What does wealth management mean?
Wealth management is the management of client assets in the name of and on behalf of clients. “In the name” means that bank accounts and securities accounts are always held in the client’s name and are managed by an asset manager or commercial bank on the basis of an agreement (asset management contract).
What are the advantages of placing an asset management mandate with an independent asset manager compared to a commercial bank?
Due to their extensive activities, commercial banks are subject to certain perverse incentives, which can lead to disadvantages for their customers. For example, transactions generate income for the bank and costs for the customer, which unfortunately sometimes leads to unnecessary transactions when a commercial bank is entrusted with an asset management mandate. In addition, commercial banks offer numerous proprietary products that generate high income for them and correspondingly high costs for their customers.
ISVs offer their own products (strategies). How does this differ from comercial banks?
We limit ourselves to a few products where we believe we can deliver a better return after costs than the market. The two biggest differences, however, are that we are heavily invested in these strategies ourselves, and that we do not double-charge fees in wealth management and our own products.
What does double charging mean in wealth management?
Most commercial banks and asset managers charge fees for wealth management, i.e., the compilation and management of client portfolios. Since most client portfolios do not consist of direct investments in individual stocks or bonds, but rather in funds and ETFs, a second fee level arises, namely at the product level (e.g., funds and ETFs). It is understandable that funds and ETFs generally charge fees; after all, managing them also incurs costs. However, this creates a conflict of interest for banks and asset managers in including their own products (preferably those with very high fees) in their clients’ portfolios, as this generates income for them at both levels (wealth management and product). Because we at ISV want to act in the best interests of our clients, we do not charge wealth management fees on investments in our own products.
How do ISV products (strategies) differ from those of other asset managers or commercial banks?
The scientific approach based on the current state of knowledge behind our products is certainly not present to this extent in many other available products. Compared to other actively managed products, ours offer attractive fees and structures for investors. Since our goal is to achieve a higher return (after costs!) than the benchmark index, we do not want to significantly raise this bar by incurring excessive costs. We believe that this will be worthwhile for us in the long term, as our clients’ assets grow more rapidly, which leads to greater client satisfaction, a better reputation, and thus more new clients. Last but not least, a significant portion of the Pichler family’s assets is invested in these strategies, reflecting the motivation to achieve a good risk-return ratio.