Clients remain buried as the dust settles
Private banking may be changing fast but wealth managers are still refusing to put clients first
This year has seen a sea-change in private banking. The old model of unlimited liability, shared by a handful of bank partners, was buried in 2013.
Soon after Wegelin was effectively shut down by a US tax-avoidance investigation, both Pictet and Lombard Odier altered their structures, with Mirabaud following suit.
The liability now lies with the companies rather than individuals. The banks may play down the role which potential exposure to further US settlements had on their rejigs, but greater transparency goes hand in hand with a more international outlook and de-emphasis of banking secrecy.
Successful Swiss private banking, far from dead in the water, will increasingly become the preserve of banks like UBS, Pictet and even boutiques like Bank Syz, all able to offer advanced asset management solutions, in addition to lending and structuring services.
Global Private Banking Awards 2013
As Jürg Zeltner, CEO of UBS Wealth Management points out, successful private banks must not only provide top investment ideas, but must quickly put them to work by launching accessible products.
A renewed emphasis on onshore banking means institutions such as ABN Amro and BNP Paribas, serving their home nations and the near abroad through branch structures, are increasingly the model of choice.
American banks are still in restructuring mode, with the Europeans backed in their efforts to boost brand and service not just by the US exodus, but by economic facts. Global household assets increased 4.9 per cent to $241tn (€178tn) from mid-2012 to mid-2013, according to Credit Suisse.
Emerging markets will also increase their share, with China expected to account for a 10 per cent slice of the world wealth cake by 2018, while Asian banks step up their onshore presence not just in China, but further South in Indonesia, Malaysia and Thailand.
Banks in Latin America are also raising their game and fighting for shares of vibrant markets, with the likes of Spain’s Santander, Brazil’s BTG Pactual and Mexico’s twin contenders Banorte-Ixe and Banamex parading their plumage.
Emerging market wealth managers are fast learning about brand differentiation. Turkey’s Yapi Kredi wants to increase the number of “wow moments” a customer experiences, Singapore’s DBS needs bankers to be RED: “Respectful, Easy to work with and Dependable,” while Nedbank aims to “serve our customers better than any other financial services institution”.
Clients in both developing and developed regions are crying out for new ideas, keen to engage with chief investment officers who go against the grain, and seeking innovation in asset allocation, risk attribution and electronic channels of communication between banker and client.
Increasingly, banks will be judged on how they engage with clients and on their levels of innovation, says Scorpio Partnership’s founder Seb Dovey. But wealth managers, he says, are barely scratching the surface, with the industry refusing to understand what clients need.
Similarly, few are prepared to take responsibility for their mistakes. Customers are not easily fooled and many withdrew money during the crisis from those banks perceived as distribution machines, rather than trusted advisers. That legacy sticks for some time, although a reputation can be rebuilt.
UBS, for instance, has twice apologised over the years on behalf of the industry for a poor general level of asset allocation advice and product quality. This year, UBS has bounced back although there is a long ladder to climb to reach its former asset levels.
Few private banks publicly admit to their mistakes. Those that do – including Northern Trust, Coutts and Korea’s KB Kookmin – are in the minority. But they may well be the banks of the future.
Like institutional partners, private clients could soon begin to prefer banks with human frailties, provided action is taken to constantly correct their failings.
