Rich investors still cautious

BBVA Patrimonios Chief Investment Officer Enrique Marazuela gestures during the Reuters Global Wealth Management Summit in Geneva October 6, 2009.

GENEVA/BOSTON (Reuters) - Battered by last year's financial crisis, the world's wealthiest are taking a much more cautious approach that ranges from how they put their money to work to how they are selecting advisers to help them, bankers, lawyers and accountants to the rich said this week.

"Collectively rich people are holding their breath," Keith Whitaker, managing director at Wells Fargo & Co's (WFC.N) Family Wealth unit said at the Reuters Global Wealth Management Summit in Boston.

"People used to have one quarterback to advise them, but now they are diversifying; but they are finding it to be a real challenge, and we are not seeing a very quick approach," he said.

In particular rich investors remain cautious about wading back into stocks despite a global equities rally since the start of the year, bankers around the world have said. Instead, many are still pursuing the most conservative strategies by sticking with cash or Treasuries.

"The dialogue we are having with clients is not when to get back into stocks but when to put money anywhere but Treasury bills," said Richard Kohan, national partner in charge of wealth transfer solutions at PricewaterhouseCoopers.

In Europe, BBVA (BBVA.MC) Patrimonios Chief Investment Officer Enrique Marazuela said: "Clients are still underweight on equities," adding that this was more conservative than the bank's "neutral" stance.

The push to preserve cash is understandable after world wealth declined last year for the first time since 2001 -- dropping 11.7 percent to $92.4 trillion, according to statistics from Boston Consulting Group.

But bankers to the rich warn this is not a shrewd strategy, and some are encouraging their clients to adopt bolder investment choices again in the months ahead.

"Safety alone is not the way to go," said Catherine Keating, chief executive officer of JPMorgan Chase & Co's (JPM.N) U.S. Private Bank. "Cash is the slow confiscation of capital," she said in Boston.

Her team sees opportunities in credit markets and said investors will want to diversify by geography in the months ahead while still being prudent after one of the world's worst-ever financial crises.

In Asia, JPMorgan bankers are still noting a reluctance among clients.

Ivan Leung, chief investment strategist with JPMorgan Private Bank in Asia, said his division is positioning for a deceleration in the global economy in the second half of 2010 by staying underweight on equities.

Leung said many first-generation Asian entrepreneurs had been reluctant to pile into equities earlier this year while their businesses were still floundering, while others pulled money out of hedge funds.

"The risk tolerance is rising now, but I will concede that the Asian equity markets are looking fully valued now. So this is the time to be even more careful," said Leung.

BUY EMERGING CURRENCIES, COMMODITIES?

Despite the low returns offered by cash, with key interest rates close to zero in many parts of the world, delegates at the Wealth Management Summit said many clients are still happy just to preserve their wealth.

Boris Collardi, chief executive of Swiss private bank Julius Baer BAER1.VX, said cash is a popular option since many customers remain wary of the equities rally.

"Private clients are sitting on cash, playing a bit with the stock market; some are already getting out again," he said.

Investors' general state of caution is also being felt in their willingness to move advisers and become fully invested again, bankers said.

Wells Fargo's Whitaker, who works with wealthy families, said he is seeing a lot of anger and regret among clients who are now questioning why they were not better prepared for the financial crisis.

Indeed many people hastily abandoned advisers for what they considered to be the more conservative players last year, said David Lamere, CEO of Bank of New York Mellon Corp's (BK.N) Wealth Management Unit.

While that flight to quality is over now, he and others still expect to pick up new business from shell-shocked investors who are looking for bankers who withstood the crisis to help them do the same.

Still Lamere said many investors are "still scared as a cat" and are only slowly allowing his team to reinvest newly acquired portfolios.

(Additional reporting by Ben Berkowitz and Parvathy Ullatil; Editing by Hans Peters and Gerald E. McCormick)