The importance of understanding client requirements and 'putting the client first' has never been greater.
The importance of understanding client requirements and ‘putting the client first’ has never been greater.
‘Putting the client first' might seem like an unusual philosophy in today's product-driven fund market. But that ethos permeates the fabric of business for Hauck & Aufhäuser, says Achim Backhaus, the portfolio manager and fund selector at the Frankfurt-based bank.
"You speak with the client about the full value of their wealth, and in a sense we build the client's thinking into the portfolio. It is our goal to give every client an individual portfolio, with which they can sleep soundly in every market phase."
Clients with €1,000 or more to invest can select from four funds of funds run by Backhaus' team: Balanced, Dynamic, Flexible or Conservative. With €3m, clients receive the bank's ‘premium offering', which can also include other investments.
Each fund of funds is constructed with 25% to 30% of ETFs for tactical asset allocation, and the rest in ‘building blocks' that follow themes or strategies - for example ‘uncorrelated alpha sources', ‘risk-protection' or ‘opportunity'.
Tailor made solutions
Backhaus explains: "Putting together the different, weakly correlated building blocks produces an optimal, risk-adjusted and well balanced risk/return profile.
"I believe that one cannot squash a fund of funds into too narrow one, for the markets do not let themselves be forced into a corset. Our funds of funds are broadly diversified, risk is controlled strictly and they follow multi-asset thinking, as does the whole house."
Larger investors might prefer separate mandates to investing in pooled funds, he adds. These days, unsurprisingly, protecting capital is the primary goal for many clients.
But not for all, as Backhaus reveals.
"If, for example, a client fears a strong jump in inflation in the coming years, we will produce for him an individual scorecard with different inflation and risk indicators. The client knows that we keep the surrounds permanently in our sights and we can orientate his portfolio accordingly."
Other clients want to diversify specific exposures - and sometimes for very individual reasons, he adds.
Since 2007, many wealthy owners of German family-owned, mid-sized businesses foresaw difficult times for Europe's economies, and so expanded into less affected emerging markets. They grew their wealth in the process, but a change of business focus also changed the kinds of risk exposures they have in their biggest asset.
Backhaus says: "Every client has different sources of their wealth - shares, property, companies and so on - and the risks linked to these are different."