Unicredit aiming to mix with the heavyweights

With his task of combining separately-managed wealth management units in core markets – including Italy, Germany, Austria, Luxembourg and Switzerland, plus a handful of Central European countries – under the UniCredit umbrella, the Italian institution’s private banking boss faces a major challenge. But Munich and Milan-based Andreas Wölfer, head of UniCredit Private Banking, who also spends much time in the operations hubs of Vienna and Warsaw, knows it is time to transfer his meticulously drawn-up strategy documents into concrete actions. UniCredit’s board members have told him their private banking franchise, currently managing E140bn of client assets, handled by 1,220 relationship managers, and nestled in between Barclays Wealth and Deutsche Bank in the global league table, is punching well below its weight. “This is a special situation. We are operating under a lot of different names,” says Mr Wölfer, mentioning brands such as HypoVereinsbank, BankAustria, Schoellerbank and even Bank Pekao in Poland. “We are not perceived as UniCredit, the private banking global player, as opposed to the likes of Deutsche Bank or BNP Paribas.” Even by just vacuuming up assets from branch networks, currently not addressing their wealthiest customers efficiently, he should be able to add an extra €30bn of affluent clients’ assets relatively painlessly. Under the internal project known as ‘One4C’, Mr Wölfer talks about “the overall positioning of all business units to sharpen specialised business models for customer centricity.” In simple words, this means upgrading affluent customers, traditionally catered for by retail bankers, into a higher-service, investment led proposition, which can generate fatter fees for UniCredit. This is important as although advisers gathered €1.7bn in net inflows in the final quarter of 2009, profits are slipping due to increasing costs. He is seeking a similar transformation to that achieved by French player BNP Paribas, which after the acquisition of the Fortis assets, is ready to trade punches with the Swiss giants, themselves on the ropes from uncertainty hovering around the offshore banking model. “We have the potential to run up to €170bn or €180bn, if we can collect everything we have in mind,” claims Mr Wölfer. “But it all depends on the transition rate from the retail banking side.” This dependence on normal bank staff to promote their customers up the wealth management ladder relies on a huge faith in the regions’ ability to deliver high net wealth individuals to the private bank. “Our strategy is not just about being in the capital cities,” reveals Mr Wölfer, who supervises teams of advisers in 44 regional cities of Germany alone. “It’s about working with affluent clients in Munich, Hamburg, Berlin, and Würzberg,” he says, referring to the historic city of his birth. “This clear strategy is onshore, not offshore.” Yet merging these internal capacities into a single operating platform, in the way HSBC has done with recently acquired Swiss franchises, is no picnic. He has done much of the background work, through rolling out a common operating platform, known as Eurosig, across Italy, Germany and the Czech Republic, and eventually introducing it in all UniCredit Group countries. But Mr Wölfer must also take account of resistance from both private bankers and their wealthy clients, many of whom, in Austria’s conservative heartlands, were happy with their existing service and don’t want to be subsumed by the new Italian owners and their German partners. For instance, Schoellerbank, one of UniCredit’s Austrian brands, is by far the most lucrative unit within the group for converting prospects and dealing with customer referrals. “From a customer satisfaction point of view, Schoellerbank is the best bank in our entire network. If we merge it with BankAustria and the rest, you lose the brand,” he shrugs, admitting that, many international customers have been dissatisfied with big brand players. Ultra high net worth individuals in particular, like the notion of being with an independent, boutique name and there are plans to leverage the best practice associated with Schoellerbank internationally, suggesting that a one-size-fits-all mentality can be alien to many wealthy private clients. Mr Wölfer expresses the strong desire across UniCredit Private Banking to increase standards of service to levels experienced by Schoellerbank customers. “The industry has lost a lot of the trust and confidence of its customers,” he says. UniCredit’s Italian customers had some exposure to Madoff products through the Pioneer sister brand, while the bank also owned a minority stake in Austria’s Bank Medici, which ran funds feeding into Madoff vehicles. “Our target is to win back this trust,” states Mr Wölfer. “We can only do this through a unified customer service model which is aligned, all over Europe.” One of the innovations is a gradual transition to flat fee remuneration, particularly in Italy and Austria, which has already scored 10 per cent customer take-up, paving the way for use of more low cost, passive investments. UniCredit has also introduced a ‘structured advisory’ service, to prevent clients deserting the discretionary model. The latter has charged high fees, but proved unpopular across the wealth management industry, because banks have slipped up in both asset allocation and product selection. Under this hybrid system, the customer and relationship manager can decide whether or not to buy into the bank’s full market opinion. “If Manuela D’Onofrio decides to overweight equity, our RMs [relationship managers] are obliged to talk to their customers about this decision,” he says, mentioning the bank’s renowned Milan-based head of portfolio management. “Around 80 per cent will follow her decision, but many may not. The RMs are very involved in the advisory process.” Unlike many competitors, there is “clear guidance” to RMs at UniCredit not to take on more than 80 key private banking clients, falling to 25 in the family office sector. This high proportion of advisory assets, coupled with a move to low-fee passive and money market funds, is clearly of some concern profitability-wise. “It’s not easy to talk about profitability,” concedes Mr Wölfer. “[Private banks] are perceived in the market to only look to profit and benefit from our customers.” He believes the magic 100 basis points profitability figure which most players hope to gain from wealthy customers is too high for onshore private banks. “It was too high in 2007 and in 2010, after the turmoil, it was definitely much too high.” Instead, he links targets to the group’s ‘TRI*M’ index for customer satisfaction. A recent switch to RM incentives, based on how happy customers are, is designed to build long-term loyalty and boost assets under management, rather than squeezing maximum revenues from each customer. “Now we have the chance to move customers to long-term, sustainable products, as the pure liquid orientation, due to mistrust in the market, is hopefully finished.” These sustainable strategies will be reflected by the bank’s plan to move from being an opportunistic to a risk-based manager of wealth, aiming to protect assets as well as create alpha. More than 50 per cent of Italian clients’ money is invested with the group-owned fund house, Pioneer, alongside a handful of preferred partners, although German clients’ assets are spread around a wider range of strategies and external managers. “We will always use Pioneer as a preferred partner in those areas where they are competitive to the market. In other areas we will look to other products and providers,” confirms Mr Wölfer. “Ours is not an institutionalised portfolio management approach, but an individual approach. This will help us to be closer to customers and to react much quicker. They don’t want a benchmark oriented portfolio if the market goes down 30 per cent.” If there is one hurdle which Mr Wölfer must overcome, it is adapting his bank’s increasingly industrialised process for regional consumption. His research shows that customers in different areas want to be treated uniquely, while his bosses want a single brand and operating structure. “We need to raise the bar of perception. We need to show the customer we have a strong private banking network in relevant markets and a qualitative customer service model.”

Andreas Wölfer, UniCredit Private Banking