From portfolio management to privacy

In the 1980s, wealth management, usually called “private banking” at the time, was strictly focussed on asset management and was pushed into the background of banks. Private banking activities, long viewed as not very profitable, thus saw renewed interest in the second half of the 1980s. The erosion of lending margins at the time also led banks to seek out new sources of profit. With the introduction of the Cooke ratio3 in 1992, activities that did not require much of their own funds became an attractive option for banks wanting to diversify their activities. The development of new products, such as life insurance, further resulted in the establishment of internal training on law and tax issues. This led to the development of an approach focussing not only on portfolio management, but also on law and tax. The first wealth management degree was launched in the second half of the 1980s and followed by the creation of many others. Spurred on by bank executives, many

“wealth management” divisions (distinct from asset management divisions) were created in the 1990s. Wealth management divisions were then filled by the first generation of graduates in wealth management, who possessed more technical expertise, specifically on legal and tax issues.

Patchy regulations and very limited success of certification - an essential support for a professional community trying to establish the social closure of a market (Sarfatti-Larson, 1977) - nevertheless show how blurred the boundary between asset and wealth management remains in France. Wealth managers still make most of their living from asset management - indeed, most of them are remunerated through sales commissions - even though they insist that they are primarily doing estate planning. Since most wealth managers are unable to distinguish themselves from asset managers, who are focussed on selling financial products, they regularly try to transform their role by making wealth management projects and clients’ secrets, rather than their portfolio results, the main elements of their work (Herlin-Giret, 2017). They seem to like undertaking a role focussed on “helping clients to think about the meaning they would like their wealth to have”, as one wealth manager explains in Gestion cle Fortune (n° 141, 2004). Unlike a straightforward logic of personal gains, wealth managers encourage clients to attach precise meanings to money. This rhetoric encourages the perception of money as less neutral, “marking” (Zelizer, 1994) it so that clients can decide what wealth means to them. Clients’ emotional attachment to the items they own is viewed here as an essential and positive element of their relationship to money. This should be given as much attention by wealth managers as the effective management of their clients’ fortunes. In a book on art finance, we read that “Art is a good investment only on one condition: to love and be guided by a passion for art objects. Choosing according to your taste is the key to a successful acquisition”. The author here opposes a financial logic to the logic of money marking, which is seen as fundamental to enabling the investment to be profitable. Neil Smith, a freelance wealth manager explains, “we should think of it [wealth management] not as managing people’s money, but as managing people who have money”. The setting and decor of the banks should immediately suggest to clients that their secrets and plans, more than their assets, are the focus of the interaction. Meetings often take place at the client’s home and computer work is moved “backstage” (Goffman, 1978) rather than done in front of them. In private banking offices, decorative items are chosen to make clients feel at home and encourage them to unveil their secrets. The importance given to privacy is a reminder of the luxury world, where interactions between clients and staff rely on an implied norm of reciprocity, confidentiality and discretion (Sherman, 2007). The dialogue between the two parties also needs to appear spontaneous, like a conversation between equals. So more than just accumulation itself, wealth managers like to highlight that they are protecting clients’ secrets, as well as helping them to give meaning to their wealth.

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