In the recent May 2018 FT Wealth magazine distributed with the FT in early May, Matthew Vincent wrote a piece under the heading ‘At last, a Club for Groucho’.
Groucho was well known for resigning from Clubs with the words ‘Please accept my resignation. I do not want to belong to any club that will have me as a member’. Most Clubs he thought were a waste of time and money.
What he did not think was a waste of time, however, was visiting his broker. In fact, he saw him almost every day, and his holdings were worth in excess of $2.6m in later life through his active interest and management.
Vincent in his article mentions the launch of BConnect Club, which is the Club I set up for UHNWIs and Single-Family Offices.
BConnect Club, Vincent says, ‘has openly declared an aim of bringing individuals together to do deals, rather than to invest conventionally’.
Other clubs, he says charge an annual membership fee of $30,000, presumably to weed out those who cannot pay, and to make a profit. BConnect Club, however, does not charge its UHNW members anything.
The begging question in his piece which Vincent does not address, is how do we weed out the rich from the poor if we do not charge a high fee?
The answer is simple.
As a practising family governance lawyer, I am fully aware of the onerous obligations put upon financial institutions and the professions to ‘know their client’ and with the increasing obsession of Governments to stamp the laundering of ill-gotten gains, they are also obliged to ensure that the source of wealth is not from criminal activity.
Each of our members, to qualify, must be verified as an UHNWI, by a practising professional; lawyer, banker or accountant, who must also confirm that he/she is a client.
The second, and possibly more interesting question, is why would UHNWIs and/or their single-family offices want to invest direct – surely it is too risky to invest in private equity?
This answer is less simple.
In my book ‘When you are Super-Rich who can you trust?’ I point out that the ‘professional’ management of wealth flourished when interest rates and inflation were high. In such a climate, the investment manager invariably made money for his/her client. This was then cleverly weighted against an industry standard, so that irrespective of the fact that the investment may have made a loss – if it was above the industry standard it was a success and a high fee could be levied by the investment manager.
However, as interest rates and inflation fell, poor performance became more obvious. This coincided with a world-wide drive, for transparency in the investment management industry to stamp out hidden fees and disreputable practices. Clients could now see how much it was costing them to invest with professionals.
This transparency will not ruin the investment management industry, there will always be wealthy people who want to outsource the management of their wealth to a professional. But to understand why investing direct for some is so desirable, it is necessary to understand what it is like to be rich.
Some rich people give to good causes – they are philanthropic, but others prefer to invest in good causes. The fact that some of these good causes or projects may fail is not a priority, they would not be any better off if they they gave it away, but the added fun is that some investments will make a profit.
BConnect Club simply brings these like-minded people together and introduces them to investment opportunities, which they would struggle to find on their own or with a few friends.
Matthew Vincent in his article quotes me ‘There are a significant number of high-end investment clubs around the world’, but he does not ask why our Club is different?
Small investment clubs invariably struggle. If they get too large they attract ‘wannabe’s’ but without economy of scale they cannot attract quality deals. This is a drawback we have resolved.
Digital technology solves other drawbacks as well. No-one can enter our ‘deal room’ unless it wants the BConnect Club to find it deals. Furthermore, our deals are only teasers –if a member is interested he needs to contact one of our Account Managers for further details. In this way, we combine a people business with digital technology.
The other advantage of having a Club of verified UHNWIs is that we can open it up to luxury products and professional advisers for whom UHNWIs are their target audience. They can feature their products and services for as little as £100 a month, or meet our UHNW members by sponsoring our events.
If you have comments or would like to discuss matters relating to restructuring, control, trusts and protection of your assets please contact us direct.
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