Three reasons bankers ditch a client

The boot's on the other foot.

HNWs are usually the ones who complain about their bankers, but 2013 has seen a power shift: the John Lobb boot is on the other foot. The introduction of a regulatory overhaul, the Retail Distribution Review, has made it more time-consuming to service clients, and so advisers are increasingly discerning in whom they work for. With mounting numbers of wealthy clients therefore being ‘managed out’, an explanation of what makes a relationship tricky and how you can avoid the cull is timely.

The chief complaint that bankers make is the level of attention that clients demand. Have you ever interrupted your adviser’s wedding anniversary with a telephone grumble about the S&P or disturbed their sleep with a quibble about the Nikkei?

Such behaviour (unsurprisingly) irks bankers, despite all their protestations of intense availability for your needs, because at the top end of the market they are only allowed to work for 30 clients, to guarantee five-star service, and if one of their clients takes up double the amount of time that leaves less time to reap fees from others. (Their fees are not your first concern, clearly.)

Equally, at the lower end of the market, bankers take on up to 400 clients, meaning that HNWs who insist on daily dialogues chew into time that could be devoted to attracting new accounts paying 1 per cent per annum. 

The wealthy will rebuke their bankers on the grounds that many sell themselves on bespoke service. Beauty parades are often won with platitudes like ‘I’m just a phone call away’, as well as assurances that advisers in local jurisdictions are accessible day and night. 

The solution, therefore, is to have your banker explain at the outset how much time they intend to dedicate to you. "That solves the most frequent problem," says a top CEO, "which is when clients say that they are happy with discretionary relationships whereby bankers do the day-to-day investment and then report back quarterly, when, in fact, they want much more active roles discussing portfolio moves weekly in a manner reminiscent of advisory relationships.’

The reverse — a communication freeze — is not much liked by bankers either. The reason is that snap-firing decisions are much more likely when clients aren’t given regular outlets to vent their frustrations — ‘so it’s important to use the annual lunch to explain your position and give your banker the chance to change," says the CEO. "Silence may suggest happiness on the surface, but it often doesn’t under the veneer, so bankers will always appreciate hearing from you approximately four times a year."

Beyond communication levels, the second sin that bankers complain about in their clients is when they vary their expectations. While legitimate after a radical transformation in circumstances like a lottery win, those who change their minds based on market movements are not appreciated.

For example, in the mid-Noughties, many bankers would report to clients that they had made 10 per cent and the response would often be:"My friend got 15 per cent — I’d like to take more risk, please." Now, however, the economic winds have changed and those same clients are happy if offered 4 per cent — proof, if ever there were, that expectations can fluctuate as much as the FTSE.

Of course, bankers find the practice trying because it requires readjustments of client portfolios. Such shuffling increases costs and eats into performance while also taking up time in workloads which, at the firms focused on sub-£3 million accounts, already include relationship and investment management. And although HNWs will quite properly query who serves whom, a balance must be struck because, according to Barclays, HNWs lose as much as 3 per cent per annum from portfolio adjustments. 

The solution starts with getting bankers to explain what they intend to deliver in military detail at the beginning of relationships so that clients won’t feel aggrieved by the results thereafter. Then it’s a matter of looking through market movements and remembering that bankers tend to underperform indices in the early stages of rallies, such as in 2012, and outperform in downturns, as in 2011, because they understand that private clients don’t like losses and so they manage money with one eye on benchmarks and the other on absolute returns. 

Expectations aside, the third thing bankers complain about is when clients don’t act as part of a team. That manifests itself most obviously when clients look over their shoulders and second-guess decisions. A glittering example is Apple: in September, the technology stock was trading at $700 but since January it is has been below $500. Losing 30 per cent has of course had plenty of HNWs prodding their bankers as to why the stock wasn’t sold, but in doing so they have overlooked the fact that many bankers backed Apple in 2010 when it was $250. 

The shortened sense of perspective is in part attributable to the media, which play up star stocks and make finance dinner-table conversation. But bankers are always keen to remind clients to look through the markets and take a five-year view. As the anonymous CEO says, ‘It always pays to remember that Robert Peston and co cover big falls in the FTSE, but they are half as interested in the rebound the following day.’

Another example of lack of teamwork between bankers and clients is, more subtly, when HNWs don’t recognise good performance or promote it to their friends. No, bankers don’t expect referrals. But they know that, in terms of time and cost, referrals are the most effective form of business development, and therefore they get frustrated when clients feel embarrassed about talking finance to friends.

HNWs will find that referring their bankers is profitable for their own balances as well, because when advisers are freed from business development and allowed to focus on their day jobs their investment results and service levels improve. (If this seems like you’re doing their work for them, perhaps that’s right.) 

HNWs who repeatedly trespass across the three boundaries will find that they aren’t so much dismissed by their bankers as marginalised. If their portfolios are over £200,000, then they’ll be passed to junior bankers, whereas if their accounts are underneath the threshold they will be pushed into a fund-of-funds service. 

In an age when the regulator requires an annual review of everyone’s portfolios and financial circumstances, bankers with 400 clients and 250 working days will find themselves stretched with even the most understanding clients — so it’s crucial to remember that the best business relationships are mutually beneficial and that making sure you fit in well with your banker’s expectations is just as important as double-checking that they fit well with yours.

Alex Pendleton writes for Spear's.

This piece first appeared on Spear's

A London Bank. Photograph: Getty Images

This is a story from the team at Spears magazine.

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The murder of fearless journalist Pavel Sheremet must be solved - but Ukraine needs more

Sheremet was blown up as he drove to host a morning radio programme

On 20th of July Kiev was shaken by the news of the assassination of the respected Belarusian journalist Pavel Sheremet. Outside the ex-Soviet republics he was hardly known. Yet the murder is one that the West should reflect on, as it could do much to aggravate the Ukrainian-Russian conflict. 

Sheremet was one of the most significant and high profile investigative journalists of his generation. His career as an archetypal  examiner of the post-Soviet regimes in Belarus, Ukraine and Russia bought him fame and notoriety in the region. From 1997 onwards Sheremet became a name for fearless and non-partisan interrogation, both in print and as also as TV presenter. He paid the price early on when he was incarcerated by the Belarus government, then stripped of his Belarusian nationality and deported. Such is the way of things in the region.

Taking up residence in Kiev, Sheremet became immersed in interrogating the political life of Ukraine. He wrote for the Ukrayinska Pravda publication and also helped to develop a journalism school. Under these auspices he was a participant of a congress, "The dialogue between Ukraine and Russia", in April 2014. He reported on beginnings of the Euromaidan uprising. He warned of the rise of the concept  of "Novorossia" and suggested that Ukraine needed to reset its current status and stand up to Russian pressure. After the Russian occupation of Crimea his blame for the Ukrainian government was ferocious. He alleged that that they "left their soldiers face to face the [Russian] aggressor and had given up the Crimean peninsula with no attempt to defend it." These, he said "are going to be the most disgraceful pages of Ukrainian history."

Sheremet was blown up at 7.45am on 20 July as he drove to host a morning radio programme.

Ukraine is a dangerous place for journalists. Fifty of them have been murdered since Ukraine achieved independence. However, this murder is different from the others. Firstly, both the Ukrainian President and the Interior minister immediately sought assistance from FBI and EU investigators. For once it seems that the Ukrainian government is serious about solving this crime. Secondly, this IED type assassination had all the trappings of a professional operation. To blow a car up in rush hour Kiev needs a surveillance team and sophisticated explosive expertise. 

Where to lay the blame? Pavel Sheremet had plenty of enemies, including those in power in Belarus, Russia and the militias in Ukraine (his last blog warned of a possible coup by the militias). But Ukraine needs assistance beyond investigators from the FBI and the EU. It needs more financial help to support credible investigative journalism.   

The murder of Pavel Sheremet was an attack on the already fragile Ukrainian civil society, a country on the doorstep of the EU. The fear is that the latest murder might well be the beginning of worse to come.

Mohammad Zahoor is the publisher of Ukrainian newspaper The Kyiv Post.