LETTERS TO THE EDITOR: Size Doesn't Count
By Peter Scholla
Barron's; September 29, 2003
Re "2003 Top Wealth Managers in the United States,"
Your list is nice, free advertising for the companies mentioned. However, the measure of "assets under management" is a very poor criterion by which to evaluate the quality of a wealth-management firm. As allocator of assets for High Net Worth Individuals here in the U.S. and in Europe for more than 10 years where we work, at all times, with more than 50 different financial-service providers -- from brokers to banks to trust companies to individual portfolio managers to hedge funds to private-equity firms -- we repeatedly find that clear reporting, timely communication, and the error rate for standard transactions are much better selection criteria than either the assets under management, the size of the balance sheet, or the number of years that a particular provider has been in business. The assets under management seem to be a good indicator of a well-financed marketing/public relations department, which has nothing to do with the quality of the research department.
Diligent research will show that several of the financial-service providers on your list excel primarily in two areas: Poor performance and unbelievably bad customer service. If you don't believe it: The performance is easily estimated by reviewing the assets under management adjusted by the net inflow of new capital/clients. (Look at SEC records and filings.) The service quality, on the other hand, is easily measured by trying to call a decision maker of any of your companies on a Friday afternoon after 3 p.m. Don't believe it, just try it.
Peter Scholla, Global Investment Adviser
Palm Beach, FL 33480, US