I created and served as founding editor and writer for Professional Planner magazine. Here's a selection of my work with the publication.
Out of Africa
Vivienne James, a private adviser for Investec, provides insight into the world of boutique banking. Lynn Elsey reports.
Investec may be a relative newcomer to Australia’s private banking realm, but if its client profile is any indication, the South African private bank has covered a lot of ground in just a few years. Investec traces its roots to trading as a Johannes- burg leasing company in 1974, eventually expand- ing to an international business platform, with core activities centred in South Africa and the UK. Investec entered the Australian market in 1997 and acquired a banking license in 2002. It currently has offices in Sydney, Melbourne, Brisbane and Perth.
Investec Bank (Australia) Limited offers a range of investment banking services and products to high net worth individuals, the corporate market and charitable organisations.
With client investment assets set at a minimum of $2 million, working as one of Investec’s four private advisers provides Vivienne James with a fairly sophisticated clientele. According to James, Investec is quite prescriptive with its private bank- ing strategy: to achieve, after tax and inflation, a five percent return plus return of capital. The private advisers aim to reach this target through a mixture of shares, property, fixed interest and cash.
The Process
Investec advisers work up a model for new clients, covering a one to five year period, to provide what they feel are realistic expectations. Implemen- tation involves a mixture of strategies,“depending on a client’s comfort and goals,” James says. The key is meeting the client’s income requirements.
James says that one of the challenges of the job is communication; ensuring that the client under- stands the bank’s philosophy. She feels that a key to achieving this and overall success as an adviser is to “start by listening to your client” in order to understand what they want to achieve and their problems. James holds face-to-face meetings with her clients quarterly, which allows her to discuss recent events which might affect her client, such as a change of a fund’s manager.
The Nitty Gritty
Investec private advisers operate under a very specific fee structure, determined by assets under advice. Clients need to have a minimum of $2 million available for investment; quite an increase in the three years since James came on board, when client asset minimums were “closer to $1 million”.
According to James, the current fee structure came about because two of the Australian partners at Investec are accountants who didn’t like charg- ing on an hourly basis. They felt that clients would be reluctant to call and ask for advice, even though it was needed, if it was going to cost them. James says there has been reluctance by clients to accept a straight fee, hence the asset-based model.
Investec advisers rebate all upfront commissions,“but it’s not often that we have any, as we mostly use direct shares and wholesale funds,” James says. However, they don’t rebate trailing fees. James said that these constitute such an insignifi- cant amount that the cost of administration to calculate and pay back doesn’t justify it. She says that this is always fully explained and not an issue to her clients. She does, however, agree that there is a potential conflict with trails and says that Investec advisers always try to dial them down.
James currently has 50 clients – all came to her as referrals – and is targeted to increase that to 65. The largest component of her pay is her base salary, which is augmented by bonuses that come mainly from developing and increasing her client base.
James prides the Investec advisory service as being completely transparent, through total disclosure of all fees to the client.“Conflict of interest is important because of how it appears to the client, especially regarding referral business,” she says. James admits that although Investec advisers operate on a fee-based structure, some potential conflicts do exist, mainly from the Investec products which are available to clients.
‘Conflict of interest is important because of how it appears to the client’
“We aren’t truly independent,” she says,“but the product is separate.” Although Investec “doesn’t produce a lot of products” they do exist and the advisers do recommend them. James admits that someone in Investec “will get a fee from that invest- ment; it will go indirectly to private advisers” but wasn’t clear on the specifics.“We try and manage it the best we can.”
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