One Size Doesn’t Fit All

Money managers custom design portfolios for people with too much money and too little time.

March, 2002

Whoever said time is money was wrong. It’s more valuable. That’s why a handful of high-net-worth individuals are hiring reputable investment advisors (also known as money managers) to manage their complex financial needs. With so much time being spent on the accumulation of wealth, who’s got time to actually manage money once it’s attained?

Hired in part for their financial expertise and skill, and on some level because having one actually conveys prestige, money managers have become the hot must-have financial accessory on the mainland. Here in Hawaii, however, where the wealthy are modest by nature and less inclined to boast their riches, it is less a matter of prestige, and more a matter of investors understanding how to make their money work for them.

One of the largest benefits of a money-managed account is the asset-based fee structure. “The client realizes that brokers work on commissions rather than percentage of assets managed,” says Orest Saikevych, portfolio manager for Denis Wong & Associates. “Here, if we do a good job, the portfolio goes up, and we get paid more. If we don’t do a good job, and it goes down, we get paid less and that’s the way it ought to be. A money manager’s best interest lies in growing his clients assets.”

Honolulu-based Denis Wong & Associates has been in business for 19 years offering comprehensive financial management services to both local- and mainland-based clients. For an annual fee of 1 percent of a client’s total assets (or a minimum of $2,500), Denis Wong & Associates will custom-design a portfolio to match their client’s individual needs. The tailored portfolios offer a client the benefits of a diversified portfolio (imagine the diversity of a mutual fund, only you are the sole owner of all the fund’s stocks, bonds and other assets), as well as the ability to make specific portfolio requests, such as avoidance of specific stocks and timing brokerage transactions to mitigate tax impacts.

Initially, the technology boom of the late nineties spurred the growth of the wealth management market. According to the New York-based research firm, Spectrem Group, the number of families in the U.S. with at least $1 million in assets more than doubled from 1995 to 2000, and the number of people with at least $5 million in assets rose from 100,000 in 1995 to 600,000 in 2000. But recent volatility in the markets has done little to deter high-net-worth individuals from seeking these services. In fact, it has made investors less confident they can manage their assets themselves.

“People tend to get aggressive when the stock market is doing well and pull back drastically when the stock market does poorly,” says Charles Wu, financial consultant with Salomon Smith Barney. “Interestingly, people need help determining the basic strategy, which should always be to maintain a diversified portfolio.” Wu says Salomon Smith Barney introduced its money management line, the Guided Portfolio Management (GPM) group, as a way to offer several services for a single fee. The program was originally targeted towards higher-net-worth individuals, with a minimum asset balance of $100,000 necessary to open a GPM account. However as lower- net worth individuals started showing an interest in money management accounts, the company lowered the minimum balance to $20,000.

Unlike Denis Wong & Associates — where clients relinquish 1 percent of their total assets strictly for management services, and actual brokerage fees are additional — Salomon Smith Barney’s asset-based fees are a little higher (averaging 2.5 to 3 percent of total assets) and are all-inclusive.

Denis Wong, president of Denis Wong & Associates, says that even though banks, financial brokerages, and other small companies are elbowing one another for a piece of the money management market, there will always be a sufficient amount of people who have accumulated enough wealth to want help managing it. He says locals, by nature, are financially humble, so even though they’re not flashy with their money, it’s out there. Smith Barney’s Wu handles more than 100 client portfolios, for a combined asset value of more than $5 million, whereas Wong handles a combined asset value of more than $50 million with less than half the amount of clients.

Wong says that unlike their primary competitors — the banks, who often offer similar asset management services to their clients — he and his staff don’t have the luxury of targeting high-net-worth individuals based on the balances in their bank accounts. The rich, after all, are the most coveted of customers for those in the finance industry. Still, plain old word of mouth has done Wong some good over the years. And even though all of his clients are wealthy, he says it certainly isn’t any sort of self-fulfilling prophecy to be able to say ‘my company gets all the rich customers.’ Of course. Isn’t that the low-key, humble, local style?

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Jacy L. Youn