Private Banks Lose Out To Mutual Funds

by Caroline Maxwell, Investors Offshore.com

18 June 2001

A recent survey conducted by Forrester Research showed that among the 'wired wealthy' in the US (that is, those with more than $1 million to invest who also use the internet), private banks are losing out to mutual funds across the board. 'The mutual fund companies score very high on wealth accumulation, whereas the traditional private banks are seen as keepers of money, not growers,' explained Ekaterina Walsh, a senior analyst with the technolgy research company.

The survey, which looked at results from 3,333 'wired wealthy' investors, found that Vanguard and Fidelity Investments came in top of a list of the 22 preferred financial institutions, outstripping a whole host of well respected private banks, including Goldman Sachs (which came in fifth), and JP Morgan (which ranked 15th). The mutual fund giants also trounced the big trust companies, all of which fell somewhere below 10th place.

A survey of those with more than $10 million in investable assets found pretty much the same bias towards fund investment, although the ultra-wealthy placed Merrill Lynch at the top of their list, followed by Fidelity, Morgan Stanley and Vanguard.

These findings may come as something of a shock to private banks that have recently raised their minimum required account deposits in order to attract a better class of client. Goldman Sachs, for example, have recently targeted their attentions at those investors with $25 million investable income, but fell six places behind the leading discount brokerage, Charles Schwab on the deca-millionaires' list. 'Exclusivity doesn't come out as one of the criteria,' said Ms Walsh. 'The things that matter are excellence in service and great quality.'

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