• Sonderveröffentlichung: Rödl & Partner GmbH

Transparency as a success factor.

(Reading time: 6 - 11 minutes)

Transparenter Bulle 2Perspective. Investors want to know exactly how good their asset managers really are. They, in turn, want to be able to prove that they deserve their clients' trust - especially in times of crisis. "Both have a high interest in objective, neutral and bank-independent proof of performance," says Alexander Etterer, partner at the auditing firm Rödl & Partner: "We deliver it."

These are the key questions, especially at the beginning of a business relationship between asset owner and manager, when trust and credibility are still a tender plant. "Has your investment strategy worked in the past? And how have you responded to crises?"

"You wouldn't believe how often beauty contests use wonderful-looking return graphs. But whether the stated results were actually achieved in this way cannot be verified," informs Alexander Etterer, Head of Wealth, Reporting & Controlling at Rödl & Partner, "moreover, it is seldom clear how the manager actually achieved a good result - with conservative strategies or by using high-risk securities."

For the potential new client, this is unsatisfactory."He wants transparency in order to understand and compare the results," Etterer reports from his daily consulting practice. If this is not given, many wealthy investors often spread their capital over several addresses in order to reduce the risk of having chosen the wrong one. This in turn is a problem for the efficient administrator. For reasons of diversification and cost efficiency alone, he can only come up with the best solution if he gets an appropriate share of the total assets. "Client-oriented asset managers themselves therefore have a strong interest in a relationship with their clients that is characterized by openness and transparency."

Both market participants would be served by a record that - objectively, credibly, comprehensibly and independent of banks - shows information about asset management strategies in connection with different investment profiles. "That's exactly what we've been doing since 2015," Etterer says.

As one of the leading auditing firms in Germany, Rödl & Partner has been intensively involved in the individual reporting and controlling of asset management strategies for more than 20 years. This allows investors to make better informed decisions. Asset managers are given the opportunity to distinguish themselves from the competition through transparency. Around two dozen banks and asset managers now regularly supply Etterer with their securities transactions from various real and anonymised reference custody accounts, which he records in real time using his securities accounting system. "We then evaluate the data objectively and neutrally as part of our 'proof of transparency' quality assurance process."

Clients can obtain this transparency certificate either from the asset manager or - after consultation with the latter - directly from Rödl & Partner. It not only proves the investment results achieved, but also contains essential information that makes the style and character of the submitted asset management strategy comprehensible. "Just as important as the pure result is, after all, for investors how this was achieved. And whether continuity can be derived from it. This is also about a kind of feel-good factor. Investors have to be able to identify with the way their capital is invested - but above all they want to understand it," explains Etterer. Interactive "smart charts" therefore illustrate the specific strengths of the respective asset manager and allow a "look into the engine room".

In addition, Etterer's analyses make it possible to compare the performance of different houses. From this perspective, the results in the crisis year 2020 are particularly revealing. Rarely have there been so many opportunities to get things right - or wrong - in a short period of time (read the analysis at the end of the article). "An above-average performance this year suggests that the administrator has processes in place that should continue to generate good results in the future," Etterer is certain.

Of course, participation in his transparency offensive is not without risk for asset managers. After all, below-average performance is also revealed in this way. "But anyone who claims to have successful processes and strategies should not actually shy away from this comparison. Participation in our transparency assessment alone is therefore proof of quality for the respective company. That's why we award the 'Transparent Bull' to those who take on the task every year."

Etterer deliberately refrains from focusing on return or risk figures. Transparency alone is his selection criterion. "It ultimately makes it possible for the investor to analyse the asset manager's work processes for himself. The Transparent Bull therefore also serves many investors today as an important prerequisite when selecting their asset manager. Quite honestly - in my opinion, anyone who rises to this challenge also deserves to be shortlisted."

In concrete terms, Rödl & Partner provides sample requirements for the proof of transparency that are typical for private and semi-professional investors. They are based on clearly defined investment guidelines. "It is particularly important to private investors that sound and practicable investment instruments are used. After all, it doesn't help if - as in many media-effective portfolio contests - highly complex, illiquid investment constructions requiring explanation are used on paper, which investors then reject in practice because they don't understand them."

Semi-professional investors, such as foundations, municipalities or associations, on the other hand, prefer investment guidelines with which they know their legal requirements are met. "They want to invest in a distribution-oriented manner, fungible at all times, sustainable, and with a focus on companies with strong credit ratings."

Participants implement the defined guidelines in the next step, providing anonymized client portfolios from their asset management or in-house model portfolio strategies. "By setting clear guidelines, we ensure that apples are not then compared with oranges." In addition, as a general rule, only one asset management strategy per investment profile is allowed to participate in the transparency verification. "In this way, we prevent several custody accounts being submitted for a particular strategy in order to then always refer to the one with the best result when talking to customers. This is very well received in the industry," informs Alexander Etterer: "Managers are happy to finally have credible proof of their performance, and clients can now discuss with their banker at eye level." ®


// Litmus test Corona - how good was your administrator?

"The year 2020 was certainly the most challenging phase that bankers and asset managers have had to master in the last 50 years," Alexander Etterer is convinced: "At the end of February 2020, share prices worldwide were still at record levels.This was followed by a brutal price collapse in the spring, which cost many indices up to 50 percent.In the summer, there was a rapid recovery, and the news of effective vaccines in November 2020 then put the stock markets into bull market mode. I've never seen anything like it."

This year, there were countless opportunities to excel - or get it wrong. How did the 18 bankers taking part in Rödl & Partner's transparency audit fare?

"We have evaluated the sample portfolios. In the table below, interested parties will find meaningful key figures for three strategy groups.This is a first clue for all those who are now talking to their bank partners about the performance of the past year at mid-year", explains Etterer. However, he says it is important not to focus solely on returns. "The crucial question is how that return came about. Those who act cautiously as a matter of principle will perhaps have generated a lower return. But then the price fluctuations and the maximum setback - the so-called drawdown - should also have been lower. On the other hand, when above-average returns are achieved, it is important to ask what risks were taken. And whether the good result was the result of a repeatable, systematic process or due to gut feeling - and thus probably pure luck. It is crucial that the manager can plausibly explain why he was positioned in which way at which stages."

Roedl Chart 93


// The Beauty Contest - Better with a Coach.

Following the sale of a business or an inheritance, many asset owners are often forced to take an in-depth look at investing for the first time. Until now, their bank visits have focused on credit transactions and standard banking. But now they must delve into the often complex details of wealth management. And this at a time when holding liquidity costs money in the form of negative interest rates and even this supposedly risk-free investment is only guaranteed to the level of the deposit guarantee - €100000 per bank.

"Most simply feel overwhelmed with the choice of banking partner in this situation. It unsettles them to put their assets in foreign hands," explains Alexander Etterer, Head of Wealth, Reporting & Controlling at Rödl & Partner.

In fact, the selection process - the so-called beauty contest - is not without its pitfalls. "Because, of course, at this moment all financial service providers present their services prettily made up and in perfect glossy brochures. But wealth holders don't want colourful pictures. They want to understand exactly how their assets are to be increased or preserved," says Etterer.

That's why a systematic tendering process - possibly with the support of an experienced coach - is so important. Alexander Etterer has been doing this for more than 20 years now. "What started small as an optimization process for asset manager searches quickly developed into a tool with depth. Today, we have set up a sophisticated process that helps asset owners identify suitable partners very efficiently."

The first step in this beauty contest, he says, is to formulate the request for proposal in concrete terms. "In doing so, the asset owner has to think carefully about what he really wants."

Then the question of how many providers should be invited to tender has to be answered. "From our experience, eight to twelve addresses are ideal. A mix of independent administrators, banks and private banks, supplemented by a savings bank or credit union, has proved successful."

Once the candidates have been identified, they are invited to submit an offer tailored to the sender's personal ideas and wishes.

After that, the real work begins. Because now the proposals have to be systematically evaluated."You wouldn't believe all the things I've experienced in the process," the expert recounts, "standard bank products flowed heavily into the offer, fee sources were incorporated twice and three times, the questions in the RFP were answered only sporadically, superficially or not at all. Or the investment proposal did not match the requested terms of reference as well as the associated risk-return metrics."

In order to identify these pitfalls, Etterer is often asked to accompany this part of the process as a coach - "because now it comes down to many subtleties." After a close examination, the personal discussion with the participants follows in a second round. "This must show whether the chemistry between the participants is right. As a coach, however, I also want to know exactly what considerations the banker has in connection with the submitted proposal. What investment and risk management concepts does he have? How will communications and reporting work?"

Then, at the end, there are the final negotiations. "The decisive factor here is that the asset management contract is optimised from the investor's point of view and not from the service provider's point of view," Alexander Etterer makes clear.

The cooperation with a consulting partner is worthwhile for investors from an asset to be tendered in the amount of about five million euros in any case. "But even for investors with lower investment volumes," concludes Etterer, "consulting services limited to two to four consulting days are of great added value."



These 18 banks and asset managers took up the challenge and participated in the Transparency Verification in 2020 (in alphabetical order:

Avana Invest

Bank Gutmann

Bankhaus Herzogpark

Capital Bank - GRAWE Group

Deutsche Bank

Donner & Reuschel

DZ Private Bank

Frankfurter Banking Company

Glogger & Partner Asset Management

Hamburg Savings Bank

Hauck & Aufhäuser Private Bankers

Merck Finck Private Bankers

Novethos Family Office

Quirin Private Bank

Düren Savings Bank

steinbeis & häcker asset management

UniCredit Bank

Volksbank Kraichgau eG Family Office

Source: Rödl & Partner


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Rödl & Partner Ltd.

Auditing company


Im Zollhafen 18; 50678 Cologne, Germany

Alexander Etterer, Partner, Head of Wealth, Reporting & Controlling

T.: 49 221 949 90 96 00

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