Deutsche bank pushes into fx wealth space

The convergence of investment banking and wealth management has edged closer with Deutsche Bank’s global markets and private wealth teams combining to provide foreign exchange products to what it argues is a new breed of high net worth (HNW) client. The objective of the venture, expanding FX sales coverage to super hybrid HNWs through the establishment of a specialist private client FX team, is further affirmation of the active role FX as an asset class is playing in the portfolios of wealth accounts. Roger Posch, ex-UBS, is heading the new unit, called Private Client FX Sales, and has been joined by a number of other ex-UBS wealth management staff including Christoph Ehrbar, former head of FX distribution and Nadeem Ladki, ex-hedge fund and Middle East private client sales. Mr Posch will report to Neehal Shah, global head of FX sales for Deutsche Bank, based in London. Client demmand “The clientele has been asking for this type of FX service. However the existing sales team at Deutsche Bank was not necessarily meeting this demand. Recently, requests have been made by a different scale of client than your typical investment banking customer,” explains Mr Posch. “We see ourselves as first in the institutional FX space, but from the private client perspective we had work to do”. Although not part of the new set-up, but integral nonetheless to supplying FX products and trading ideas to Mr Posch’s sales unit, is Sarah Stingelin, head of private client FX. According to Ms Stingelin, FX has been chipping away at the total asset allocations of HNWs and, in light of credit and equities volatility, it has become more yield-rewarding, accessible and mainstream for the less conventional investor. “Pension fund allocation to FX a few years ago was next to nothing, but investors understand FX can add value and diversify risk, and this is equally true for the new buyer we’ve identified recently,” she says. Already exposed to FX This new player, a hybrid of super HNWs, hedge funds and traditional institutions, is where Private Client FX Sales is concentrating its efforts, explains Mr Posch. “By nature these clients have been exposed to FX, for example a Greek shipping magnate who might do FX as a hobby, whereas some do FX just to understand how others assets such as bonds and equities perform in their portfolio,” he says. He nods to Russia (because of the burgeoning commodities market there) and India in terms of where new, super, wealth accounts will emerge in 2008. South Europe is a few steps ahead in terms of the creation of family offices, however. In terms of client target numbers, it is estimated in the 100s rather than 1000s, but assets will bring in the fees and vice versa. Ms Stingelin explains: “The more assets we get in, the greater optionality we have to do more FX for our clients. We have the product (via global markets) but not necessarily all the clients, so we looked at a way of helping Private Wealth Management get the assets in via global markets and use what the bank is good at”. Simplicity works But if the joint venture between global markets FX and private wealth at Deutsche is a novel one, the product range offered to the hybrid space is deliberately uncomplicated. “In times of trouble, it pays to be simple,” cautions Ms Stingelin. On the sell-side, Mr Posch, fresh from UBS (a bank going through the pain barrier in terms of its subprime writedowns) says it pays to have an honest approach in both fees and products. “For private wealth clients you have to be fair in terms of fees and what we offer in terms of FX trades. I would rather have an argument with a client about why I’m not supporting a certain trade, than not. Given the client base, you definitely gain trust by having fewer losses than by having greater profits”. “It is easier dealing with a private client when they’ve seen both losses and gains made on FX trades,” he adds. Simpler FX products perhaps but the upside characteristics of this asset class remain its diversity and low correlation, which can be strong selling points during turbulent markets. Argues Ms Stingelin: “When a hedge fund says they understand you take it as a given, but if a private client responds in the same way, then we need to ask again, ‘do you really understand?’ It is important to make sure they do, and keep it relatively simple because some clients can have short memories about losses and trades in the past that went very, very wrong.”