Global Private Banking Awards Analysis: New players rise up to challenge for ‘Champions League’

While there is little doubt that the big brand, global banks continue to dominate in PWM’s annual private banking awards, some interesting trends are emerging which clearly permeate the industry.

UBS Wealth Management has taken the honours as best global private bank, best in Asia, as the leading brand and best for technological deployment and it was only a matter of time before Credit Suisse, Switzerland’s second global powerhouse, would rise again and re-create its glory days.

Those may not be far off, bearing in mind Credit Suisse lifts the crown this year for the best new initiative in client-facing technology. This is in addition to a regional award for the Middle East, a country award in a tough-sanctions-ridden, economically-suffering Russian market and a high commendation for Asia, demonstrating the bank’s fast Eastern resurgence.

“The successes of firms like UBS did not occur overnight,” says awards judge Sebastian Dovey, founder of wealth think-tank Scorpio Partnership, with future growth driven by the power of corporate identity and a more unified platform encompassing investment banking, as well as wealth management, attracting new interest on a daily basis from the emerging wealthy.

But some more unlikely players are creeping up on the blind side, slowly and solidly improving their propositions. It is banks from other European locations which are proving to have more surprising and enduring strategies to fight the established giants.

On the multi-jurisdictional stage, the “Champions League” of banks consists of 20 institutions, according to Scorpio Partnership. But at a regional level, there are also likely to be a few operators in each continent with an appetite for expansion and ability to achieve a combination of brand, leadership and a strong franchise in each market, requiring “attention to all the details of maintaining a world class offering on a localised basis”.

The continued rise of BNP Paribas Wealth Management is particularly impressive. The Paris-based firm has romped up through the rankings, named again as best private bank in Europe, while retaining its French crown, winning the league in socially responsible investing and mentioned in dispatches for excellent showings in Belgium, Hong Kong and the innovation category.

The judges were keen to point out that ABN Amro, winning the highly competitive Dutch contest, was not too far behind its French rival on a pan-European basis, and performing well in Germany too.

The capacity of some European banks to innovate has been demonstrated by Spain’s leading player for 2015, BBVA, also notching up an award for digital communication, while grand Spanish rival Santander has displayed its international credentials by triumphing across Latin America as well as closer to home in Portugal.

Singapore’s DBS, once more excelling on home turf, has also been named most innovative private bank globally, a major honour for the rising Asian regional force.

A clear trend to onshore private banking is underlined by a greater number of banks winning titles, rather than global players dominating regional categories, even if a pan-Nordic specialist such as Nordea can still be voted top dog not just in the region, but in Norway and Finland too.

“We are experiencing a major shift in the approach followed by the private banking players,” says Shelby du Pasquier, head of the banking and finance group at Geneva lawyers Lenz & Staehelin. “The larger institutions are actively moving forward to set up or strengthen their actual onshore presence in their main markets. This move requires significant investments and a long-term perspective that may eventually lead to a transformation of those groups.”

The smaller actors, he believes, will continue to focus on a smaller number of core markets which they service on a cross-border basis.

The idea of a Swiss-centric global industry has been receding since the attacks on leading players of Zurich and Geneva by US authorities, demanding names and account details and imposing massive fines. Concentration in the Swiss industry is likely to increase, with further mergers and exits on the road ahead in coming months, believe local commentators, in parallel with the ongoing refocus of Swiss private banking.

“Offshore is a phrase that is rapidly being consigned to the history books,” comments Scorpio’s Mr Dovey. “In the context of tax reporting, with the likes of Fatca [Foreign Account Tax Compliance Act] and now CRS [Common Reporting Standards], we are transitioning inevitably towards a financial world without borders. Notably, clients appear to be more in step with the trend than some financial institutions.”

While most major global and regional banks appear to have realised the old days of soliciting undeclared funds are behind them and put in place procedures to better scrutinise new clients at the “onboarding” stage, many are haunted by legacy business, which has led to unwelcome headlines about players such as HSBC.

It is tough for banks to rid themselves of thousands of existing undeclared customers, particularly smaller accounts, says family office adviser Gerard Aquilina, with firms far from completely cleaning up their books.

“Many accounts are legacy accounts bankers have inherited and many clients were not known to existing teams and need to be contacted,” he says. “Doing this by phone in secrecy-prone countries is a challenge. Once contacted, clients need to either regularise their situation or find new banks to accept them. This can prove a huge and unhappy task.”

Other less obvious trends are also troubling the industry. Rather than concentrating on investments and providing performance returns for clients, some private banks are beginning to perceive investments as commoditised products.

One of the reasons, believe commentators, is to do with the dated private banking business model, where relationship managers are supposed to influence portfolio structure and asset allocation, whereas this is often outside their area of competence.

“Especially after the disastrous performance of most banks in 2008, banks have tried to upgrade the competence of their bankers,” says a sceptical Mr Aquilina about the dilemma many face.

Private bankers, he says, have their hands so full of administrative and regulatory duties, plus a pressure from above to gather assets, that their ability to manage portfolios is often sub-optimal. This has led to the creation of specialised teams to help bankers construct and monitor portfolios, but with equally unconvincing results. “So many try to impress clients with performance when clients really just want capital preservation and some minimal return,” he says.