March, 25, 2010

After Steffen Binder and his partners sold a Frankfurt-based Internet research firm for $15 million in September 2000, he invested his share of the windfall with private banks. As the dot-com bubble burst, his holdings shrank faster and then rose more slowly than the market.Binder discovered that fees were eating into his returns by pushing the annual cost of his accounts to more than twice the management fee of 0.8 percent to 1.2 percent of assets charged by a majority of wealth managers, he says, declining to identify his banks.

“Ninety percent of wealth-management clients are not aware of the costs they pay indirectly,” said Binder, 43, who in 2008 co-founded MyPrivateBanking.com, a Kreuzlingen, Switzerland- based firm that provides research and analysis on the private- banking industry. “If they invest in relatively expensive alternative products it can be a huge amount.”The financial crisis cut assets at wealth managers by 17 percent to $14.5 trillion in 2008, according to London-based Scorpio Partnership in a study last year of 248 institutions worldwide, including the biggest: Charlotte, North Carolina- based Bank of America Corp., UBS AG of Zurich and New York-based Citigroup Inc.

.

.