How Bad Financial Decisions Put a Lot of Money at Risk: Insights from Roland Plaintiff, Head of Investment Solutions at Raiffeisen

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According to the Bankers Association, financial institutions in Switzerland managed a total of CHF 3.9 trillion in private assets in 2021 – and the money is constantly increasing. Why do so many people rely on comprehensive financial support?

Roland plaintiff: The motivation is simple: people either want to build up a fortune or secure the existing one. This usually requires expert financial advice. Awareness has increased that bad decisions, perhaps also due to incomplete information, mean that a lot of money is at stake. Trust is all the more important – in the advisors and in the financial institution.

What aspects are taken into account in asset management?

We analyze the personal situation of each investor in terms of provision, pension, liabilities such as mortgage interest, education and so on. The investment volume and the investment strategy are derived from this.

Wouldn’t it be possible to do this alone? Do you lack the necessary financial knowledge to make appropriate investment decisions independently?

Investing money optimally involves a lot of work and can be complex. For example, think of the permanent analysis of the global economy, the development of corporate profits, interest rates, political risks and many other factors. You have to compare this information with the current portfolio and decide whether adjustments are necessary against the background of these analyses. No, the necessary financial knowledge is not always lacking, often there is simply a lack of time or interest.

So who would you recommend such a mandate to?

There are no typical customers – that’s why we offer many implementation options in asset management at. An important argument for such a solution is often that there is a lack of knowledge about the global economy and markets or, above all, of time. Often a large part of the money is placed in asset management as a core and a portfolio is managed as a small satellite that is managed by the company itself.

With the conclusion of an asset management mandate, a certain minimum level of assets is usually required. In addition, the solution is not necessarily cheap. Is the offer only for the rich?

Die digital wealth management Raiffeisen Rio starts with us at 5,000 francs, classic asset management at 50,000 francs. Digital asset management in particular shows that the entry hurdles in terms of volume have fallen massively. Of course, managing the portfolio also involves costs. However, this is a flat fee that includes, for example, advice and administration, transaction costs or tax reporting. Depending on the activity, the costs of transactions in a self-managed portfolio can quickly exceed the fees for wealth management. The increase in assets under management also shows that the misconception that there are only investment solutions for very wealthy people is slowly disappearing.

In recent years, more and more online wealth managers and robo-advisors have been competing with traditional providers. How do the offers differ?

First of all, you really have to differentiate between digital asset management and a robo-advisor: With digital asset management, the decisions are delegated to the bank, with robo-advisors the investors make the decisions themselves. Certain providers try to differentiate themselves by offering a lower price. But the price differences are small for the digital solutions. Other aspects play a more important role: Certain offers are more playful, with many options and community functions. Others are kept very simple and implemented with modular building blocks.

To what extent do you rely on new technologies in asset management yourself?

In fact, we systematically analyze a very large amount of market data, the results of which we incorporate into our investment decisions. The market data shows how the market participants are positioned and how the momentum is developing. For example, the herd behavior of investors can repeatedly warn against exaggerations. With an asset management mandate, investors benefit from an infrastructure and comprehensive analyzes that are hardly accessible to private individuals.

“Depending on the activity, the costs of transactions in a self-managed portfolio can quickly exceed the fees for wealth management.»

With the asset management mandate, the decision-making power is handed over to the bank. Can I still intervene if necessary?

The most important thing in a wealth management is choosing the right strategy. This must correspond to the risk capacity, but also to the risk tolerance of the investors. Then personal preferences should also have an influence: For example, do I want to put a special focus on Switzerland? Or sustainability? Once the strategy has been set, investors usually don’t want to intervene.

What if I change my mind?

If, for example, preferences change or you want to increase or reduce risks, you can adjust this at any time. Just like you can balance the portfolio on a daily basis. Incidentally, the most successful investors are those who work out the investment strategy properly, remain true to this strategy and then do not have to question it every time there is market turbulence.

How does the bank react to current market changes?

These are analyzed by the investment committee and tactical changes are then decided. There, for example, a decision is made as to whether the equity quota should be adjusted and via which countries this should be done. The portfolio managers then decide which investment instruments are best suited to achieve this.

How can I understand that as a customer?

Our investment process is very transparent and comprehensible, from the strategic to the tactical allocation of assets, to the decision on the individual transactions, to the proof of the results of the decisions. Although investors delegate the decisions, they are informed about them and can always follow our current assessment of the markets via our publications on the investment strategy.

How do you assess the market development in the current year?

2023 has certainly been a good year so far: attractive yields can be achieved again on the bond markets after the rise in interest rates, and the stock markets are moving upwards with some fluctuations. One reason for the positive trend is certainly that the central banks are nearing the end of their interest rate hikes, which means that the risk appetite of shareholders is high – after fears about interest rates had still “damaged” the 2022 investment year. The drop in inflation is now having a positive impact on market sentiment.

However, is a recession also feared?

The economy is likely to continue to slow down due to the high interest rates. Temporary turbulence is therefore to be expected in the course of the year. However, professional asset management can react precisely to such market situations.

Which investment ideas are currently in particularly high demand in asset management?

A prominent trend in 2023 was certainly artificial intelligence and technology companies that benefit from it. In this area, however, we also observe a lot of hope and exaggerations. Especially when the economy is clouding over, we tend to look for safe stocks with substance that are not primarily driven by high expectations, but by solid sales and profits. There is a strong focus on bonds, which offer potential again after the rise in interest rates. Here, too, we focus on quality, even if high-yield bonds promise a higher return. Real estate investments are also in demand again: Not least because of the end of the interest rate hikes, investors are once again seeing entry opportunities here. We share this view.

And what about sustainability? After all, in November 2022, Raiffeisen was the first national retail bank to launch an impact wealth management mandate.

This mandate is for investors who attach particular importance to a positive, measurable ecological and social impact in addition to the pure opportunity for returns. Thematic investments are also used in this mandate, such as a fund on “sustainable energy” or “water”. When it comes to bonds, for example, we rely heavily on green bonds. The mandate also includes microfinance funds. We look at how far the invested companies are in line with the sustainability goals of the United Nations, the 17 Sustainable Development Goals, and also show this – along with other sustainability indicators – in our portfolio reports.

How sustainable are the other asset management mandates?

A sustainable implementation of the other mandates is very important to us, because we are convinced that aspects of sustainable corporate management, social issues and ecology complement the classic financial analysis and we can thus achieve even better investment results. We therefore systematically integrated our sustainability criteria into our mandates last year.

In any case, you have convinced the trade press: Raiffeisen was founded in Private-Banking-Rating 2023 by the business magazine “Bilanz” as the overall winner. How proud does that make you?

Of course, one is proud of awards from independent bodies, especially since we have received this award repeatedly. The decisive factor for this was Raiffeisen’s convincing performance in providing comprehensive advice and in developing a complex and sophisticated investment and financing solution. We focus on holistic advice in order to understand exactly what the needs and goals of our customers are.

They find out More about Raiffeisen asset management here.