This articled originally appeared on LinkedIn: “I have decided………and I am becoming an IAM (Independent Asset/Wealth Manager)!!” written by Aseem Arora.
So you are an established Private Banker who has strong relationship with your clients nurtured over a period, decent book of business (client assets), have been delivering meaty revenues for your Private Bank for years, understand the financial products and markets well, are confident that clients like your investment ideas, solutions/services and most of all have been emboldened by the current trend of increase in number of private bankers going independent!
AND, given the current incessant and ever stricter regulatory challenges (FATCA, Exchange of Information, Common Reporting Standards, Anti-Money Laundering, Know Your Client regulations etc. etc.), the reams of time guzzling additional documentation that comes with these, not to mention the relentless pressure of delivering your revenue & AUM goals in a low interest rate and volatile investment climate, you feel like shouting “Enough of Private Banking……. I am going to become an Independent Asset Manager (IAM)” and not worry about bureaucracy, not being able to provide all the required solutions to my clients due to a restricted, ever tightening product and service platform, living with constantly changing internal policies and finally become my own boss and make much more money than I can make today.
Nice thought, but think again!
Are you ready to take the challenge as the grass is typically greener on the other side? Have you done your homework thoroughly and thought through the pros and cons? Do you have it in you to be an entrepreneur? Are you a person who can really roll up his sleeves and get his hands dirty? Can you live with the ambiguity of not getting your monthly pay check for months on end and a fat bonus at the end of each year?
The idea is not to discourage or scare you from making this move but just to ensure that you are taking this decision for the right reasons and have really thought through what exactly it entails to be a successful IAM. Having seen many successful and not so successful IAMs up close, here are the things I can suggest that one must consider before taking the plunge:
- Your prime motivation and objective for setting up your own IAM business, i.e., genuinely providing long term value through practical solutions to your loyal set of clients for a decent fee which they will be happy to pay or just make “money” through commissions and retrocessions.
- The power of the “Brand Value” of your private bank to pull and retain your clients vis. a vis. your “Personal Brand Value”. Will your important clients definitely move with you once you are “Independent”? Are they really tied to you or to your bank?
- For all the bankers becoming successful IAMs, have you bothered to know the reasons for those that are languishing or have just failed?
- Ongoing regulatory & compliance requirements, responsibilities, mandatory periodic submissions & audits.
- Your target market, segment and region. Cross border or local?
- Your revenue, expense, break even assumptions and projections, time to market and financing your operation till the revenues start kicking in, which depending on the markets, can take many months or a few years in some cases.
- Licensing requirements, costs and the time it takes to actually get a regulatory license to operate as an IAM.
- Your relationship with custodian banks, third party product providers, i.e., Insurance Brokers, Fund Management Companies, Trust Specialists, Company Incorporation and Secretarial Service Providers, Corporate Banking relationships etc.
- To be an “Asset Class Specialist”, say a Fixed Income specialist or a provider of investment solutions across asset classes with a mix of in house specialty for a particular asset class and use of third parties for other asset classes.
- To just manage the financial portfolio of the client or become a full service provider, i.e., Real Estate Advisory, Commercial & boutique Investment Banking services, Generational Asset Transfer Planning and Wealth Structuring Services etc.
- Technology and system requirements for client reporting, on-boarding, record keeping, order execution, fee calculations etc.
- Your fee model, fixed upfront fee, commissions or performance fee.
- After the initial seed clients and investments, what is your plan to grow the business to an optimum size.
- Staff requirements & talent availability for running and growing your IAM business.
- Business premises decisions.
- To be your “Own Boss” but at least in the beginning, to be your own “Office Boy” as well.
- No “Business Class” travel and other perks that come with working for a prestigious and established private banking institution.
The above are some of the important considerations, and by no means exhaustive, that you MUST think and plan for, if you are indeed convinced about taking the plunge. All the very best!