Having started in financial services in London in the early 1990s, Mark Nowell has worked with high-net-worth clients across Europe and the Middle East. He is a registered European Financial Planner and holds professional qualifications from the Cyprus Ministry of Finance as well as the UK.
3D Global has been working in Cyprus since 1997. We asked Investment Director Mark Nowell about how clients have changed over the years.
Nowell: We’re one of the longest-standing wealth managers in Cyprus. We’re a Cypriot company, but we’re British-owned and -managed; our traditional client base has been the retired expat. I am an expat myself, so I know them well. I’ve worked in the UK, in the Middle East, and now in Cyprus. We have many high-net-worth clients; British, Russian, German clients — we have a broad spectrum that probably reflects the nationalities of the population of Cyprus. We also have clients not just in Cyprus, but across Europe and across the Far East, the Middle East and Africa. But because Cyprus is our main focus, it’s where the majority of our clients are based.
Do you find that? clients also look for a different style of portfolio management.
Nowell: Absolutely. I often liken it to people who have an interest in cars. One person buys a car because it’s red. Another buys a car because it’s reliable, and it’s going to get from A to B in safety. Others care about speed, style, comfort, , luxury, safety, whatever. There are other people who are interested in what actually happens under the bonnet.
Similarly, we have clients who just want to know what they are going to get at the end of the day, not interested in the mechanics inside. Others want to get involved in every decision, and analyse with us every asset that we’re recommending. Others will come to us with an asset they’ve chosen and ask if they should invest in it. And even will come to us and say, Well, actually, I’m quite interested in this asset, what do you think?
This is not surprising, because many of our clients are or have been successful in business, whether that be in advertising or shipping, or whatever. And that is what they’re good at. They’re not necessarily good at finance, and good at identifying investment opportunities and managing their money. And that’s what they come to us for.
And ultimately, with the majority of our clients, we work on an investment advisory basis. We agree a mandate in terms of targeted return and targeted risk. Maybe there’ll be some restrictions in terms of assets, for example they want an Environmental, social and governance style (ESG) investment. But we’ll agree the principles, and then we will make recommendations, asset by asset. We have found that, even when we were providing portfolio management as opposed to investment advice, our advice was essentially the same. The only difference was we were investing without discussing each change with the client.
How do you find client expectations have changed?
Nowell: Today, an increasing number of clients, Cypriot or international, understand that they have to expect single-digit returns at a reasonable level of risk. If they have that understanding, then we can provide a good assurance of that return.
Clearly, the return on bank deposits is going to be unsatisfactory. Many banks, in this time of negative rates, even ask for payment on deposits greater than €100,000.
So reasonably reliable, single-digit return is satisfactory. Many people are asking: “Where can I put my money that is safe? This is new. One of the most important things is, if you’ve worked hard to accumulate the assets that you have, the last thing you want, is for those assets to then be depleted because of haircuts, or negative interest rates, or unreliable advisors.
To help in the avoidance of scams, we offer educational seminars, both to our investors and to the general public, on how to protect yourself from fraud, avoiding online scams, because in the UK alone in 2019, £1.2 billion was lost in online scams.
Do you find that there’s a big difference between the international clients and Cypriot ones?
Nowell: Cypriots have a love of land and property. And they have a mistrust of the stock markets, and you can understand why, as there have been a number of crashes in the past.
So the Cypriot high-net-worth investor looks at land, or apartments or buildings, etc. first, and then they will consider alternative investment strategies.
But investing in real estate is not without issues. Owning the bricks and mortar introduces other risks. You’ve got liquidity risk: If you’ve put your money into a block of flats, or put your money into a house, if you want to realise any of that money for other purposes, you’re either all in or all out. And then you have capital gains tax. Or, if no one rents, you have no yield.
So we complement real estate investment with alternatives. Here, the challenge is that in recent years, there have been so many esoteric funds, where people have been trying to commercialize and package into an investment product, parking at airports, storage units, cemetery spaces, even legal litigation funds.
With all these esoteric investments, what you’ve got to do is to try and pick out the golden nugget, the one or two that are going to be that are going to be good. I’d rather reject one or two golden nuggets along with all the rubbish, than make bad investments that lose money for our clients.
This is where our investment committee is invaluable in assessing every investment that is offered to us.
Choosing the right fund managers is also important?
Nowell: Funds are an important component. I’m not only interested in what a fund manager has done over the last year, or five years, I’m interested in the long-term consistency of their performance. And if we look at a sector where we’re trying to get some asset allocation, and we cannot identify a method of beating the index, then we get an ETF that follows the index. You know, rather than trying to reinvent the wheel, if there is a wheel that’s round enough, we’ll use it.
Basic portfolio diversification has not changed much, however?
Nowell: In order to design a portfolio that matches the risk appetite of the client, you have to have a certain amount of cash, a certain amount of gilts, bonds, equity, property, commodities, alternative assets and so on. We are successful getting the asset allocation right at the outset.
Because success is about time in the markets, not timing the market. And if your asset allocation is right from the beginning, you will not have to change it much over the very long term, over years. There is good research behind the fact that time in the market brings investment success.
There will be global, macroeconomic changes that mean you have to make small adjustments. But, essentially, once you’ve got it right, it stays right.
