Annual Report 2024 — Letter of the Chairman of the Board of Directors
What’s actually happening, what to do about it —
and what’s in it for you
Dear clients, investors and partners,
there are two crucial questions whose importance extends far beyond the financial world:
1. What is actually happening?
2. How does it concern you?
No matter how you look at it — seeing things, circumstances and situations clearly („what is actually happening“) and being able to draw the right conclusions, decisions and courses of action from them („how does it concern you“) is essential.
As well as challenging.
If anything, the pursuit of accurate perception and action must inevitably be paid for with a great deal of effort, time and, yes, mistakes.
Honesty. Transparency. Self-reflection. Great demands on oneself.
These are all essential prerequisites for continuous improvement, of oneself or one’s life’s work.
In my case — WEM.
That’s why every time I look back and take stock — in the form of an annual report, for instance — is more than a mere formality for me; it is an integral part of how I strive to live, work and deliver results for our clients, partners and investors.
Please, allow me to then look both backwards and forwards through this lens and touch on a few central points:
What is happening in the society?
Each of us is confronted (several times) daily with how dynamic and challenging the current times are. We would also probably agree that it is unlikely to be any different in the foreseeable future, and will continue to intensify instead.
With all this, the pressure and urgency grows and it is becoming more and more difficult to be able to make the right choices, to deal with the situations and to be able to identify when it is all just too much and it’s necessary to say no.
There is increasing pressure on interpersonal relationships and it is becoming more difficult to give them the necessary patience, openness and attention to keep them healthy and thriving.
Similarly, the information overload is increasing and it is becoming more and more difficult to evaluate relevant sources and which information should or should not influence us.
How does it concern you:
It’s necessary to seek balance.
Humans are emotional creatures and can’t always evaluate things correctly. The same is true when it comes to investing — but the key here is to strive for balance and give as much weight as possible to the rational approach instead of feelings.
So let’s think more about seeking balance. In work-life relationships, in our demands and in relaxation — but also in our decisions in finance and investing.
When it comes to investing, the tried and tested “happy medium“ and „measure twice and cut once“ are good and solid guides.
What is happening in WEM?
People are and will continue to be the key aspect of everything. What we are struggling with — like most specialized areas — is a shortage of skilled, mature and experienced people. At the same time, I’m grateful for our steadfast employees who have been doing the hard work for many years, whether in the back or front office.
What deserves special mention and highlight is our collaboration and partnership with Norbert Galik, our CTO. His arrival at WEM in 2020 marked the beginning of an era in which we have been able to make tremendous strides and incredible progress. His contribution, shared values, vision and relentless drive are more than enough reasons for me to increase his stake in WEM to 7.5%.
How does it concern you:
The ultimate goal of all (not only) personnel-related actions is to continue to professionalize and streamline our performance across departments — administrative, operational and executive.
Naturally, change is an inevitable element here. Some changes will be related to changing positions, others with staff members as such. The most important thing is definitely how we will develop the existing team and who we will recruit as new members to key positions in WEM.
What is happening with our fees?
We view WEM as a company that has strived to provide the highest quality and the most fair products and services since its inception. Not necessarily the cheapest — but with the greatest value delivered, which then delivers satisfaction to our clients.
Fees are an essential part of how companies operate, but they are not always transparent enough. We approach it differently, our way. Hence:
Our wealth management and personal approach services through our Wealth Department are currently included in the price and fees of our portfolios. So — with the exception of our Save For Tomorrow investment savings — management fee, entry fee, performance fee and success fee are also included in the fees; in practice, in a roughly 50:50 ratio. Half of the fee therefore covers operations and portfolio management, the other half covers all other services and client care.
How does it concern you:
As we do all the time, we will continue to streamline and, where possible, automate as many aspects of our operations as possible. This will be reflected, among other things, in changes to fees and their gradual reduction.
Just how far we can go with fees in this way will always depend on the particular service we provide and the performance of our portfolios. Our ambition is to get below 2% for dynamic portfolios, 1% for balanced portfolios and 0.5% for conservative portfolios, with performance and success fees in the range of 5 — 10% for actively managed portfolios. For passive management, we want to get down to 0.5%, with no performance or success fee.
What is happening with the mistakes?
Mistakes happen. They are a normal part of our lives. We also make them here in WEM. But it is not the market standard to talk about them; rather, it is almost a business taboo.
It’s just that the only one who doesn’t make any mistakes is the one who does nothing. And at WEM, we do a lot. But we believe that we are moving forward by making mistakes. More precisely — with mistakes, identifying their cause and implementing the necessary solutions.
Of course, we are not yet perfect in the process of improving ourselves or how we approach mistakes in the first place. Different people and different approaches also mean different responses to mistakes.
In general I think the entire culture around making mistakes is still very immature in Slovakia. Viewing mistakes as something unacceptable and approaching other people’s mistakes through the lens of „it couldn’t happen to me because I don’t make mistakes“ can only create a fragile, unsustainable and, ultimately, an extremely inefficient system.
So what mistakes did we make last year? We focused on too many new complementary activities and projects. Although well-intentioned, and although each has the potential to be a valuable addition to our spectrum of services, the conditions were not necessarily ripe for each one.
We made a few mistakes in setting up external collaborations and projects and also in evaluating the assets included in our investment portfolios. However, there is no investment manager in the world, which also includes us, who can get all of their investment decisions right. However, we do have a process in place whereby we continually evaluate the reasons for these decisions and take the necessary corrective action. In the end, it is the statistics and success rates that are important, and I will share these with you later in charts and figures.
How does it concern you:
More focus and discernment in evaluating what to go into and what not to go into. A properly set up process for reviewing decisions, results, lessons learned and corrective actions.
Over and over again.
What is happening to the Slovaks and their investment mentality?
„Real estate is the best investment.“
Do you share the same opinion? After the situation with the cadastre at the turn of the year, your perception may have changed a bit. However, it should also be remembered that Slovaks have a very short memory.
At least for the time being, however, it is true that a number of our clients, along with the current development of the political situation, are thinking about withdrawing part of their invested capital from real estate.
It is also appropriate to be careful not to get duped, which is another area in which Slovaks excel, unfortunately. They like to be lured into incredibly tempting investment opportunities that offer returns from the realm of dreams — and are not regulated.
A hot topic will be the opportunity to invest in Slovak government bonds, which will offer two options with appreciation rates of 3 and 3.3% with investment horizons of 2 and 4 years. The enormous interest in them confirms the caution of Slovak investors and their inclination towards stable appreciation.
How does it concern you:
As always, we recommend a sober approach and — ideally — consultation with a trusted partner when evaluating attractive investment opportunities.
When it comes to real estate, with the right allocation and decision, we are of course ready to assist in both buying and selling. Despite the current situation with the cadastre, this does not mean that we at WEM do not believe in the real estate market. On the contrary, it can be an important part of portfolio composition and proper asset allocation.
What is happening with the allocation of your money and where is it invested?
93.51% of all assets are invested in the publicly traded market. A total of 185 securities are currently purchased, 70 of which are single stocks and 103 through ETF funds.
The remainder is then made up of assets purchased through a Commission Agreement through the assignment of an order to purchase securities, mostly corporate bonds or structured products. A detailed explanation of the Portfolio Management Agreement and the Commission Agreement can be found in a separate section below.
How does it concern you:
Given our results to date, we plan to maintain this ratio and distribution.
What was happening in the financial markets in 2024 and what were our results?
Bullish sentiment continued to prevail in the markets and the main stock indices indicated overvaluation. There has also been a debate for some time as to whether the market is at too high a level. By comparison, this is where the market was in 2000/2001 and 2008 during the Dot-com bubble and mortgage crisis.
How does it concern you
From the available data we can read that the market is healthier than previously. Thus, it can be assumed that the current situation does not foreshadow a scenario similar to that of the given two periods.
However, this does not mean that it is not appropriate to maintain a healthy caution and to take care of the necessary diversification.
The current period also favours companies that provide clients with a more active management and proactive approach to investment portfolio allocation and intervention.
As you are certainly aware, at Wealth Effect Management we believe in this approach and will continue to apply it judiciously. This is also linked to our focus on creating new relevant solutions and services.
What was happening with WEM in 2024 and what were the biggest milestones?
There was no shortage of major events in 2024.
The most important of these related to major developments in our IT systems. This has practically manifested itself in the launch of the WEM mobile app for users of both Apple and Android devices and, above all, in the creation of our B2B platform Flip. Flip is a comprehensive all-in-one platform that enables financial professionals to buy securities and manage clients.
We were also able to launch WEM Employee Motivation, an innovative employee engagement program that appreciates the wealth of both employees and companies.
As part of our alternative investment options, we have also added to our existing SICAV fund, WEM Private Fund, the ability to invest in private debt through WEM Private Credit. The investment opportunities here offer a fixed return backed by real estate.
Foreign expansion is also progressing — after 10 years of operation and growth in the Bulgarian market, we have opened a larger office for more than 12 current employees.
The Prague office deserves mention as well. Its primary focus is currently on setting up the necessary Family Office structures, but we foresee Prague as an additional base for our future services and business activities.
The big question at the end — what’s in it for you?
Our promise to you that we will continue, day after day, to work to keep earning your trust.
After all, there are few more serious and tangible proofs of trust than putting your wealth in someone else’s care.
Our outlook for 2025
To simply focus on what we are best at.
At the same time, continuously improve where we fall short.
Therefore, 2025 will not be a year for us to start many new activities in many different directions. It will be a year of focusing on 4 key areas:
- IT systems and, with them, further improving the quality, convenience and value of our services
- Client service corresponding to our vision and ambition
- B2B development through the Flip platform and related activities
- WEM Employee Motivation program, which allows to appreciate the assets of both employees and companies
I sincerely thank you for your trust.
We will do everything we can to give you more and more reasons for it.
Thank you.
Peter Štadler
CEO and Chairman of the Board,
Wealth Effect Management o.c.p., a.s.
You can read the Annual Report 2024 here: https://wem.sk/wp-content/uploads/2025/04/WEM-Annual-Report-2024.pdf
