No asset-switch panic seen among Europe's rich

By Steve Slater

GENEVA, Oct 9 (Reuters) - Private bankers have seen little sign of panic among the world's rich after the bout of financial market turmoil, but assets have shifted to cash and other safer havens and managers are urging clients to be more vigilant.

This summer's turbulence could also increase the pressure on private bankers to improve their investment advice, attendees at Reuters' Wealth Management Summit said.

"Certainly there are some clients moving to cash and away from what they were in, but only some," said Peter Flavel, head of Standard Chartered's (STAN.L: Quote, Profile, Research, Stock Buzz) private banking business.

"Our advice to clients is ... have a heightened sense of awareness about the future, but it's not necessary to make any big changes now if you're investing for the long term," Flavel told the summit held at Reuters offices in Geneva.

Senior wealth management executives at other banks also indicated there had not been a knee-jerk reaction -- partly as they were already promoting a diversified portfolio -- but clients needed to avoid illiquid investments.

"We advised clients who had been over-leveraged to reduce a little bit and take a more prudent approach, because ... there will be volatility," said Samir Raslan from Citigroup's (C.N: Quote, Profile, Research, Stock Buzz) global wealth management arm.

DELAYED REACTION?

Sebastian Dovey, partner at wealth management consultancy Scorpio, said there had been a repositioning of assets but it was too early to quantify and often there was a slow reaction to such shocks, as seen after the stock market decline of 2000 through 2002.

"It took a lot longer than the banks were hoping for the clients to become comfortable to come back into the markets ... there is always is a delayed reaction," Dovey said.

The turmoil exposed shortcomings of investment advice provided by some private bankers, according to Ray Soudah, founder of Millenium Associates.

"There are several hundred investment managers and client advisers, maybe even a thousand ... who are in the process of restructuring client portfolios messed up by the recent market turmoil.

"That exposed the lack of professionalism and the lack of expertise at the client-facing end in selling products and investments to clients," Soudah said.

Managing the assets of the world's rich is the fastest growing area of financial services.

Their wealth rose 11 percent last year to $37 trillion, according to the 2007 World Wealth Report by Capgemini and Merrill Lynch. There were 9.5 million people with liquid assets of over $1 million.  Continued...