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When 500 private bankers gathered at the Dorchester Hotel to toast the wealth management industry a couple of days ago, the casual visitor could be forgiven for feeling it was business as usual.
The occasion was the annual Private Asset Managers (PAM) Awards, the champagne was flowing, and guests tucked into a three-course candlelit dinner of foie gras terrine, roasted veal and toffee parfait.
But even before the gongs were handed out, it was clear that not everybody was in the mood to celebrate. Two of the biggest names in UK wealth management, Barclays Wealth and UBS, were notable by their absence.
And most of the PAM awards, judged by a group of wealth managers from across the industry, did not go to firms that had succeeded in making clients money - it was more about preserving capital.
That's hardly a surprise when the new Forbes Rich List claims the world's wealthiest people have seen their fortunes plunge by 23% in the last year.
The painful truth is the wealth management industry is suffering a crisis of confidence. As James Anderson, chairman of PAM, says: "There is a wave of distrust and in many cases that distrust is well placed."
Some clients, who entrusted their assets to wealth managers and have lost a great deal of money on duff investments, are planning to sue.
Professional trustees, who oversee funds, may also prosecute because they will be in the firing line themselves.
The collapse of US insurance giant AIG has already spawned court action and there are strong rumours of lawsuits against banks that recommended AIG products.
The case of rogue US asset manager Bernard Madoff, who pleaded guilty yesterday in New York to fraud, is also certain to bring litigation - particularly against UK firms that directed clients' cash through feeder funds to Madoff.
There are reports that at least one firm, the Safra Group, has offered compensation to some clients whom it invested with Madoff.
Plainly there are many lessons for the wealth management industry to learn which go far beyond a relatively small number of fraud cases.
Richard Madeley, managing director of JPMorgan private bank, one of the best performers in UK wealth management in the past year, says: "A key part of delivering value is avoiding mistakes. You avoid mistakes by having a due diligence process. We put some funds in front of our due diligence process and decided that [investment] was not something we wanted to do."
Madeley declines to name the funds, although it is understood some were run by major firms. "We've always stressed the importance of investors understanding risk and if we don't like an investment, we'll stay clear," he says.
The big banks don't tend to dominate wealth management in the way they do in investment and corporate banking.
Many of the best-regarded wealth managers are smaller firms that can focus more on individuals' needs. "There can be a big difference in approach between a large bank and a smaller portfolio management business," says PAM's Anderson.
"There is no question a large number of the big banks have been flogging their products rather than providing a service and advice."
He identifies private banks Hoare & Co. and Mellon and smaller firms such as Sarasin & Partners, Jupiter Asset Management and Newton Investment Management as among those performing well in the last 12 months.
Conversely, some of the big-name private banks have struggled - not least because the reputations of their parent companies have been trashed. Coutts, for example, saw an exodus of cash because of the crisis involving its owner Royal Bank of Scotland.
"That is not to say Coutts isn't providing a good service to clients and it's ring-fenced with its own balance sheet," says PAM's Anderson, "But clients can be irrational."
In Coutts' case, steering clients like Sir Keith Mills, the Nectar tycoon, into the duff AIG Life Premier Bonds cannot have helped.
There's nothing like losing money to make people fret about how their assets are managed, of course.
Another lesson from the credit crunch, say experts, is that clients must take a more proactive approach to wealth management.
"Too often clients go into these discussions [with their wealth manager] with their eyes wide shut," says Anderson. "They don't ask, 'Why is the firm doing this?', 'Why is the firm offering me this product?'"
Clients must also consider what mandate they give to a private bank - something that some of those people who lost money on AIG, Madoff or Lehman Brothers funds may only now realise.
That's because many private banks and asset managers operate on the basis that they offer advisory management where they give recommendations that the client must approve.
It makes it hard to sue if the investment goes wrong subsequently. But if a client gave a firm a "discretionary mandate", where it is up to the wealth manager to decide the investments, there may be a far stronger case to sue.
Change does not usually happen fast in wealth management. Most clients take a long-term view and do not move assets around hastily. It is a discreet world, built on long-term personal relationships.
But there is certainly anecdotal evidence that some people have grown impatient and changed wealth management firm.
Even then, clients should think carefully. Some firms such as Ruffer and Ermitage - two winners at this year's PAM awards - are cautious and may be better suited to managing in a bear market.
Perversely, now might not be the best time to join them if one thinks the market is close to the bottom.
A few sceptical souls must wonder if we would be better off managing our money ourselves. But in an era when interest rates are close to zero, bankers joke: "Cash is the new toxic asset." Arguably we need good wealth management more than ever.
As Madeley of JPMorgan says: "It is important that the industry does not look inward or blame each other for what has happened. We need to focus on clients and rebuild confidence."
