Private banks opaque on performance and fees: study

LONDON (Reuters) - Wealthy users of private banks do not enjoy as much transparency on how their investments are doing or what they are paying in management fees compared with users of mass market mutual funds, a study shows.

A survey of the websites of the world's 40 largest wealth managers' released on Wednesday by research consultancy MyPrivateBanking found only 10 percent offering some form of quantitative data on the investment perfomance of their clients' accounts.

Only 8 percent of the institutions surveyed provide a three-year investment performance track record, a measure widely considered to be an industry standard for mutual funds.

While mutual funds publish data on performance and management fees, exposing them to sometimes stark scrutiny of their track records against peers, private client accounts are not subject to the same transparency expectations, the report says.

Private banks also fall short on disclosing how much they charge for their services with just 22 percent giving any quantitative information about fees.

Even fewer - just 18 percent - give "precise quantitative" information on wealth management fees, the survey says.

"Banks can show that they have an edge in managing investments by disclosing their track record on discretionary accounts. Over the long term it is just a question of whether banks will become more open voluntarily or if regulators are going to have to come up with mandatory disclosure standards," said Steffen Binder, Research Director of MyPrivateBanking.

Critics of private banking said the results were not surprising.

"I guess that (wealth managers) aren't in a terrible hurry to make it clear what the costs are... If your costs are really low you'd be telling everybody about it. If they're not, you won't," said Robert Lockie, a financial adviser at London based Bloomsbury Financial Planning.

However, Sebastian Dovey, managing partner at wealth management think tank Scorpio Partnership said private banks are making progress on transparency and what they reveal on their websites will not always reflect the advances made by the industry.

"I am not surprised that many have either not yet posted schedules or have very generic information on their websites. While we would all want it to be addressed faster I am not certain, however, that the current status is fully a sign of disinterest on the part of the banks," he said.

(Reporting by Chris Vellacott, editing by Sinead Cruise)