry over the last few years.

External asset managers (EAMs) are also referred to as wealth managers or independent asset managers. Who are they independent from? Banks. They will work with banks on your behalf, among a number of other organizations, but they are not bank asset management departments. The banks continue to be the legal custodians of your assets, but the EAM effectively replaces your private banker.

Setting up bank accounts with several private banks and managing your capital kept with each of them is an important task that the EAM will perform but this is far from everything that he or she can do for you. Your EAM will also work with your tax advisors, advise on inheritance matters, help you with estate planning, and make recommendations on particularly attractive opportunities. If your EAM’s expertise is great enough, the agent will also assist you with dividends, private equity, commodity trading, investing in hedge funds, in foreign property, and so on.

The EAM studies the profile of each customer with great care. He or she will try to come to a good understanding of the client’s preferences and general economic outlooks. Monetary values are important but there are other types of values that exist too. Your EAM will seek to meet your personal desires and keep you happy with the investments that you make.

Many people now are interested not just in returns on investment, but in genuinely making a difference based on how they allocate their portfolios. The feeling of satisfaction that an investment will bring may be as important as the cash that it generates along the way.

Some people believe that banks can offer everything that a client may need when it comes to asset management. ‘The bank administration have assigned a personal Relationship manager to me and that means I am a preferential customer who is going to enjoy a lot of attention and care on the part of the bank’.

Well, we hate to say it but your Relationship manager has at least a couple hundred other clients on his or her hands, which makes it impossible to practice an ‘individualized approach’ to every customer. And it is the bank who pays his salary, the vast majority of which is made up of bonuses based on what he manages to earn from you. He is under constant pressure to sell the bank’s new products, creating an inherent conflict of interest. The EAM, on the other hand, receives his remuneration directly from you, so he will pick the investments that make sense for you from international markets, even if they are managed by – for example – competing banks.

Each investor will have his or her own set of preferences and the number of those can be quite impressive. In addition to that, the nature of these preferences can be extremely diverse. No Relationship manager who works for the bank can physically take all the individual client’s inclinations into account simply because there are a large number of clients that he or she services. Banks are reluctant to hire too many Relationship managers because they are quite expensive.

A large number of wealthy people are dissatisfied with this sort of generalized methods that the banks employ. Thus, they try to find an external asset manager who can customize the investment and other types of solutions in a way that will fit their customers personally. Different EAMs specialize in different areas and it is quite possible to find the one that suits you best of all.

Protecting Your Wealth for the Future

The financial sector is going through a transition period today. Things are changing at a crazy speed due to two main reasons. First, the global fight against terrorism continues and the measures aimed at eliminating the possibilities to finance terrorism are a remarkably significant part of the overall effort. For the banks, it means the introduction of new requirements and new regulations. Over the last few years, banks in both the Old World and the New World have spent billions of dollars/ euros on KYC (Know Your Customer) and due diligence procedures.

The second reason for the ongoing changes in the banking regulations is the continuing global financial crisis. The national economies almost recovered from the blow that they had to take in 2008 when the coronavirus came about and locked the whole world down. Many experts predict that we are going to face an even more severe crisis in the near future in comparison to the one we saw some ten years ago.

Without doubt, the international financial authorities are trying to mitigate the negative consequences of the crises – but the only thing they can actually do about them is lay down some new rules of the game. As new requirements appear one after another, an individual investor is simply unable to keep up with their speed. A good EAM will keep a close look at what is going on in the regulatory sphere, which will let his or her client make the most informed investment decisions. Clearly, the more informed an investment decision, the more secure is the investment.

The EAM as an intermediary between the bank and the client

It often happens that somebody who has worked as a Relationship manager for a large bank leaves the bank and sets up his or her own firm that provides external asset management services to individual clients. Hiring such a former professional banker would be especially advantageous.

First of all, the EAM will be of great help to you in opening accounts in several banks and not necessarily all in the same country. Usually there is no need to travel, as it is the EAM who interfaces with the banks, not you. He or she will know what exactly the banks will require from the potential customer in terms of KYC. Banks love working with EAMs rather than communicating with new customers personally. When they provide services to EAMs, the EAMs can be dealt with using IT directly from the back office, so the bank saves a lot of money by needing fewer Relationship managers that come at quite a high cost as we have noted above. Another important thing is that the banks know for sure that the EAM will do most of the due diligence job for them and suggest only the client that stands the best chance to pass through all the Compliance Department procedures. When the bank does not want to take a new client onboard directly, it may be willing to reconsider if the client applies for services via an external asset manager.

Second, it is going to be less expensive for you to deal with the bank if you do it via an external asset manager. Private banks have decades of experience in hiding fees so you will end up paying more if you do not know about the hidden fees. As a former bank employee, your EAM will know everything about them and he or she will thus be able to help you avoid unnecessary costs.

At the same time, EAMs’ tariffs and fee structure is much more transparent. They are private entrepreneurs and it is in their best interest to charge fair prices and build the relationships with the clients on honesty and dignity. Besides, EAMs are strictly regulated by official bodies so unlike with the banks, you will know exactly what you are paying for and how much.

Third, as a former insider, the EAM will know about the best deals that the bank that he or she used to work for can offer. As the banking operations and internal policies are quite similar in most parts of the world, your EAM will know what to look for when you establish working relationships with a second or a third bank as well. You have to realize that banks use money as the resource that allows them to make money. For this reason, they will always want to promote the service packages and the products that will have a larger profit margin for them. You EAM is going to suggest the investment options that are going to have a larger profit margin for you.

With the ever-changing rules, it is difficult to play the game indeed. The external management business is flourishing and the number of firms that offer such services is growing. Why? Because they provide the services that wealthy people really need. An EAM will help you navigate in the unsafe water of investment and finance. In particular, it is much easier and much more beneficial to work with the bank if you hire an EAM for this purpose.

If you are looking to open a foreign or offshore bank account, we recommend that you find an external asset manager who will be able to help you obtain services from a private bank – in Switzerland or elsewhere. The banking system in Switzerland boasts some qualities that other national banking systems can hardly match. The combination of political neutrality, stable economic growth, strong national currency, centuries-long banking traditions, and openness to innovations is almost unique.

This said, however, there are other countries where you can find secure banks that will offer beneficial cooperation conditions. Moreover, an external asset manager can do much more for you than help you build rapport with the bank: far from all assets are bankable, and diversification surely requires you to keep a considerable portion of your wealth outside the banking system. A good EAM will help you put your resources to the best possible use.

Offshore Pro Group has been in the financial consultancy business for years and we will gladly help you find the best financial solutions if you decide to seek our advice. Please write to us to info@offshore-pro.info or use WhatsApp or our live chat to get in touch with us. Whatever communication means you choose, we will be able to suggest the solution that will fit your personal outlooks and your individual investment preferences best!