George Lo, the Geneva-based chief investment officer of Lloyds TSB Bank, may spend most of his time devising investment strategies for high-net-worth individuals; but he believes investing is for everyone. 'Rationally thinking, as soon as anyone has a dollar to spare they should consider investing it,' Dr Lo says. 'There is overwhelming statistical evidence that the bulk of performance does not come from stock selection, but from asset allocation and different asset classes, between geographical markets, and currencies.' And how does one assess an appropriate risk level? It is a personal decision, Dr Lo says, adding that investors are generally better served by heading further out on the risk spectrum than you might imagine. He says most investors are far too conservative, their outlook obscured by short-term volatility. For example, many people will say that stocks are always riskier than bonds. This may be true for a short-term investment, but not for long-term investing. Since 1926, the stock market has produced annual positive returns about 70 per cent of the time. With this in mind, he says investors should learn that losses in the stock market are inevitable. Investors who panic and sell their long-term investments short could easily find themselves buying back into the same stock funds a few years later only to discover that they have to pay more because they have increased in value. 'If you sell investments that are losing money what will you replace them with?' he asks. Private wealth is growing fastest in Asia, which now accounts for just over one fifth of total global wealth. But while growing personal wealth is creating a boom in private banking, it has also put private banks under strain to meet the increasingly demanding needs of their clients. 'These people are rather young and they look at the business quite differently than, say, their fathers did, and their expectations are obviously very different,' Dr Lo says. Instead of confidentiality and access to offshore accounts, they are more likely to enquire about which hedge funds are hot, or which private-equity players have the best track records. Many of these investors came of age in the internet era; they want global coverage, in real time and preferably online. Dr Lo says the growing number of high-net-worth individuals is good for business but these clients expect more than private banks have traditionally provided. The relationship between private investors and investment service providers is sometimes fraught with emotional and professional conflicts. 'It is very much like a marriage between two people, who are often each other's harshest critics but at the same time need each other,' Dr Lo says. One common problem in managing client relations: most investors expect high returns with little risk, an unrealistic assumption that often leaves the personal wealth manager juggling expectations. The trick, says Dr Lo, is to educate the client to understand that lasting wealth is created by making smart decisions over the long haul. 'If investors opt to have their assets managed professionally, it should be because they consider this the best way to preserve and grow their wealth,' Dr Lo says. If the analysis of the client's need is done properly at the beginning of the relationship, he says there is usually little need to change tact during volatile markets. Investors who thought that Hong Kong's property market would continue growing but instead came tumbling down in 1997, had learnt a tough lesson. 'Nothing makes 20 to 30 per cent on a sustained basis. After the punishment of the last few years at least some investors' objectives have become more realistic.' Dr Lo believes there could be handsome gains to be made in the local property market over the next few years as prices have fallen substantially from the late 1990s peak. 'The macro conditions are ripe for a cyclical rebound,' he says. Thanks to falling interest rates the affordability ratio has improved, a positive sign for the housing sector. 'Hong Kong's gateway role is diminishing,' Dr Lo says, cautioning market fundamentals have changed. 'The last real-estate bubble was based at least partly on the ability of local firms to charge a premium to outsiders looking to strike it rich on the mainland.'