Wealth Management and Private Banking

Wealth Management and Private Banking


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Experts: Michael Story (PIMCO), Olga Serhiyevich (PIMCO), George King (Maseco Wealth Management) 

Moderator: Cath Tollotson

Key Message:

Client demand for values-based investment is growing. ESG and impact investment strategies are increasingly providing a framework for wealth managers to respond to this demand. However there is work to do from both a product and advice perspective if wealth managers are going to introduce these solutions consistently into client portfolios. 


  • Agreement that ESG (application of environmental, social and governance standards to investments) is present in all asset management activity to some extent. It needs to be articulated more effectively to ensure clients understand what level of ESG impact their investments are making.
  • The asset management industry increasingly believes that ESG standards will move to the core of their investment strategies as they become more experienced in applying them.
  • Impact investing (investment strategies with targeted social returns) is of increasing interest to HNW clients and more wealth managers are launching dedicated funds, mainly private equity strategies, which aim to tackle specific social issues.

Key themes:

Clients are driving the values-based investment agenda. Many asset managers are in the process of launching ESG funds and some wealth managers are now assessing how to incorporate ESG strategies into client portfolios and also how to offer impact investment funds targeting spe cific social needs.

“This is being driven by our clients …we have not reacted quickly to this need.”

Those assessing their options highlighted that impact investing is a growing theme among the new generation of wealthy and will therefore increase in importance over time. Wealth managers need to consider how they address this need from a portfolio and advice perspective.

A number of participants warned, however, that the term ‘impact’ means different things to different people. At one end of the spectrum there are “old school” and “new school” exclusion-based SRI strategies, (although most participants felt these strategies have had their time).

In the middle territory are ESG funds, which are becoming more widely available as mainstream asset managers are now introducing these standards in the core asset classes.

“ESG is simply proper analysis and should soon be naturally embedded in the assessment / analysis process for all investments.”

observed one participant.

Meanwhile, impact investment strategies tend to be more specialist private equity strategies aimed at targeting a particular social issue. These are often closed funds which are increasingly being developed by wealth management firms and offered directly to their private clients.

Implementation challenges

For wealth managers, there are essentially two main challenges to implementing a values-based investment strategy for their clients. The first relates to the investment product options. The second relates to the advice process. 

From a product perspective, those looking to include ESG funds within the core portfolio will need to accept that there is a challenge to assess the amount of impact that can be achieved realistically when set in the context of the total volume of capital in, for example, the global bond market. 

Asset managers widely accept that an ESG framework represents the highest quality of investment research and will become the industry standard for all investments over the next 20 years. However, at present they are only just starting to build their processes and investment selection approach. Linked to this, they are also unwilling to publish specific ESG track records; partly because they don’t want to be marginalised, but also they fear potential reputational damage if a strategy or investee company deviated from the standards.

The challenge for wealth managers therefore is how to position these funds within a client portfolio.

“What are we saying to clients: this fund has ‘some’ impact or ‘might’ have an impact?”

The alternative is for wealth managers to launch their own dedicated impact investment funds where the impact can be directly measured. Some firms are doing this using closed-end private equity structures that target specific issues. However, as these funds are limited in scope, they do not address the growing level of mainstream client interest in this topic.

From an advice perspective, wealth managers also face a huge task to bring all their RMs up to speed on this topic. The terminology is complex; the concept of impact is complex and the range of solutions is also complex. Then there are the added challenges of understanding the risk/return profiles of these investments and identifying whether or not there is a trade-off between financial and social return inherent in these strategies.

 “A quarter of clients may say to you this is what they want i.e. impact – but then follow-up with what is the return and is there a liquidity premium etc,”

as one participant noted.

A further challenge presents itself if a wealth management firm offers ESG and traditional investment portfolios as alternatives.

“If clients are then asked to choose, aren’t we effectively making a moral judgement     about them?”


In spite of these challenges, the majority felt the time has come for them to grapple with these issues as ESG is moving to the mainstream of the asset management industry and is higher on the client agenda as well. As one participant observed:

“It is a huge mistake for the industry to wait for this…waiting is the wrong answer; if you’re waiting you’re behind…it’s our job to lead.”