The 6 Treasury Lessons from Wealth Management Principles

23 Mar 2023

Wealth managers have mastered the art of how to understand a client’s life situation, risk attitude and financial goals. Gaining this deep understanding unlocks the value for any wealth management client.  It begs the question of the Birchstone Markets founders; “why should the man on the street be the beneficiary of such proven financial techniques when corporates and institutions across the UK still have to wade through the mire of complexity, inconsistency and vulnerability when it comes to their FX risk management?”

In this article, we explore the six fundamental ways that wealth management principles should positively affect FX risk management. We have based these findings on interviews with companies, anecdotal feedback, and our experience in the market. 

1. It Starts with You

The starting gun of any wealth management journey is to assess the risk attitude of the client before considering the portfolio that may be appropriate. This isn’t finger in the air stuff. No, this scientific and skilled testing allows the wealth manager to understand their risk attitude and risk capacity, often framing the investments and level of risk they should consider.

Notably, in recent research Birchstone have conducted amongst companies with FX risk, their ‘Risk Tolerance’ is often markedly lower than their ‘Risk Capacity’, as illustrated above. What does this mean? It is a very strong indicator that even for companies where they may have capacity to take on slightly more risk in their FX management (i.e., wider budget rates, less board scrutiny) the Risk Tolerance of the individual undertaking the decisions is a major factor. This knowledge is crucial in any effective risk management conversation, inspiring us to work with financial psychometricians here at Birchstone to build a risk profile report which enables us to score client risk before embarking on product and strategy choices.  

2. Connected Goals

The leading wealth managers out there don’t just guide their clients based on a pounds and pence number they are targeted to make; they know their deepest financial goals, insecurities, and family aspirations. Being goal-orientated allows the experts to cater to the client’s portfolio, alongside their risk tolerance scoring, to exactly the level of risk and income required to meet their ambitions and then manage them. They can’t be expected to make high returns for a client that has income needs using low-risk products.  

Whilst there are clearly broader factors to consider for any finance team managing FX risk, such as hedge accounting, our research suggests that meeting or beating a budget rate still dominates their objectives. 

Notably, governance and the ability to effectively regulate and communicate how the FX risk is managed also scored highly, which hints that the ability to articulate your strategy is something that many FDs and CFOs are still searching for. That said, some businesses have other objectives, and we need to make sure we understand those to ensure the most suitable strategy.

3. Clear Strategy & Reporting

Many say that the true value of exceptional wealth management is when your investment portfolio reflects your exact risk appetite, market themes, and quality engagement with your wealth manager. For too long, an FX portfolio for companies managing their risk has been vulnerable to a dizzy pattern of misunderstanding, shallow client knowledge, product pushing, and inconsistent hedging behaviours. According to our research, owners of businesses are only taking primary control of the FX risk in 11% of the sample.

In our research, 89% of the time the FD or CFO are making the final decisions. This is often a lonely place and you don’t get thanked for getting it right but will be judged for getting it wrong. 

No pressure then folks! Creating alignment of strategy across key stakeholders is therefore paramount and knowing when clients aren’t aligned in FX strategy is important. How do you reach that utopia of alignment around your FX strategy? Clear, simple and effective reporting that binds your stakeholders together.

4. Data Driven Decisions

Arguably the wealth management industry has been one of the major beneficiaries of the dominance of Fintech since the turn of the century. The rise of data, analysis, and innovative platforms for clients to manage their wealth in a manner that they wish, empowered by a myriad of data points at their fingertips, is changing the game for good. 

In FX risk management things are beginning to change too. Making multimillion-pound FX decisions is often a lonely place. So, when making those calls it’s helpful and important to see what your peers are doing in order to contextualise and often ratify your decision. Understanding what like-minded clients are buying, where they are budgeting from, and what their goals are will give you that conviction that may have been evading you up until now. 

“ How do you reach that utopia of alignment around your FX strategy? Clear, simple and effective reporting that binds your stakeholders”

5. Active & Agile

The clouds are undoubtedly beginning to part to welcome further innovation and smarter use of technology to enhance clients understanding in treasury management. Yet, just like in wealth management, traditional personal service and relationships may never be replaced but purely complemented and enhanced by the power of technology. Knowing when the client wants to speak, what they want to talk about and knowing they play golf on a weekend or love cooking Italian food (or any cuisine for that matter!) are the ingredients that make relationships stick and we wouldn’t have it any other way at Birchstone. We’re people people. That may mean we’re old school but when combined with our thirst to use innovations in investment management and data analytics to empower our customers to take control of their treasury risk, we’re onboard for change.

6. Reassuringly Simple

In the world of investments there are a lot of complex products and complex language. It can be overwhelming, confusing, and we tend not to buy things we don’t understand. Making things complex certainly isn’t clever. That’s why we promise to always speak plainly and simply with zero jargon. Enough said. To see a sample of our FX reporting suite or gain access to more peer data please email us at [email protected] or call us on 020 3846 7390.  


Data in this article has been prepared based upon historical interactions by our staff with relevant industry personnel. On this basis the document is for indicative and illustration purposes only. Birchstone Markets Limited is registered as a Limited Company in England. Companies House No. 13146432. Registered Office: 103 Wigmore Street, London, United Kingdom, W1U 1QS. Birchstone Markets is an Agent of Hamilton Court Foreign Exchange Limited, which is registered with the Financial Conduct Authority under the Payment Services Regulations 2017 (FRN 810625) for the provision of payment services. Birchstone Markets is an Authorised Representative of Hamilton Court Foreign Exchange Limited, which is Authorised and Regulated by the Financial Conduct Authority (FRN 810631) to deal in certain Investment services. Birchstone Markets is registered with the Information Commissioners office under the 2018 Data Protection Act and GDPR (Registration Number ZB147227)

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