PWM/The Banker Private Banking Awards 2011

The judges

• Yuri Bender, editor-in-chief, Professional Wealth Management magazine, London.

• Seb Dovey, partner at Scorpio Partnership in London.

• Shelby du Pasquier, head of the banking and finance group at Lenz & Staehelin, Switzerland.

• Simeon Fowler, CEO of Fox Partnership, Singapore.

• Justin Ong, partner, PricewaterhouseCoopers in Luxembourg.

• Alois Pirker, research director for wealth management at Boston-based Aite Group.

• Amin Rajan, CEO of London-based Create-Research.

• Ray Soudah, founder of MilleniumAssociates in Switzerland.

The much-anticipated Private Banking Awards for 2011, from PWM and The Banker magazines, come as a whole new wave of structural change is about to hit the wealth management industry.

The recent resignation of Ossie Grübel from the helm of UBS, with the ex-Credit Suisse veteran apparently trying to fight tooth and claw for the extension of the integrated model (where private banking, asset management and investment banking are increasingly intertwined to boost product sales and profits), is likely to have a profound effect on the industry.

How services are delivered was a key factor considered by our panel in the one-month intensive judging process for the awards, following four months of research into private banks by our information-gathering team. The judges compared the answers given by the banks with a series of detailed questions about key performance indicators, portfolio management, asset allocation, due diligence, risk management, growth strategies, customer service, ethical factors, business models, staff retention levels and innovation. Quantitative data was also screened by wealth management consultancy Scorpio Partnership.  

One bank model outdated?

Last year, several of the judges had already predicted that the integrated, ‘one-bank’ model was past its sell-by date, and that each division of a bank would have to be able to stand on its own two feet. Since the financial crisis of 2008, regulatory pressure for a split between investment banking and other units, so risky trades do not contaminate retail and private banking brands, as happened at UBS, is also bearing heavily on existing delivery models.

Yet, despite these recent storms, UBS has returned to the top table after reversing significant private client outflows and won the accolade of Best Private Bank in Europe. And significantly, its Asian CEO Kathryn Shih has been given the new and special award of Best Leader in Private Banking. This was one of the most hotly contested awards.

Julius Baer, which won the award for Best Private Bank in Switzerland, is still the prime example of the ‘pure-play’ private bank, difficult to argue with as customers appear to get truly independent advice, rather than being force-fed products from investment bankers in the same group.

The judges were keen to reflect the feeling in the market that these integrated structures do not always best represent clients’ interests. That is why we have seen a lot of smaller, boutique banks, and indeed emerging private banking units of larger banks, stealing the show from some larger competitors.

Banks such as Berenberg in Germany, Schroders in the UK, CIMB in Malaysia and Swiss institutions Falcon, Vontobel, Banque Syz and Bank Sarasin are triumphing in their particular categories despite stiff competition from bigger brand, integrated players. With Sarasin once again elected winner of the Socially Responsible Investing prize, the strategists at the Basel-based bank still appear well ahead of the competition in this sphere.

Despite changes at management level, HSBC, in securing three awards this year, is still impressive in terms of organisation, communication and strategy for growth, although it will soon have to watch its back, bearing in mind the rising ambitions of Standard Chartered, DBS and the continued growth of the Swiss banks in Asia.

Asian importance

In order to further outline the importance of the Asia-Pacific region within the judging process, we selected a new judge, Justin Ong from consultancy PricewaterhouseCoopers, who has significant knowledge and experience of key banks active in that area. This has added further credibility to our methodology.

Citi once again narrowly won the premier accolade of Best Global Private Bank. Its presentation, strategy and understanding of the nuances of wealth management are still setting the standard, underlined by the bank’s leader Jane Fraser, who was subjected to an intensive questioning session from the judges.

Best Global Private Bank

Winner: Citi Private Bank

Highly commended: JPMorgan Private Bank, UBS

As millions lost billions in 2008, ‘regaining clients’ trust’ became a new mantra.  Since then, ever more wealth managers have increased their bench strength of relationship managers, changed their roster of asset managers, revamped their compensation systems, ventured into the Far East or focused on their core capabilities. As such, they have changed the ‘hardware’ of their businesses: the visible aspects of their operating model.  

But Citi Private Bank has also made big leaps on the ‘software’ side: culture and leadership. Although intangible, it has unleashed powerful tailwinds in creating what is now a widely admired global giant with distinct footprints in every major wealth market.

This has happened under the stewardship of Jane Fraser. She sees herself as a passionate steward of an evolving “client franchise” that puts clients at the heart of the business. “Clients are far more cautious now. Our job is to protect and promote their interests,” she says.

The resulting flight to quality, safety and simplicity need not dumb down the results. She has streamlined the client base to promote more intensive engagement. She has broadened and deepened the investment expertise to ensure that today’s volatility can also be a concealed opportunity for those who want to capitalise on it. She has re-jigged staff compensation, to underline that clients are partners. The heads-I-win- tails-you-lose fee structure is history.

She recognises that promoting a partnership ethos is a matter of hard graft, not weasel words, and under her management, Citi Private Bank is a worthy winner of the PWM/The Banker Best Global Private Bank award.

Best Private Bank in Asia

Winner: Standard Chartered Private Bank

Highly commended: HSBC Private Bank, UBS

Best Private Bank in India

Winner: Standard Chartered Private Bank

Highly commended: HDFC Bank

Standard Chartered Private Bank has performed well over the past year, and has been recognised as both the best private bank in India, as well as the best private bank in Asia.

The private bank has built on the network of the wider Standard Chartered bank, which has history going back 150 years, and is known for its focus on emerging markets. Standard Chartered Private Bank, which has its headquarters in Singapore, has experienced rapid growth in the past 12 months in terms of income, assets under management and the number of new client accounts that were acquired. In 2010, for example, its assets under management grew by 39% in Asia and 31% globally.

The past year, however, has brought particular challenges for the bank, and the wider industry in general.

“In the past year, the private banking industry has seen and felt the most significant changes in the area of regulation. The industry has come under increasing regulatory intensity from compliance to fees, client suitability, transparency, increased capital reserves and so on,” says Shayne Nelson, CEO of Standard Chartered Private Bank. “Private banks have had to be nimble and adapt their operating models to the new reality,” he adds.

Mr Nelson notes that part of this new reality is increased costs. “In general, the cost of doing business in private banking has increased. In Asia, this has been exacerbated by fast-rising salaries from a talent crunch. Our challenge lies in maintaining strong growth at healthy cost/income levels, while not compromising client satisfaction,” he adds.

Best Private Bank in Europe

Winner: UBS

Highly commended: ABN Amro Private Banking

For UBS, the Swiss bank with one of the world’s most enviable wealth management franchises, 2011 was shaping up to reinforce a solid recovery since the credit crunch.

One year earlier, the medicine prescribed by new chief executive Oswald Grübel started to bite. Profitability was restored, staff were visibly more confident and the group even embarked on a flashy worldwide advertising campaign.

After suffering SFr200bn ($223bn) of net outflows in the credit crisis, flows turned positive this year, showing the pendulum had decisively swung. Money was still leaving traditional Swiss ‘offshore’ accounts, whose owners may have been spooked by fears about bank secrecy. And the results of the group’s expensively built European ‘onshore’ operations were mixed. But all were outweighed by massive net inflows from UBS’s very richest clients – its ultra-high-net-worth individuals – and booming Asia. In the first half, UBS’s private bank excluding the US booked almost SFr17bn of net new money.

The upturn was seen as reward for the efforts of Jürg Zeltner, UBS’s head of wealth management outside the US, and Lukas Gaühwiler, his counterpart running Switzerland, to rebuild staff ranks and regain business.  

In Switzerland, Mr Gaühwiler, a Credit Suisse recruit, was restoring morale and polishing UBS’s image. Mr Zeltner, a former head of UBS Germany, was similarly on course, rekindling morale and contacts, not least with the independent financial intermediaries who funnel significant funds the bank’s way.

Then came September. First, UBS revealed a $2.3bn loss at its London operations because of an alleged rogue trader. Then followed the surprise departure of Mr Grübel after a board meeting in Singapore, originally planned as a recognition of the bank’s recovery, but eventually overshadowed by events in  London.

Morale has not sunk to the depths of the credit crunch. But UBS private bankers, especially in Switzerland, feel once again they have been let down by their higher profile and better-paid investment banking colleagues.

What matters now is how customers react. Internal memos from the board and a parting missive from Mr Grübel attempted to limit the damage to morale, making it in turn easier to reassure concerned clients.

Best Private Bank in Central and Eastern Europe

Winner: OTP Private Banking

Highly commended: UBS
 

OTP Private Banking stands out in its home market of Hungary for private banking, and has a large market share compared to its competitors.

At the end of 2010, the private bank had 16,784 clients with assets under management reaching Ft609bn ($2.83bn). During 2010 the total assets under management increased by 11.5% compared with 2009, while the growth in client numbers was 5.2%.

The development of discretionary portfolio management is quite low in the Hungarian market, and so OTP Private Banking has been able to carve out a niche in this area.
The private bank aims to be the market leader for a number of years, especially as it has adopted an approach that involves a new risk management method. The bank has also seen a shift from benchmark tracking to an absolute return strategy on its portfolios.

The bank not only improved on the rate of assets under management in 2010, it was also able to reach an average of 10% yield on its client portfolios.

The bank also cites its high customer satisfaction and points out its low churn rate of 2.6% in the past five years. The customers who left the bank were mostly clients belonging to the lower end of the private banking segment. The bank explains that it has a high retention rate in the high-net-worth segment. OTP puts its relatively high retention rate down the fact that it has been able to maintain effective and intensive dialogue with its clients through its network of advisers.
 
Best Private Bank in the Middle East

Winner: HSBC Private Bank

Highly commended: Standard Chartered Private Bank, Citi Private Bank

Best Private Bank in Hong Kong

Winner: HSBC Private Bank

Highly commended: Standard Chartered Private Bank

Best management team

Winner: HSBC Private Bank

Highly commended: Citi Private Bank, Intesa Sanpaolo Private Banking
 
After several years of trying, HSBC is finally reporting a steady increase in the percentage of Hong Kong client assets allocated to discretionary rather than advisory solutions.

A clear positioning of the Asia and China Opportunity Discretionary programmes has also started to attract non-Asian investors. The bank also likes to draw attention to its flexibility to do bespoke mandates and its ability to demonstrate strong performance, while reducing volatility.

Clients also have the ability to inter-react with a whole team – including portfolio managers and discretionary investment specialists – rather than just with traditional gate-keeping relationship managers. A ‘counselling team’ has managed to persuade many Asian clients, previously deal-happy short-termist investors, to move to a medium-term mindset. HSBC sees this as a critical development for its Asian business.

In the Middle East, HSBC has set up a dedicated family office initiative that aims to meet the needs of local families. This can be a particularly complex issue in the Middle East and north Africa region, where large families often own many interconnected companies with different aims. Good family governance and effective intergenerational management and transfer of assets has also been a rising theme for the bank.

Best Private Bank in the US

Winner: Northern Trust

Highly commended: JPMorgan Private Bank
 
Northern Trust’s victory in the US private banking sphere comes against a background of what is describes as the continuing evolution of advice-based wealth management. The bank prides itself in particular on being able to manage investment mandates customised to client requests, administration of multiple complex trusts within a family, and the ability to quickly generate reports on net-worth and investment activity.

The firm is focusing increasingly on each client’s ability to fund specific goals given their unique circumstances. This liability-led approach comes from Northern Trust’s experience in the institutional market place, and is as yet relatively rare in private banking. “Our approach matches assets to their needs and goals so that client can feel secure in their future,” says Jana Schreuder, president of the personal financial services business unit at Northern Trust.

Typically, in current times, advisers are often calming clients and discouraging them from either selling or buying in response to short-term market fluctuations, unless they have sufficient excess liquidity.

Services are being delivered more and more through the bank’s online financial management platforms, which have capacity to review investments by exposure, asset class, sector mix and actual and potential gains and losses. The service is even more sophisticated for ultra-high-net-worth families through the Wealth Passport platform.
Expansion in the US includes the recent opening of an office in Washington, DC – strangely Northern Trust’s first in the country’s capital city.

Best Private Bank in Latin America

Winner: Itaú Private Bank

Highly commended: HSBC Private Bank, Banco do Brasil

Best Private Bank in Brazil

Winner: Itaú Private Bank

Highly commended: Banco do Brasil
 
The merger of the two largest private banks in Brazil, Itaú and Unibanco, was the result of thorough planning aimed at creating a global Latin American bank and it was an impressive achievement, says João Medeiros, Itaú’s head of international private banking. Net new money in 2009, the year of the merger, increased by 39 % to $4.8bn and continued to grow by $6.1bn in 2010. Assets increased by 26% to $70.2bn during 2010.

“We have grown organically throughout 2010 by increasing clients’ share of wallet and originating new money,” says Mr Medeiros. Partnerships within Itaú’s structure and worldwide marketing efforts, which boosted the brand perception outside Brazil, were combined with rigorous sales discipline and improvement of client’s experience.

Cross-business referral agreements with the investment banking and retail banking arms generated 50% of net new money in 2010.

Operating profit growth by $91m year on year resulted from improved client and advisor segmentation, better pricing and improved offering. In 2010, the review of client segmentation criteria, which are based on asset under management ranges and market origin, resulted in a 44% increase in the average private banking client ticket. This also enhanced the delivery of customised service level. Clients that fell below a target level of $1m increased their assets under management with the bank to continue to be with the private bank, while the others were migrated to the bank’s personal banking division.

In addition to Brazil, Itaú operates in the Bahamas, Brazil, the Cayman Islands, Luxembourg and the US. Brazilian clients were mainly responsible for the bank’s growth in 2010, as economic conditions in the country improved, while Chilean and Uruguayan clients also contributed to the increase. In 2012, the bank’s target is to consolidate its presence in the Brazilian market and increase its penetration in the Hispanic markets.

“We are a player with Latin DNA, deep knowledge of the region and growing expertise on global markets,” says Mr Medeiros. “The combination of global know-how and local flavour favours the build-up of solid, long-lasting relationships with our clients, risk control and governance.”

Best Private Bank in China

Winner: China Merchants Bank

Highly commended: ICBC Private Banking
 
China Merchants Bank (CMB) enjoyed phenomenal growth during 2010 and is improving its services, including the pioneering funds platform, alternative investments, and a key distribution target for many smaller managers in Hong Kong and elsewhere in Asia.

“Within the regulation permitted, we will explore whatever is available on the market,” says CMB’s cautious but gregarious chairman, Ma Weihua, on the bank’s open platform project. “Although we are committed to these ambitions, we insist on a careful screening process from our product committee. From working with partners to designing the product itself, whatever is best for our clients is our priority.”

CMB now boasts 22 private banking centres in 18 cities, employing 200 staff. Since July 2010, head office in Shenzen has enforced a greater risk control during the sales process. While the eastern coastal area has more high-net-worth individuals with higher assets per capita, the number of wealthy individuals is growing at a faster rate in Bohai Bay and central and western China.

“With the local government’s support, these two regions have enormous potential as new growth hubs for China’s private wealth market. The growth rate of our staff will have to double within the next three years,” predicts Mr Ma.

There is a regular check to make sure private banking relationship managers are conducting an advisory consultation and sale of products based on full understanding of a client’s needs, rather than a fast-track approach which cuts corners. Internal auditors also check that single product risk and overall asset allocations are adequately explained to clients.

Product innovations include a high-yield real estate fixed-income fund and products investing in art, wine, commodities and ‘arbitrage transactions’. International ambitions are being harnessed through the recently acquired Wing Lung bank in Hong Kong.

Best Private Bank in Singapore

Winner: DBS Bank

Highly commended: Standard Chartered Private Bank, Bank of Singapore

Su Shan Tan, group head of wealth management, DBS Bank

The aim of DBS Bank to consolidate its position as Singapore’s largest private bank and one of Asia’s leading institutions will be backed by a move of its headquarters to the newly constructed Marina Bay Financial Centre in the second half of 2012.

The new premises, where DBS will occupy 18 floors, will allow the area dedicated to DBS Private Bank to expand by about a third when compared to its existing location at the now-outdated PWC building in Singapore’s central district. “The extra room will give us the flexibility to increase our headcount,” says Su Shan Tan, group head of wealth management at DBS Bank and a bright, charismatic leader, well-known in Singapore’s media.

A recent investment of S$250m ($197.5m) over five years will take “private banking in Asia to a new level”, says Ms Tan, responding to the region’s rapid rise in wealth creation, particularly in the affluent sector. Online banking will be a key part of this new resource.

While DBS is ubiquitous in Singapore, where its brand is all-pervasive, it has been criticised by consultants and investors for not having enough ambition across the rest of Asia. Ms Tan is trying hard to refute these criticisms and address the imbalances, including leveraging the DBS Treasures Private Client platform from Singapore for the Hong Kong market. The idea is to combine the best of transactional banking with investment advisory services.

Best Private Bank in South Korea

Winner: Hana Bank

Highly commended: Korea Exchange Bank, Shinhan Private Bank
 
 Since introducing the private banking model in South Korea 1995, Hana Bank has seen the number of its private customers and assets increasing by an average of 10% annually. Assets for clients with an account with more than Won500m ($430,000) amounted to Won22bn at the end of last year, with Won1.6bn in net new money.

The bank has been actively promoting the use of asset allocation, customised portfolio management and investment education, says Hyung II Lee, head of Hana Private Bank. This strategy has had some success as the proportion of investment assets – including equity, fixed income, and alternatives – on the total high-net-worth individuals’ assets under management has reached 61%, versus less than 50% of other domestic banks. The product based fee structure has mostly driven Hana Bank’s profit growth in 2010, he says.

“Client needs are always evolving and the innovation of both products and services is essential,” says Mr Lee. Following changes in regulation, which lifted the separation between retail and investment banks, Hana launched a number of customised products, such as advisory wrap accounts or absolute return funds, which were well received by customers. “The timely launch of products got very positive response, as the recovery of global economy drove customers’ higher risk appetite,” says Mr Lee.

The private bank acquired more than 1100 new customers in 2010 to reach 16,170 in total.

New services were also introduced; some of them targeted at the second generation of clients, such as a couple-matching service between children of high-net-worth customers and wedding planning. “The issues around financial planning for people in the post-retirement space and the transfer of assets to the second generation could bring the next wave of innovation,” says Mr Lee.

The bank claims to have been the first in South Korea to introduce private banking applications on smartphones and the first to offer a video call service between its headquarters and branches.

Hana is expanding in Asia, through local subsidiaries and branches in Indonesia, China and Hong Kong. It also recently established a strategic alliance with CMB China.

Best Private Bank in Taiwan

Winner: Chinatrust

Commercial Bank
 

James Chen, president and CEO, Chinatrust Commercial Bank

Chinatrust has put in a strong performance over the past 12 months, picking up the award for best private bank in Taiwan again.

James Chen, president and CEO of Chinatrust Commercial Bank, says of the bank’s performance over the past year: “Chinatrust has strong commitment to maintain its position as the market leader by continuing [to polish] the business model to satisfy customers’ needs.”

There are a number of ways that the bank has worked on building on its lead in the Taiwan market. For example, in the private banking and wealth management business, Chinatrust established a new segmentation model with a one-bank approach that aims to offer a more accurate advisory service, product portfolio and membership package.

Mr Chen says that the ‘one-bank’ approach has helped Chinatrust serve its clients better, as well as enhance the advisory and sales approach of the organisation.

“Chinatrust built stronger relationships with its VIP customers than most rivals in 2010. [We] still surpass major wealth management banks in Taiwan with a lion’s share of VIP customer number and assets under management,” he adds.

Competition, however, is heating up in the Taiwanese market, which means that it is now more important than ever to have the right strategy.

“Chinatrust needs to build a strong business model for high-net-worth individuals, in addition to our success in mass affluent customers, to distinguish ourselves among the fierce competition. Besides, we need to upgrade the wealth management fee model to sustain our fee revenue. The key to success is to integrate internal resources to make these things happen as soon as possible,” says Mr Chen.

Best Private Bank in Italy

Winner: Intesa Sanpaolo

Private Banking
 
 Formed by the merger between Banca Intesa and Sanpaolo Imi in 2007, Intesa Sanpaolo Private Banking is a dominant player in the Italian private banking space with its €75bn in assets under management. Over the past two years, net new money grew by €4.2bn, of which €1.7bn gathered in 2010.

Its number of high-net-worth clients, who are served by 800 relationship managers, has remained stable at 40,000 for the past few years. “The largest part of net new money derives from new investments made by existing clients, who were satisfied by the performance generated by our gestioni patrimoniali [Italian multi-manager discretionary portfolios] in the difficult years of 2009-10,” says Paolo Molesini, Intesa Sanpaolo Private Banking’s CEO. “Increasing the share of wallet is definitely a primary objective for a private bank of our dimensions. However, we are constantly committed to acquiring new clients from the market or through synergies with the retail and corporate clients of the Intesa Sanpaolo banking group.”

Operating profit has increased by 37% to €176m, mainly due an improvement in the asset allocation in clients’ portfolios, achieved through a correct mix on managed investments – such as funds, gestioni patrimoniali and insurance policies, as well as to the recent introduction of added value advisory services.

The integrated platform with a single fee for transaction and banking services launched in 2010 was the first step towards the creation of “an all-round advisory service”, created in 2011 with private advisory. This is a fee-based, highly customised service for clients who are not willing to delegate completely their portfolio management and have assets of more than €2.5m. The bank is working on extending this service to clients with wealth worth €1m to €1.5m.

This strategy has increased the percentage of recurring income, improving financial results. To implement its growth plans, operating expenses have increased by 7%, but cost control and economies of scale have enabled Intesa Sanpaolo private bank to reduce its cost-to-income ratio from 56% to 52%, explains Mr Molesini.

“We are aware that our human capital is our most important asset and it is especially in these uncertain and volatile markets that our role becomes fundamental,” says Mr Molesini. “Clients need to be reassured, so that they do not make any rash and panic-driven decisions.”

Best Private Bank in Germany

Winner: Berenberg Bank

Highly commended: Deutsche Bank
 
Germany’s oldest private bank is proud of its deep-routed traditions. Berenberg Bank’s biggest shareholders are the descendants of the founding family and the partners running the business. Being independent contributed to draw 400 new clients and €1.1bn in net new money last year, says Markus Taubert, head of Berenberg private bank. Clients are increasingly wary of those institutions that create and issue their own investment products, he adds.

“Entrepreneurs in particular, who are the bank’s main client group, are usually better informed about business models and incentives and readily understand the differences between our business model and that of large banks,” he says, adding that being a mid-sized owner-managed company resonates well with most entrepreneurs.

Free of any conflict of interest, Berenberg Bank, which manages €25.5bn, is able to offer the best product advice. “We do believe in open architecture, as a more guided approach would perhaps limit our investment universe,” says Mr Taubert.

No more than 5% of client monies of discretionary mandates is invested into in-house funds. While third-party funds are used in areas where the bank does not have internal expertise, most clients’ assets are invested in plain-vanilla securities. The bank can count on a team of three secondary researchers as well as 70 primary researchers.

Based in London since 2008, these cover 330 European stocks. The recommendation lists for equities and bonds are updated on a daily basis and centrally available to all the 130 plus advisers. The client-to-adviser ratio is set at 50 to 55.

The institution relies on sophisticated asset allocation and risk management models and offers a flexible fee structure, dependent on individual customer preferences. Relying on an integrated model with the group’s asset management and investment banking arms, the private bank gives its wealthy clients access to investment solutions and services normally available to institutions. Structured products are employed on a small scale only to reduce risk, for example equity market risk, but Berenberg investment bank does not issue any structured product, says Mr Taubert.

A private banking office was opened in the City of London this year to respond to market demand and it serves both UK onshore and offshore clients as well as German expats.

Best Private Bank in the Nordics

Winner: SEB Private Banking

Highly commended: Danske Bank
 
SEB beat off strong competition from regional rival Danske in its Scandinavian home market. Owned by the Wallenberg family, Sweden’s wealthiest and most powerful dynasty, SEB has been making strong progress in private banking under global head Martin Gärtner.

This includes broadening the product range to include delegating sub-advisory mandates to US managers and revamping its range of third-party funds. Hedge funds, both internally sourced from key asset management, purchased in 2008, and external strategies are an important plank of the portfolios. Thorough manager research is particular important on the alternatives side, says Mr Gärtner. Liquidity is also crucial and Mr Gärtner attributes the bank’s recent solid performance as being largely down to the correct management and identification of these alternative sources of alpha.

Strong inflows during 2010 helped the bank cement a leading position in the Swedish market, but there is also an increased emphasis on cross-border business across the Nordic region and beyond into Germany and the Baltics.

Best Private Bank in Spain

Winner: BBVA Banca Privada

Highly commended: Popular Banca Privada
 
Best private bank in Spain for the second year running, BBVA Banca Privada gained more than 6000 new clients last year and net new money grew by €2.7bn to reach around €39bn in total assets under management.

The focus was about improving communication and transparency and to adapt to client new needs, such as those arising from modern lifestyles.

“We are carrying out a revolutionary project to change the way we interact with clients using new channels,” says José Garcerán, BBVA Banca Privada’s head of private banking in Spain. “Being a pioneer in the use of new technology solutions is what mainly differentiates us from our competitors”. BBVA has been the first private bank to launch an iPad allocation and is investing a considerable amount of resources to upgrade its website, iPad and smartphone offering.

In late 2009, the bank allocated an ambitious three-year budget of €11.7m – of which €3.6m was invested last year – to create a more robust integrated private banking platform, involving the upgrading of portfolio capabilities, financial planning and reporting tools through different channels. “Transparency is one of the key targets of our integrated private banking model. Clients will be able to gain access to their positions, make transactions and produce reports across different channels,” says Mr Garcerán. In 2010, the bank started offering new integrated reports on a monthly basis.

More robust and systematic processes govern the relationship between advisors and clients, and the team working model has been improved to enable relationship managers to better leverage the expertise of specialist in-house teams. While new branches and flagship offices are being redesigned, remote advisor positions were also introduced.

In 2010, BBVA’s open architecture fund platform, Quality Funds, was restructured into four dedicated departments in order to minimise operational risk and improve transparency. Its headcount has doubled to 35 people since late 2009.
 
Best Private Bank in Switzerland

Winner: Bank Julius Baer

Highly commended: UBS
 

Boris Collardi, CEO, Bank Julius Baer

Bank Julius Baer, headed by CEO Boris Collardi, has triumphed on home soil against stiff competition from smaller local players and the larger, integrated global giants.

Part of the bank’s Swiss success has been down to a change in organisational structure, previously divided between Switzerland’s French-, German- and Italian-speaking regions, but now unified under a single boss.

Julius Baer prides itself as being the only Swiss bank, apart from market leaders Credit Suisse and UBS, with a nationwide network. “It is no longer just Zurich and a few other places,” says bank spokesman Jan Vonder Muehll. While the majority of the bank’s staff remain in Zurich, there are now 400 in Geneva – competing strongly with the likes of Lombard Odier and Pictet – 200 in Lugano and 100 in Basel, the home territory of Bank Sarasin.

Along with other banks, Baer is marketing a new-style ‘Edelweiss’ mandate to local customers, investing in Swiss-quoted blue-chip stocks such as Nestlé. The rationale here is that Switzerland has been a shelter from storms in the financial crisis, with the stability of local stocks increasingly appealing to private clients.
 
Best Private Bank in Turkey

Winner: Garanti Masters Private Banking

Highly commended: Yapı Kredi Private Banking
 
Although the development of the private banking industry in Turkey is at a nascent stage, Garanti Masters Private Banking (GMPB) aims to lead the domestic industry with a management approach that is on a par with its western European peers.

GMPB focuses on an advice-led model that involves the client so that they feel actively involved in the process of managing their assets. Wealth protection has become a theme in recent years, which means that the bank is more cautious and has added extra levels of control that go beyond regulatory compliance. Since the financial crisis, clients are more discerning and are demanding increased levels of transparency. For this reason, GMPB is sharing detailed information with its clients about market, credit and operational risk.

GMPB says that the uncertainty about the global economic environment is a feature of the private banking industry in Turkey. This has led to increased competition in the sector, and has affected both the growth of assets under management and profitability.

To deal with this changing environment, GMPB places an emphasis on innovation and is known in the market as being the first to introduce certain products to Turkey.

One of the latest products, which was introduced in September 2010, is the Global Luxury Brands Fund. This is a capital guaranteed fund and takes a bullish view on the RBS Luxury Total Return Index.

Aside from structured products, GMPB is also able to offer investment solutions that are designed specifically for individual clients.

Best Private Bank in the UK

Winner: Schroders Private Banking

Highly commended: Barclays Wealth
 
Schroders has been one of the ‘nearly players’ now for several years, but the perception among the judges of the PWM/The Banker awards is that this investment-led private bank is finally getting its act together, after many years of laying the foundations.

Indeed, according to CEO Rupert Robinson, boutique institutions such as Schroders have been spurred into action by the financial crisis. “Private banks must deliver more, and [must deliver it] better in the low-growth economic environment we are faced with,” says Mr Robinson. “Those who can generate solid returns and protect the downside will be rewarded with increasing flows of assets from clients who trust them and are prepared to pay for quality.”  

At the same time, investment in systems to be able to cope with regulation without suffering problems arising from margin erosion and compliance overload are also key to success, Mr Robinson adds.

Schroders has recently stepped up its investment in talented thinkers in portfolio management, having recently added a new chief investment officer, and now being on the verge of announcing a new head of manager selection, straddling long-only and hedge fund strategies. The idea is to also increase the input and experience of asset allocation and risk management techniques from Schroders’ institutional asset management business.

“In recent years we have enhanced our portfolio construction process to reflect a relevant and practical time frame for private clients,” says Mr Robinson, describing a forecasting framework that focuses on a seven-year time horizon and takes into account economic cycles and current market valuations.

“We are also incorporating greater flexibility into asset allocation decisions and allowing conviction investment views within a risk framework without constraints imposed by limited tactical ranges, based around strategic long-term portfolio weights.”

Among private banks in the UK, Schroders is also one of the more discerning when it comes to minimising fees levied by portfolio managers, in the belief that this is one of the main sources of performance drag in a low-return environment. This means greater use of low-cost passive products and certain structured products such as reverse convertibles and semi-annual review notes, which can exploit volatility to capture attractive coupons.

Best Private Bank for Customer Service

Winner: JPMorgan Private Bank

Highly commended: Northern Trust, RBC Wealth Management

Best brand in private banking

Winner: JPMorgan Private Bank

Highly commended: Standard Chartered Private Bank, UBS
 
JPMorgan Private Bank has built up a strong brand in the industry that is known for its long history – more than 160 years – and aims to be synonymous with excellence and integrity. This for the bank means utter discretion and always keeping its clients’ interests at the centre of what it does.

The private bank manages more than $600bn in client assets and serves clients from 64 offices globally, employing 5610 people worldwide.

The client focus has become increasingly important, especially given the current economic environment. Pablo Garnica, CEO of JPMorgan Private Bank for Europe, the Middle East and Africa, says: “Given current market volatility and the increased regulatory environment, our challenge is to continually digest and analyse the information and communicate it to our clients in a timely and effective manner.

Another challenge, and ultimately our primary goal, is having the best talent and technology in every corner of the world to bring our clients innovative investment solutions in any market environment.”

The current environment has brought a number of developments. Mr Garnica says: “One of the more significant developments in the past year has been the overhaul in the regulatory environment around the globe. Some of these changes are complex and not standardised across all markets. Another major shift has been the rapid development of new technologies. We recognise the power these technologies can have on the client experience, and are continually working on innovation to ensure we stay ahead of the industry.

“At JPMorgan, we are focused on being industry leaders by bringing our clients a range of ideas and solutions in an ever-evolving market environment, and we take pride in our transparent and rigorous due diligence approach which has been in place for more than 40 years.”  

Best Private Banking Boutique

Winner: Bank Vontobel

Highly commended: Berenberg Bank, Bank Delen
 

Zeno Staub, head of Bank Vontobel Group

Bank Vontobel, always perceived as a German-focused institution in Zurich, has sometimes been left behind in the vast expansion of private banking, which has benefited its competitors such as Julius Baer.

But the recent installation of former asset management boss Zeno Staub as head of the group shows that investment skills and asset allocation know-how are now seen as key attributes right across the bank’s business lines.

While the group runs SFr130bn ($145bn) in managed assets, most of this money is managed on behalf of institutional clients. Private clients, accounting for about SFr30bn, are now a major target in Mr Staub’s expansion plan. He hopes to boost the assets they hold to SFr50bn within three years. He also has plans to internationalise Bank Vontobel’s mainly Swiss client base. The US market, now ignored by many competitors fearful of antagonising the country’s far-reaching authorities, is seen by Mr Staub as providing an excellent long-term opportunity.

Best Emerging Private Bank

Winner: CIMB Private Banking

Highly commended: Banchile Wealth Management
 
CIMB Private Banking is a market leader in the private banking space in Malaysia and today has assets under management of RM8.54bn ($2.73bn), more than doubling its $1.33bn figure from 2008.

The private bank’s management philosophy focuses on wealth preservation – especially in light of the financial crisis – and so emphasis is placed on this, rather than on shorter-term investment goals.

CIMB Group has a universal banking platform and the wealth management platform is integrated to the ‘One Bank’ concept, so that CIMB Private Banking offers a suite of products that is integrated under one roof.  

CIMB Private Banking has now completed transforming its platform, a process that it began in 2008, which it argues now offers better operational efficiency through automation, an enhanced delivery structure, and expanded offering of products and solutions.

In 2010, the private bank saw a 61.9% year-on-year increase in revenue, which was attributed to increased scalability and more diversified streams of revenue and increased annuity income across a wider range of products and asset classes.

CIMB Private Banking has witnessed a number of changes in the industry. The bank notes that a significant development is the shift in behaviour of the authorities from being a regulator to an enforcement officer, and a shift from a supervisory role to full oversight of the industry players. This brings its challenges and is feared that it will limit the development of the private wealth management for high-net-worth individuals and sophisticated investors. One fear is that share of wallet per client could remain stagnant and investors eventually find loopholes to channel their assets offshore in pursuit of more choice of investment products.

Best Private Bank for Innovation

Winner: Banque SYZ & CO

Highly commended: CIMB Private Banking

Eric Syz, managing partner, Banque SYZ & Co

Banque SYZ & Co, which was established in Geneva in 1996, has seen its clients’ assets under management grow to reach SFr25bn ($27.7bn) to become one of the success stories of Swiss private banking.

Eric Syz, one of the three managing partners of Banque SYZ & Co, believes that Switzerland is back in favour again.

Mr Syz says: “The huge debt problems and the euro crisis have made many European investors worried and they are now finding their way back to Switzerland, rightly perceived as a safe country in which to hold your assets.

“Another positive trend is the withholding tax agreements negotiated this summer with the UK and Germany. This is a very positive development as they not only provide an important tax manna for these governments but, more importantly, they provide investors a path to tax compliance while maintaining their financial privacy.

After years of market upheavals, investors are finding that the Swiss investment style – ie. focus on capital preservation, active management, diversified and non-indexed portfolios – remains the best answer to their needs.”

Balancing return and risk continues to be the major challenge for the bank. “Of course, you need to deliver good returns, but you must above all protect their assets. I believe that the best way to go is to adopt an absolute return objective and to align interests by putting in place a performance fee system,” says Mr Syz. “In the current markets, this is certainly a big challenge but, with an active asset allocation and modern investment techniques, you can achieve superior results.”

Best Private Bank for Socially Responsible Investing

Winner: Bank Sarasin & Co

Highly commended: Danske Bank, CIMB Private Banking
 

Burkhard Varnholt, CEO and head of asset management, product and sales, Bank Sarasin & Co

Bank Sarasin has more than 20 years’ experience in sustainable asset management and is one of the leading providers of socially responsible investments in Switzerland.
The bank focuses on giving consideration to financial, social as well as environmental factors when analysing issuers of securities. It has a sustainable investment approach that is built around themes such as renewable energy or water. The bank argues that giving attention to sustainability can help to reduce investment risks.

For example, Bank Sarasin argues that no investments were made in Greek, Portuguese or Spanish sovereign bonds. Another recent example is that Bank Sarasin was not affected by the Gulf of Mexico oil disaster as it did not invest in the companies involved. Also, companies that have more than 5% of their turnover from nuclear energy were not included in the investments.

Burkhard Varnholt, CEO and head of asset management, product and sales at Bank Sarasin, says of the changes that have been occurring in the industry: “The most significant drivers of change are also shaping a new, global, economic and political order: globalisation, demographic change, the shifting balance of power between the public, financial and corporate sector, and increasing environmental concerns. These factors are challenging old business models and enforcing a new mindset for asset managers to embrace sustainable investment choices as a real opportunity.”

And commenting on the challenges of Bank Sarasin, Mr Varnholt says: “We need to scale our business model to keep up with rapidly growing demand. This requires the utmost focus, rigour and prudence as people and ideas are our most valuable assets.

You might call this a high-class problem to deal with – but it’s also challenging and rewarding.”

Best Leader in Private Banking

Winner: Kathryn Shih, Head of Wealth Management Asia-Pacific, CEO, UBS Hong Kong
 
For the PWA/The Banker Private Banking Awards judges this is a very important component of the awards. In selecting the winner of this award there are a number of very important factors that were taken into account in considering the right individual to be awarded the Best Leader in Private Banking. The judges considered the following key factors in the leadership assessment:

•  Charisma: Instills faith, respect, and trust and conveys a strong sense of mission.
•  Flexibility: Functions effectively in changing environments and is able to change course when the situation warrants it.
•  Courage: Willing to stand up for ideas even if they are unpopular and will do what is right for the company and for employees.
•  Dependability: Follows through and keeps commitments.
•  Integrity: Does what is morally and ethically right.
•  Judgement: Reaches sound and objective evaluations of alternative courses of action through logic, analysis and comparison.

Needless to say that the list of contenders was strong but what was key for the judges was that the chosen individual had consistently and unwaveringly upheld these core leadership principles over many years.

The individual we have chosen has been working for UBS Hong Kong for more than 20 years and has held leading positions over this time. She started as a client advisor and rose to head of private banking operations in Hong Kong, after which she was a regional market manager of greater China followed by north Asia, and now her current role as Asia-Pacific head and CEO. The Banker and PWM are therefore pleased to give the award of Best Leader in Private Banking to Kathryn Shih.

Most Improved Management Team

Winner: Falcon Private Bank

Highly commended: HSBC Private Bank
 

Eduardo Leemann, chief executive officer, Falcon Private Bank

Since April 2009, Falcon Private Bank has been owned by Aabar Investments PJSC of Abu Dhabi, which is majority controlled by the state-owned International Petroleum Investment Company.

The Swiss private bank is the former AIG Private Bank and Eduardo Leemann, chief executive officer of Falcon Private Bank, has been credited with being an impressive leader and successfully managing his team during the transition. The bank aims to increase its revenue further, but the improvement and progress that the bank has showed so far is notable.

The bank has a growing presence in Switzerland, the Middle East, eastern and western Europe and Asia. It currently employs 280 people at its head office in Zurich and has branches and representative offices in Geneva, Hong Kong, Singapore, Abu Dhabi and Dubai.

Falcon Private Bank, like the rest of the industry, is operating in a difficult environment. “In my view, the most significant developments that had an influence on our industry last year were margin erosions combined with major growing market uncertainties,” says Mr Leemann.  

This creates a number of challenges for the private bank. “One of our greatest challenges is the development of product and strategies for private clients which suit their need of capital protection plus decent returns. As a Swiss private bank owned by Abu Dhabi – and with a global presence in Switzerland, the United Arab Emirates and Asia – one key challenge remains the management of a global franchise combining all cultural aspects under one brand,” says Mr Leemann.

EXTERNAL PROVIDER NOMINATIONS: 2011 WINNERS

Best fund management group

Winner: Franklin Templeton Investments

Highly commended: JPMorgan Asset Management

Best emerging market fund management group

Winner: Franklin Templeton Investments

Highly commended: Aberdeen Asset Management
 
Winning the award for best emerging fund management group for the second year in a row, and the award for best fund management group for the first time, Franklin Templeton is one of the largest dedicated independent asset managers in the world.

Headquartered just south of San Francisco, in San Mateo, California, Franklin Templeton has offices in more than 30 countries around the world and offers investment solutions and services in more than 150 countries.

With $660bn in assets under management globally ($105bn in Europe), recent fund launches have included the Templeton Emerging Market Balanced Fund in May and the Franklin Templeton Global Allocation Fund in August, while the acquisition of UK-based Rensburg Fund Management has increased the firm’s equity fund range in the country.

Best Exchange-traded fund provider

Winner: iShares

Highly commended: Deutsche Bank
 
Winning the award for best exchange-traded fund (ETF) provider for the second year in a row, iShares continues to dominate the global ETF market. More than $620bn is invested in iShares’ 474 funds – 43% of the global market. Yet the provider is determined to continue to expand both its fund range and its presence at a local level.

“We are not complacent in any way and are on a process of continuous improvement,” says David Bower, iShares’ head of European marketing. “For example, we have opened an office in Copenhagen this year to provide a local servicing capability for Danish and wider Nordic-based investors. We now have offices and dedicated iShares ETF teams in France, Switzerland, Germany, Austria, Italy, Denmark, the UK and the Netherlands, and we’ll continue to build that out as the market in Europe grows.”

Mr Bower explains that iShares does not yet cover the full set of asset classes with its products and will continue to expand its offering. He points to the launch of its first non-fund products in Europe this year – the four physically backed, exchange-traded commodities, providing exposure to gold, silver, palladium and platinum, along with a dollar high-yield fund in September.

Mr Bower says of the increasing interests of regulators towards the European ETF industry: “This is not surprising given that ETFs have become a more mainstream product within the European marketplace, coupled with recent innovations in ETF manufacture in the investment strategies available and the structures utilised. ETFs are already among the most highly regulated investment products available.”

One area under review by regulators is the approach being taken to index replication by the ETF industry. There are broadly two methods, namely physical replication and synthetic replication, and iShares definitely leans towards physically backed ETFs. Of the 109 Dublin-domiciled funds listed on the London Stock Exchange, 107 are physically replicating, and two use synthetic replication, while the German fund range has just one synthetically replicating ETF.

“iShares is committed to physical replication where the underlying market allows, and when the market does not allow enable tracking by physical replication, we will use our market leading synthetic model,” says Mr Bower.

Best structured product provider

Winner: Barclays Capital

Highly commended: JPMorgan, UBS
 
The past few years have been challenging ones for structured products, but the ability to deliver client-centric solutions across asset classes from one desk has been very important, according to Kevin Burke, head of investor solutions and Barclays Capital fund solutions distribution.

Clients have been looking for simplicity, transparency and liquidity in structured products, he explains, while he believes that investing in technology has paid huge dividends. “To have a market-leading e-commerce platform that allows our clients the ability to price and execute efficiently ideas across asset classes has been a increasingly important component of our client service.”

He highlights the Comet platform, designed by Barclays Capital’s investor solutions team, which now has more than 140 private banks using it to tailor bespoke structured investments across a wide range of structures.

Mr Burke says Barclays Capital has been seeing increasing levels of interest in listed products, for example, into the iPath exchange-traded note product suite, which spans commodities, volatility, equity, fixed income and foreign exchange and had attracted $7.1bn by the end of September and $450bn since inception.

With the return of uncertainty to the markets, Mr Burke says that the more risk-averse clients have been focusing on fixed-income investments. “In terms of the high-net-worth and ultra-high-net-worth channels, I would say that the investment sentiment has been more mixed, with more thematic investments and with an eye on volatility,” he adds.

“We have seen a lot of interest in our commodity and volatility suite of products as investors continue to look for diversification and also efficient hedging tools. Another interesting theme we saw from sophisticated investors was in gaining transparent access to a variety of asset classes via quantitative investment strategies.”

Best global custody provider

Winner: State Street

Based on the nominations of the private banks that entered the awards this year, State Street was chosen as the best global custody provider.

One private bank commented that State Street was a reliable custodian services provider that was able to fully support every aspect of its custody and accounting services needs.

Quality, technological innovation and a professional service are all a focus for State Street. Not only has it built its reputation for being reliable for its core custody services, it aims to be equally recognised for its reporting and data integration tools. Its custody and accounting capabilities are integrated onto one platform so that a number of services are built into a single solution.  

As of March 2011, State Street had $22,600bn in assets under custody and administration worldwide, and $2100bn in assets under management.

The range of services that State Street offers includes securities settlement, safekeeping, income and dividend collection and repatriation, corporate actions processing, proxy voting, tax reclamation, foreign exchange, cash management and derivatives processing.

It has a wide network and operates in 26 countries and more than 100 geographic markets worldwide. It is known as a global custody leader and has been able to develop effective relationships with local market participants – regulators, exchanges, central banks, depositories and sub-custody providers – which has become more important in the current challenging environment as it needs to mitigate custody risk and exposure for its clients.

The organisation also puts emphasis on thorough research and expertise in how market events, participants, inherent risks, practices and regulations impact the custody of its clients’ assets.