Credit Suisse’s new breed target super rich

The appointment in July 2009 of Blake Shorthouse as head of Credit Suisse’s ultra high net worth (UHNW) business in Emea signals the renewed push of the Swiss private bank into this rapidly growing market segment.

Mr Shorthouse, based in Zurich, and previously deputy global head of key clients at UBS, was tasked to create a specialised unit of a new breed of private bankers, called investment partners, split into seven regional teams across Emea. Although Credit Suisse has been focussing on the UHNW segment for decades, the new unit was set up specifically to target the super rich and cater to their complex needs. The multimillionaires of this world are mostly business owners, who have often set up family offices, and require help managing their wealth as well as commercial banking services for their companies. Unlike the “normal” private bankers, these specialist bankers have that breadth of experience and knowledge to be able to have an ongoing dialogue with ultra wealthy individuals, both about their personal wealth management and business banking needs.

“Our aim is to deliver across the full spectrum of financial needs – private to corporate and asset to liability when serving our UHNW clients,” says Mr Shorthouse.

Each of the investment partners handles only 10 to 20 client relationships each in order to provide that required “high touch” service.

The more generalist private bankers will continue to look after their existing ultra high rich clients, who, at Credit Suisse, are defined as those having a net worth of at least SFr250m (€200m). The new team will focus on gaining new business. At the same time, the ambitious plan is that investment partners will integrate themselves into those existing relationships and help relationship managers to develop them. Over the long term, the investment partners will gradually become the only ones responsible for the super rich.

Successful ingredients

Many banks have carved out specialist units to focus on this fast growing segment, which is also the most profitable, but very few of them have the key ingredients to be successful, according to Mr Shorthouse.

First of all, it is necessary to have a global investment bank within the overall group, which can provide access to institutional solutions which a pure private bank cannot offer, he says. The second ingredient is a healthy balance sheet, as many UHNW clients are looking for financing. The third vital element is a culture which is genuinely one-bank driven.

If some universal-service bank models came under strain in the credit crunch, Credit Suisse remains a strong advocator of the integrated approach, which has proved to deliver good results, particularly during the crisis.

“By the one bank model I mean a partnership culture where different parts of the bank routinely help each other to win business.” A referral mechanism is in place at the bank and it is bearing fruit. The amount of integrated collaboration revenues are measured and made it public in the bank’s annual report. The figure stood at SFr4.4bn for 2010. The bank aims for these collaboration revenues to reach 18 per cent to 20 per cent of net revenues.

“We deliberately place pressure on ourselves every single quarter by publicly reporting one-bank collaboration revenues,” says Mr Shorthouse. “Reporting the number and rewarding staff to refer clients creates a mental shift within an organisation, we are directly rewarded to be collaborative.”

In general, when an investment banker introduces a client to his private banking colleague, he is taking a leap of faith that that division is going to look after his client properly, and that there are not going to be any boomerang effects on their relationship.

But Mr Shorthouse states he has not detected any type of hesitancy from the investment bank to deal with the UHNW team, because they know that clients are going to be properly looked after.

When it comes to investments, Credit Suisse private banking is not just at the end of the product pipeline for the investment bank, he says. There are no sales quota that every adviser has to sell x percentage of structured products to their client base. This is also due to the fact that the private bank is an important revenue generator for the whole group.

Future ambitions

The UHNW business is a lower margin business, compared to the high net worth. The very wealthy are quasi-institutional clients, who are able to squeeze institutions on price, but because they are much bigger accounts and have a higher growth rate, they are a very attractive segment.

Asked whether this new breed of specialist private bankers will also bring new expertise and will drive to expand alternative product teams, Mr Shorhouse explains that the UHNW team will be using the existing product

platform but that they will be able to interpret clients’ needs in a much more skilful way for the clients. “What really distinguishes us is our ability to advise. UHNW clients have complex needs and they often need the whole bank to service them well.”

Although the very wealthy have similar needs, dealing with private individuals differ enormously from dealing with family offices.

“We do not segregate our client base based on inherited wealth, entrepreneurial wealth or advisory versus discretionary. Our client base comprises of two constituencies: UHNW individuals and individuals of employed family offices and they are both equally valid and important. A large proportion of the billionaire community either have family offices or are thinking about setting up family offices. This is why we need to be good a both.”

High net worth clients who take their decisions personally, generally need discretionary and advisory services more than family offices, which tend to cherry pick their investments, have multiple banking partners and require sophisticated global custody solutions. “We see family offices as a different type of client. A true family office, running more than half a billion euros of capital, employing five or more investment professionals is a professional counterparty for us.”

Russia and the Middle East were the first regions where the investment partners started operating. In so called developed Europe, the teams have begun developing a book of business more recently, thanks to the appointment of key people such as ex UBS Ian Dembinsky, head of UK, Africa, Israel, the Netherlands and Nordic countries.

In some regions, like the Middle East, family offices have just started appearing on the scene. But in Germany or the UK, where the market is much more mature, family offices have historically represented a barrier for the bank to grow in the UHNW space, notes Mr Shorthouse.

“These investment professionals want to speak to the investment bank, to institutional asset management product providers, they want institutional pricing and need to look smart in front of the beneficial owner. So to capitalise on this opportunity, we have set up a team just focused on family offices, and we have tried hard to plug that team into our asset management capability and closely to the investment bank. We don’t see family offices as competition but as important potential clients” continues Mr Shorthouse.

His comments do not apply to multi-family offices, which are basically asset management firms and asset management boutiques and therefore competitors. These firms have been able to take advantage of the major difficulties faced by investment banks during the credit crunch. Many wealthy entrepreneurs opted to give their investment portfolios to independent asset managers and multi-family offices that had no connection to the big banking brands.

This trend seems, however, not to have affected Credit Suisse, which has emerged as one of the very strongest banks from the credit crisis and continues to enjoy a healthy balance sheet.

Blake Shorthouse, Credit Suisse