We are in fascinating times when it comes to the wealth management industry, at least from the perspective of a tax lawyer who works on stra...

We are in fascinating times when it comes to the wealth management industry, at least from the perspective of a tax lawyer who works on strategy and other issues with private banks and the families they serve, and who trains relationship managers and wealth planners around the world.

What I see is unhappy families, unhappy banks, unhappy relationship managers, unhappy wealth planners and unhappy trust company personnel. This all results in one conclusion: it is a time of enormous opportunity for clear thinkers.

Why all The Unhappiness?
Families are often unhappy as the service they are getting from the private banks and trust companies they work with pales in comparison to the promises of glossy brochures and expensive ads. The reality is that turnover is high, with "relationship" managers moving from institution to institution before relationships can be built with even one generation, let alone the multiple generations a family involves.

Relationship managers on the move avoid introducing clients to internal wealth planners and trust company representatives, fearing a loss of their hold on clients. Senior management has no idea about the value of fiduciary structures to the bank and to the families being served. The short-term financial objectives of private banks and their employees do not match the long-term objectives of families. Clients are being sold products rather than being provided with the guidance and service they seek and need. Investment funds lack a focus on the home country tax system, resulting in the loss of easy to achieve tax efficiencies, and a failure to provide even the basic information needed to permit investors to file their tax returns. Families are missing out on the opportunities for legitimate tax advantaged investment, often misled by private banks addicted to "hiding the money" - a far easier strategy than understanding the real needs of the families they serve.

Families are unhappy with their trustees and foundation boards, many of whom are much better at getting out their annual fee statements than at properly administering the fiduciary structure involved. How many trust companies are neglecting the basics, failing to prepare trust accounts, to identify the location of assets, and to regularly meet with and understand developments among the beneficiaries they are meant to be responsible to? How many trust companies lack anyone who has read the trust deed? How often are trusts "sold" as a product to address a narrow tax or other issue without any real focus or understanding on how critical a well structured trust can be to long-term family succession and asset protection objectives?

Banks and trust companies are unhappy because the days of long lunches and easy fees are gone. We are in a world of growing transparency and compliance. Compliance is expensive, but not as expensive as non-compliance. It is not enough to offer bank secrecy - banks need to understand how the laws and dynamics of the home countries of their clients affect the needs of their clients. The possibility of selling a private bank or trust company and valuing the business based on the quantum of assets under management is a thing of the past. Today, a buyer needs to understand what they are buying - the value of a simple bank account is far lower than the value of a long term trust structure under administration; the value of a client with assets fully declared in their home country for tax purposes is far different from the value of a tax evader whose problems with home country tax authorities may become the problems of the bank. An explosion of trust litigation is at the beginning stages, with trust companies starting to pay the price for having failed to grasp the responsibilities associated with proper trust administration.

Those who work for private banks and trust companies, and particularly relationship managers, are facing the greatest challenges. Increasingly private banking teams are being managed by people who know little about private banking, having developed their careers in the short-term transactional world of investment banking. A focus on the last quarter's new funds under management and fees from clients is the opposite of what a relationship manager needs to build long-term links to families, and the multiple generations involved. The relationship manager also has the challenge of coping with the competing pressures of compliance and asset gathering, and the burden of now being at the center of "selling" bank products and services ranging from fund management to derivative products to mergers and acquisitions.

Now is a perfect time to step in and succeed. But what is success in the wealth management industry? Success can be as simple as aligning the interests of the financial institution to the interests of clients. In a time of turmoil, there will be some clear winners.

· What if a private bank or trust company reduced current salaries and bonuses, but created a "partnership" approach, allowing those relationship managers and wealth planners who meet seniority and quality standards to increasingly share in the profits generated by long standing clients? What if on retirement these same employee/partners were able to work part time continuing to act as trusted advisors to the families they have long served? Would this attract the best and brightest who are looking for long term homes for themselves and their clients? Would this be a better way of ensuring real relationships with multiple generations?

· What if a private bank decided not to compete on price, but on service and knowledge, in a market starved for something better? Wealth planning and fiduciary structures are not commodities, but services that are critical to the families banks wish to serve. Legal approaches to tax minimization can double returns, but how many private banks really understand and take advantage of the opportunities in this area for their clients?

· What if a private bank or trust company established itself as the real trusted family advisor, coordinating annual family retreats, putting the relationship manager at the centre of regular "family days" programs for the families the institution serves? The private bank can create a menu of offerings for these meetings, allowing families to choose from a range of participants from inside the financial institution as well as outside the institution, permitting discussions on issues ranging from security and kidnap avoidance to tax planning, to opportunities in emerging markets. Exercises involving all generations, designed to build family trust, and to begin to allow the youngest generations to understand the opportunities and responsibilities of wealth, and the role of philanthropy can be part of what a private bank or trust company offers - fun for families, fun for the relationship managers, and creating the connections to all generations in families served that allows for real private banking relationships.

· What if banks began developing investment funds and individualized investment approaches that focus on the after tax return, not the pre-tax return? In a world of increasing transparency, private banks are finding that clients actually have reporting obligations in their home countries. How investments are made can have dramatic effects on returns. Strategies for investing in a tax-advantaged manner can produce far better consistent returns than expensive and opaque hedge funds. What if a private bank serving global families began to put families from different countries together in investment programs designed to arbitrage between tax systems - at basic levels allowing current income to flow to families in countries with no tax on such income (such as Hong Kong) with capital gains flowing to families in countries with no tax, or lower rates of tax on such income? Would this be creating value for families?

· What if private banks that are part of full service global banks are really able to deliver all of the bank's resources to families, with internal fee sharing and other roadblocks having been solved in advance? Wealth and succession planning, disposals of businesses, acquisitions, derivative products designed to address tax and succession needs, financing, all brought to clients through the centre of it all, the private banking relationship manager.

· What if compliance and risk officers were part of the client service delivery team, involved in client solutions from the outset, working together with relationship managers to deliver value to clients while slashing risks for the bank? Would this be better than an environment where the relationship manager and wealth planner conspire to keep things away from the compliance department?

· What if a private bank or trust company put real effort in training and knowledge sharing, with an emphasis on a real team approach to client service, and a real sharing of the "tacit" knowledge of bank staff? The creation of effective knowledge management platforms, combined with the development of "knowledge centres" focusing on the internal expertise within banks requires more of an investment in forward thinking than an investment of money.

· Would clients be happier with a relationship manager committed to the institution, and committed to the families they serve, and who can really deliver all that the bank can offer, from portfolio management, to trust services, to mergers and acquisitions, to succession planning and more? What if the relationship manager was trained to not necessarily have all the answers, but at least be equipped to ask the right questions, and if the relationship manager were the host and facilitator of annual family meetings on bank premises, reaching out to multiple generations?

The good news is that very, very few are getting it right. The families served by private banks and trust companies are looking for something different. Success is easy when so many are distracted