ABN AMRO Private Banking offers wealthy clients a range of financial services, including investment. Clients can choose between execution only services and investment advisory services - or they can let the bank do their investing for them. This is called discretionary portfolio management.
If a client of ABN AMRO Private Banking prefers to invest independently, the service we provide is called ‘execution only’. The client decides independently what to invest in, and assesses independently what the related risks are. The bank may provide non-specific support, such as general market information.
Investment advisory services
Clients can also opt for investing on the basis of advice from the bank. The bank’s advice is tailored to the client’s risk profile. The ultimate investment decision is up to the client.
Discretionary portfolio management
Finally, clients can decide to leave the management of their investments entirely to the bank. This could be because they do not have the time or the expertise to do their own investing. Or because the client is not allowed to take investment decisions due to potential conflicts of interest. In that case, the client opts for discretionary portfolio management. The bank takes all buying and selling decisions within a pre-agreed investment mandate.
If the client opts for investment advisory services or for discretionary portfolio management, the bank and the client sit down to discuss the client’s personal and financial situation and establish the parameters within which the bank is authorised to proceed. This also involves determining the client’s risk profile. Depending on the clients situation and preferences, this profile may vary from very defensive to very aggressive. If a client opts for execution only, the bank just checks whether the client has sufficient knowledge and experience to understand the risks related to investment decisions.
An important aspect of our investment services is securities administration and safekeeping. We call this custody.
Clients who give a bank custody of their securities must be protected in the event of the bank’s insolvency. This means that clients must be able to access their securities even after a bank failure. The law may offer such protection. In the Netherlands, for example, it is provided by the Securities Book Entry Transfer Act (Wet giraal effectenverkeer). Another means of providing this protection is by using the services of a custodian. The client’s securities are held by a custodian company from which the client can claim them directly. As such, the client’s securities are segregated from the bank’s own assets.
Using a custodian can also have commercial reasons. For example in countries where it is market practice for banks to delegate custody of clients’ securities to a custodian (or nominee, as it is called in some countries) rather than hold such securities themselves. Internationally, ABN AMRO Private Banking has its own custodian companies in locations like Guernsey, Singapore and Hong Kong.