The Madoff Reflex: Offshore Private Wealth Clients Flock to New Money Managers

While the headlines have been full of painful stories regarding those who lost millions to Madoff's Ponzi scheme, wealthy clients who did not invest with him are taking a fresh new look at their financial management teams…and deciding they can do better.

Last week, as reports of client defections from UBS were sifting through the Internet, Credit Suisse’s CEO, Walter Berchtold, told London's Financial Times that Credit Suisse had actually been attracting more “new wealth clients” so far in 2009 than anyone
else.  The CEO has his “eyes set on besting UBS”, still considered to be the number one player in the sector.

According to another article on the subject of wealthy investors' response to the financial crisis,  42% of high net worth individuals  “are likely to review
or switch wealth managers in the wake of the financial crisis”.  It would appear that these are precisely the customers Mr. Berchtold is wooing with CS' "OneBank" concept, an institutional effort to keep clients in-house as much as possible by offering collateral services beyond what has traditionally been handled by wealth managers. (To me it is remeniscent of the multidisciplinary efforts of the Big Eight accounting firms before the notion of full-function consultancies was the norm…but then again, I'm old…)

In yet another article in the International Herald Tribune last week, the single
biggest complaint these very clients have about their current money managers: “the speed of response to
crisis” and inadequate “levels of communication and contact"…the very issue most frequently raised in bar complaints filed by clients against their attorneys.  Meanwhile, those increasingly nervous bankers remain firmly out of touch with what their clients think about them: 75% of
wealth managers believed their clients trusted them; in reality, only a third
said they trusted their money managers. 

Bottom line: the wealth management industry is being reshaped by its investors, who believe that they have NOT been well-served by their managers as the current financial crisis has unfolded (and will continue to unfold).  The fact that Madoff's scam was invisible to most of these managers — and to an SEC which ignored internal warnings and gave Madoff a thumbs-up more than half a dozen times — has shaken the trust of those with most at stake, who are in the "there but for the Grace of God go I" mode.

Mr. Berchtold is seeing movement in his direction, but it is only the beginning.  If you fall in this category and are looking for a fresh, responsive, pro-active wealth management team, contact me at for some straight answers.