Banca Generali has more than doubled its client assets under management to €61bn ($68bn) since 2013, with new funds introduced by a tight network of loosely affiliated financial advisers known as ‘promotori’. It now hopes to take this domestic model and deploy it beyond Italy’s borders to further grow and diversify revenues.
Majority owned by Assicurazioni Generali, one of the world’s biggest insurers, the bank has successfully combined organic growth with key acquisitions on home turf, including the private banking operations of Credit Suisse Italy in 2014, and investment boutique Nextam Partners in 2018.
But it was another deal announced last December, soon to be completed, which signalled the start of Banca Generali’s new, international strategy. This came in the shape of the acquisition of Valeur Fiduciaria, a wealth management boutique based in Lugano, Switzerland, established in 2009 by former Credit Suisse managers.
New markets
The move was hailed by the bank’s personable leader, 44-year-old Gian Maria Mossa, as the start of a “targeted international expansion”, driven by the need to meet increasing client demand for diversifying custody of assets across different booking centres.
“Seeking diversification of booking centres is an accelerating trend among large asset owners, in Italy and around the world,” says Mr Mossa, CEO and general manager at Banca Generali.
The bank also targets the large Italian community in the southern part of Switzerland, while aiming to serve Italian, Swiss and international wealthy clients holding Swiss assets. Out of the €15bn in total asset growth projected by 2021, the bank expects to source €3bn to €4bn in client assets from Switzerland, including the SF1.3bn that came through Valeur.
As the desire of Italian clients to have “declared assets” in Switzerland grows, over the medium term he expects to capture at least 5 per cent of the €150bn to €200bn of estimated money held by Italians abroad, mostly in Switzerland, in line with the bank’s 5 per cent market share in the Italian private banking market.
Only a small percentage of these assets has so far been repatriated following the country’s introduction of “tax shield” programmes over the past few years, following the end of private banking secrecy and beginning of automatic exchange of information between tax authorities.
New regulation on external asset managers (EAMs) coming into force in 2020 – expected to drive concentration in this very segmented industry niche – could also trigger a tail wind, with Banca Generali positioning itself as an “aggregator”.
The real challenge will be to capture clients in the German and French parts of Switzerland, says Mr Mossa, which would represent pure “upside”.
The broader plan involves building a “digital bank”, by securing a banking licence or acquiring a small bank - supporting relationship managers focused on providing financial planning and investment advice.
“We are starting from scratch, so we do not have the challenge of cost layering and legacy systems,” claims Mr Mossa, believing this to be a differentiating factor in a country where the level of technology at financial institutions is generally very low, except for large brands such as UBS.
His strategy involves extending to Switzerland the partnership established with Saxo Bank in Italy. Here the alliance with the Danish institution has led to the creation of a new entity, BG-Saxo, providing online trading and digital services to Italian clients, specifically designed to create a scalable, exportable model.
In Switzerland, the bank’s ambition is to fill a service gap, targeting individuals with €500,000 to €5m in assets. This client segment is increasingly shunned by big Swiss players, who have shifted their focus to the ‘ultra’ client niche, but one in which Banca Generali is “very strong”.
In Italy, the bank sources more than 70 per cent of client assets from this and higher wealth brackets, the remainder coming from more retail level clients. The newly launched trading platform, which also allows digital client onboarding, targets high net worth investors holding part of their wealth in stocks and bonds.
Digital expansion
That said, he believes that expanding digital services, which he hopes will attract younger generations to the bank, needs to be complemented by the traditional wealth planning service offered by expert private bankers. “I do not believe much in robo-advisers, rather I do believe in a hybrid model, where private bankers are empowered by technology to offer a better advisory and client service,” says Mr Mossa.
Banca Generali has been the first bank to establish a partnership with UBS Asset Management, using its white-label technology offering, UBS Partner, launched last year. The platform, adapted to Banca Generali’s requirements, scans client portfolios daily and assesses them against corresponding risk profiles, key instrument quality criteria and investment goals. By identifying clients that are not on track to meet personal financial goals, it helps private bankers review the asset allocation to help get them back on course and better manage portfolio risk, also providing investment recommendations, explains Mr Mossa.
Client worries
The Italian wealthy are mainly small or medium entrepreneurs – an increasing client target focus for the bank – or independent professionals. Today, clients’ concerns about transferring wealth to their children are exacerbated by growing worries about market volatility and geopolitical risk.
“Clients are desperately looking for income and stability in their investments, which is not trivial, because these two concepts fight with each other. A long time ago, the answers to this need were traditional insurance policies, but this is no longer the case,” he says.
Wrapping mutual funds and traditional insurance products together remains one of the bank’s most successful solutions to help people manage succession planning.
However, among the very wealthy, there is growing appetite for illiquid investments, such as private debt, fuelled by low interest rates, which have rendered traditionally-favoured government bonds and real estate much less attractive.
Last year, the bank sold more than €1bn in private debt products to clients, being the first institution to offer securitisation solutions linked to the Italian economic system. Unlike private equity, clients can easily understand private debt, he states, as it can be likened to bonds that cannot be sold until maturity.
Yet, this new development may seem a paradox in a country with a low level of financial education and one of the world’s lowest percentage allocations to equities held in portfolios.
Italy once boasted the world’s highest penetration of government bonds, with real estate wealth twice as big as financial wealth. The banking crisis and the banks’ ‘bail in’ in 2014, which saw many Italian investors lose their savings, was a turning point. At the same time, real estate prices, which peaked in 2010-2011, started falling, while taxes on properties increased and the economic crisis deepened.
As a result, the Italian asset management industry has boomed, with investors gradually switching from government bonds to funds. “There has really been a big change in the saving habits of Italians in the past few years, due to the shock of the bail in, and the fall in real estate prices,” confirms Mr Mossa.
But the financial industry has ridden the wave of change in the easiest way possible, with bankers fobbing off clients with ‘target funds’, using the same pitch as traditional bonds, but with disastrous consequences. Spreads widened, not only for Italian government bonds but also high yield and corporate bonds, and prices fell.
Italians’ saving rates, traditionally very high, are today a stark symptom of people’s negative outlook for the future. “Clients are very distrustful, your relationship with the client must be based on transparency and extreme honesty. Profit margins need to be kept at the lowest level possible, because if clients are not taking risk you cannot charge them too much,” he acknowledges.
Changing role
It is this challenge in redefining the role of the private banker which appears to be uppermost in Mr Mossa’s thoughts. Assessing the role of real estate and sustainable portfolios in future family plans will be key, he believes.
“The real added value of the private banker is to help clients assess their wealth in relation to their family requirements, including liquidity needs and unexpected events.”
