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| Advisory Jungle |
Emerging from the Thicket
Suzanne McGee
01/01/2006
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Five affluent investors with different financial circumstances and goals all recognized they needed
more from their advisors. All leveraged personal and professional contacts for
recommendations and thoroughly researched the credentials and qualifications of
prospective candidates. Armed with knowledge and persistence, they successfully
navigated the financial jungle and now enjoy more beneficial working
relationships with their financial advisors and, consequently, more peace of
mind.
Entrepreneurs, former owners of
Kiehl’s.
Need: A global reach for their business and investment
activities.
Strategy: Allow leading banks to compete for their business;
perform thorough research on leading contenders.
Klaus and Jami Heidegger were going global. In 2000, they sold Kiehl’s, a
155-year-old hair and skin-care products business purchased by Jami’s
grandfather in 1921, to L’Oreal for a reported $175 million. They set off to
start new businesses, leveraging their branding and marketing skills. But they
soon realized they needed access to a financial advisory team at a global
investment bank that had a broader footprint than that of their then-current
brokerage firm. “We do business in Switzerland, and I go to Asia a lot where we
have manufacturing operations; UBS has a presence and will be able to offer us
support in all those regions,” says Klaus, who is president of Swiss Masai,
which manufactures specialized ergonomic footwear.
Yet, the decision to go
with UBS came only after researching and weighing their options, a strategy they
admit they did not follow when picking their preceding firm. The Heideggers
chose their previous advisor—a broker at a large Wall Street house—after
relatively little comparison shopping. A personal friend worked at the firm, and
they assumed it would be advantageous to know an individual in an oversight
position. They now regret it. “Our performance was not what it could have or
should have been,” Jami recalls. “We learned we really should have shopped
around more and gotten competitive bids for the services that were being
provided.”
This time, they did shop around. Their short list included five
advisors, gleaned from a combination of references and their own due diligence.
They wanted to ensure smooth communication with their account management team
and that their advisors would be responsive to and accepting of their rather
conservative risk tolerance. They also wanted good internal governance and
oversight. They undertook several meetings with three advisors—all global
financial powerhouses that could support their financial activities in Asia and
Switzerland—and reviewed reams of supporting documents in a process that took
nearly five months.
“We learned we were desirable clients and that we could
shop around and have everyone fight over us,” says Jami. The couple opted for
UBS because it offered what seemed to them the perfect combination of
attributes: Backed by a bank, they were comfortable that their new advisors
would have to meet more rigorous regulatory guidelines than those at their
former brokerage. They also felt their new advisors clearly understand how
conservative they are (“We keep almost all our money in muni bond accounts;
almost nothing in stocks,” Klaus says. “Our goal is wealth preservation,” Jami
adds.) Having specific qualifications or credentials was less important than
being reassured that their advisor was not going to try to pressure them into
transactions or products that they did not want. “We researched the structure
and [found] that there was no sign of conflict of interest between the
investment bank and the investment advisory parts of the business,” Jami says.
They were drawn to the fact that UBS’s high-net-worth investment business
operates independent of any other UBS division, particularly those involved in
marketing funds or other investment products.
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