Brian Clarke, Director of Key Trust Company and recent winner of the STEP independent trust company of the year, gives Citywealth his views during the current difficult times.
The events which lead to one outcome on Monday can lead to a different outcome on Tuesday. There is now simply too much information for any one individual or a computer to fully comprehend. There are just too many moving parts and our minds are trained to select only the information we need and to filter the rest.
Applying this concept to the market suggests that each investment manager or trader will tend to focus on what they personally consider important and ignore the rest. Two old (but none the worse for that) investment philosophies are: The random walk theory, which says that everything that can be known is already factored into the price, therefore the move in tomorrow’s price will be random.
The other theory is that while it pays to follow a trend, when following the herd, accept that you are walking in the droppings.
Because decision makers work with fundamentals, technical signals, and numerous financial variables to meet the supply and demand requirements of their firm, they have to select those elements that are relevant to them. They focus on those elements that are specific to their decision-making, filtering out other variables as either being too small or too fleeting. Result: they do not work with the real market but with a mental model of the market.
In a year when the filtered-out issues suddenly become dominant, this can have a disastrous effect on investment policy. Banks, commodities, oil all have significant valuation changes beyond any average trend line.
At our annual meetings with family clients, we are always talking about the entire global spread of investments and how important it is to ensure a balance.
The elements we strive to include are real estate, art collectables that can be enjoyed, land, cash, equities and holdings for long term income. As an independent company, we are perfectly placed to introduce the best managers for each asset sector.
In these volatile times, I believe, having a secure, broad and inclusive spread of assets gives a good foundation for stress-free living.
www.key-trust.com
Monday, 6 October 2008
Brian Clarke, Director of Key Trust Company offers some views on investment for family offices and families in business
Thursday, 13 December 2007
Understanding trusts: Once assets are in trust, they are gone.
Those who operate trust services in the wealth sector feel it is pertient to make wealthy individuals properly understand that once assets are in trust, they are effectively gone.
For intermediaries or bankers, litigation can also be avoided if proper planning and understanding is built in from the start of the process, for instance when clients say: “so I can get the money back at any time?” the response should be: no - once you have chosen this route, it is given away forever. The reason why this is important and why “let-out” clauses are inappropriate is that they can just make the trust structure unravel if the revenue or IRS start a tax investigation because if the tax office can prove that the money can be recouped at anytime then tax penalties will be levied.
Monday, 10 December 2007
Asian wealth
There is a lot of interest in Asian wealth, whether Indian, China or if spreading a net wide areas like the Middle East.
Conducting some research with Hong Kong, Japanese and Singapore based intermediaries, a strange anomoly has appeared. Not only is wealth in Hong Kong rising to sums as grand as $20 billion US but trust companies ,that once flourished, have all but been purchased by banks in the region. This is something that is in stark contact to Europe where trust companies are de coupling from banks to avoid conflict with regard to investment management of trust monies (banks insisting the funds stay with them, rather than going onto the open market for best returns).
In Europe, as we have seen with Close Trustees and Close WM, it is seen essential to survival and ongoing growth to de couple and present wealthy clients and intermediaries with the sound knowledge that open architecture in investing is the only route for the money being entrusted to them.
As with Europe though one trend is similar. Asia hasn't got a large pool of intermediaries (lawyers/attorneys and accountants) to seek for work. On past trips to Singapore, banks in the region were 'raping' any professional firm of all their staff to equip themselves with a compliment of client relationship managers, who are identified as the most successful route to securing new private client monies into the banks. How that model works when there are no intermediaries left in the market to pitch too, must surely be a puzzle indeed.
