In this interview we talk to the founder of a new wealth advisory firm setting up in London that says conflicts of interest remain a significant industry problem. The firm, called Aquarius, aims to help clients handle that.
Worried about conflicts of interest, hidden fees and befuddled by private bank sales patter? It appears that there is quite a big niche opening up for firms purporting to help ease the pain.
Ultra-high net worth clients may, on the face of it, have the resources to figure out some of these challenges themselves but in many cases they don’t and particularly lack the one thing that no-one has invented – time. And a new UK-based firm, Aquarius, backed by Geneva-based investment house Crescendo Group, is getting off the ground.
Aquarius founder, Leonardo Brummas Carvalho, a former Credit Suisse figure, spoke to WealthBriefing recently. “Today, our industry has become very ‘product pushing.’ Managers have been under pressure,” he said. “It [a bank] makes more profit by selling you its own product,” he said. “From a financial point of view, it is a clear thing to do. From an ethical, long-term view, I am not so sure.”
It might surprise even more cynical readers that, more than a decade from the 2008 financial crunch and all the anger and regulatory action it provoked such as MiFID II and Dodd-Frank, there is still talk about “product push” and other conflicts of interest. But Brummas Carvalho thinks that while some egregious practices may have faded, there are so many pressures on banks to continue behaving like this. And, as this publication has noticed in the past, a world of ultra-low/negative interest rates has hammered banks’ margins, encouraging RMs and others who want to earn a bonus an incentive to steer clients in particular directions.
He says that his business will help clients navigate these reefs and shoals.
The Aquarius business model is designed to help clients navigate the options and, where necessary, act as a bit of a “personal shopper” for UHNW clients, he said.
Brummas Carvalho is no rookie in this business; he has worked in wealth management for 15 years. He left his last bank job for the Zurich listed lender – Credit Suisse – in 2019. He was group co-chief executive at ITI Capital after then, before starting up Aquarius.
“This project is about changing perceptions around financial services. If you ask people what they think about firefighters and whether you admire them, you will get a ‘yes.’ It is not the same if you ask about bankers!” he said.
The rise of Aquarius is also a sign of the steady move around the world of people out of banks and into external asset managers, independent advisory shops and family offices. To give one example, Azura, a business founded about two years ago by a former Julius Baer banker, says that it is continuing to expand. In the case of that business, it makes much of how it helps its ultra-wealthy clients, many of whom have significant operational business interests, gain full access to banks’ balance sheets. In Singapore, Switzerland and other regions, the appeal of becoming independent drives business growth. (See a recent look at the Swiss EAMs market here.)
All to play for
A business such as Aquarius has a huge opportunity, says Brummas Carvalho.
The firm charges a fee and that is a source of recurring revenue.
Brummas Carvalho stresses that this business isn’t a foe of banks at all, but a complement to them. “We aren’t enemies of banks but partners…we are cautious partners. We are giving an independent view to clients to help them compare brands and find clients the best deals. We make sure clients have the right banks in the first place.”
With banks having a lot of intra-structural features, clients may not appreciate the full cost of what they pay in fees.
Soon, Aquarius will be made appointed representatives of a licensed company, which will allow it to operate. In parallel, it will submit an FCA licence request, which takes between six and nine months to process.
This news service asked how Aquarius will position itself when financial firms have shrunk their investment banking/trading functions as capital rules and risk exposures are reined in?
“We will not use our balance sheet, but merely provide advisory services to our clients. All the big banks are not independent. Part of our job is to double check what they are doing and directly advise our clients. We don’t need to differentiate from them because we provide a different service,” Brummas Carvalho said.
“What I can say in general is that these large banks are increasingly seen as a commodity as they all tend to provide the same products and services. Our proposition is niche oriented. We collaborate with big banks because our clients need their balance sheet. This doesn’t mean that we will not review and ensure that the service and pricing they are providing to our clients is the correct one.”