PWM/The Banker Private Banking Awards 2013: Global Winners

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  Best Global Private Bank
• Best Global Brand in Private Banking
• Best Performing Private Bank
• Winner: UBS Wealth Management

UBS Wealth Management has turned its operation around,shaken off much of its post-crisis bad publicity and returned to the upper echelons of the private banking industry in 2012.

After outflows in 2010, it enjoyed healthy net new money in 2012 and managed to cut expenses, while boosting its share of Asian clients to 25% in asset terms. UBS posted inflows of $22bn in 2012, up $8bn from the previous year, showing a renewed faith among private clients, most of whom typically shuffle their portfolios between four or five trusted partners, according to which one is in the ascendancy. 

Despite being based in Europe, the bank’s strongest inflows come from the Asia-Pacific region, and developing markets in general. There is a strong focus on Hong Kong and Singapore, with increasing resources being allocated to developing a presence in Japan, Taiwan and mainland China. Other developing markets such as Brazil, Mexico, Israel, Turkey, Russia and Saudi Arabia are also being prioritised.

Structural changes mean that wherever a client resides, a house view can now be implemented in every portfolio. Senior management has been striving to impose more central control over rogue relationship managers since clients were caught in Madoff losses, which also coincided with bad news from the bank coming from the global crisis soon after 2008. About 15,000 investment funds are now screened by a central verification team, which has also introduced new asset classes including US corporate high-yield and emerging market bonds to help boost returns.

The one market UBS has yet to fully recover in is Switzerland, where critics at rival banks still blame the global giant for catapulting the industry into disarray for not only recruiting excessive numbers of US tax-payers, but then negotiating ineptly with US tax authorities, thus affecting the Swiss industry.

In order to boost engagement in its traditional homeland, the bank introduced a new advisory model, UBS Advice, during 2012, aimed at clients who want to make their own investment decisions. It plans to roll out this concept internationally. Bank strategists claim that within one week of a relevant market event happening, they guarantee that relationship managers will contact clients with a solution. This service attracts a new flat-rate advisory fee, a charging model that the bank expects will eventually become the industry norm.

After many Swiss banks pressed the panic button several years back, shocked at the increasing market imprint of multi-family offices staffed by dissatisfied executives from larger banks, UBS has invested significantly in its ultra-high-net-worth segment, offering new initiatives such as Impact Investing, combining philanthropic objectives of making positive social and environmental contributions, while also achieving good financial returns. 

The bank’s global family offices group functions as a joint venture between the wealth management unit and the investment bank, to target the needs of the world’s largest 250 family offices.

Many of these changes have been brought in by wealth management boss Jürg Zeltner. While he took the flak and had to apologise to clients for problems and mis-sold products soon after the crisis, he is now reaping the rewards of a rise in form and fortune. Currently, at least, his star is rising.

• Best Private Bank for Innovation
• Winner: Northern Trust

The types of innovations introduced by Northern Trustclearly testify to the key role technology and digital communication are now playing in private banking.

Last year, the US bank rolled out its goals-based investing approach across the country, powered by proprietary software, and delivered by its client portal, Passport Mobile, to the Apple and Android app stores.

“What resonates with our clients is that they know we understand them,” says Jana Schreuder, president of wealth management at Northern Trust. Clients have, she says, responded “enthusiastically” to innovations such as goal-driven investing and Passport Mobile. 

“The goals-driven investing approach gives clarity to clients through a collaborative experience that improves confidence in reaching financial objectives and ties a specific, dynamic asset allocation to each goal,” she adds. And this close alignment of priorities and investments can help investors avoid some common mistakes, such as trying to time the market.

The bank’s smartphone app allows clients to perform transactions and access information while providing easy access to the bank’s thought leadership via social media. 

According to Northern Trust’s most recent client survey, 84% of its clients prefer digital communication to paper, compared with 42% four years earlier. “In response to these preferences, we have shifted a great deal of our outreach efforts to electronic, digital and social channels,” says Ms Schreuder. Over the past three years, Northern Trust allocated more than half of its technology capital to further enhance its digital channels.

The US bank also has a social media presence on Twitter, LinkedIn and YouTube and is actively using these channels to share content from its subject matter experts. Client-facing social media efforts – via Twitter and LinkedIn – will soon be integrated into the bank’s mobile app. An iPad app, Wealth Path, allows clients to access content tailored to their goals.

These tools, along with the bank’s integrated wealth management approach, led to record results for 2012, with assets under management growing 14% from the previous year to $198bn.

• Best Private Bank for Socially Responsible Investing
• Best Private Bank for Philanthropy Services
• Winner: BNP Paribas Wealth Management

BNP Paribas Wealth Managementhas long been building its proposition, taking advantage of a strong bank branch network across its native France, but its efforts are finally being recognised both at home and abroad with a string of awards in 2013.

The growth has been accelerated by a series of key mergers to boost assets held globally to Ä265bn. But 2012 also saw a phenomenal Ä7.5bn net new money, more than double the previous year.

One key innovation has been the development of the ‘key client’ group, for those with more than Ä25m to invest, particularly focusing on capturing family office business growth from Europe and the Middle East. This involves a closer collaboration with the bank’s corporate and investment banking division and an increased focus on female clients and entrepreneurs. Indeed in France, where BNP Paribas boasts client assets of €73bn, making it the leading wealth management institution, the bank has begun to concentrate resources into its 61 so-called ‘maisons des entrepreneurs’, its dedicated set up for small businesses, and part of a broader range of 230 private banking centres across France. French clients are serviced by 1200 private bankers, of which 370 are dedicated to the entrepreneurial segment.

Following the integration of Fortis Bank Belgium, BNP Paribas also has managed to secure a leading position in the Belgian wealth management market, where clients benefit from more than 900 private bankers and investment experts. But the old Fortis system has been somewhat streamlined, so that each private client now just has one key banker servicing them, rather than two under the old model. Once the delivery mechanism was in place, the French bank then began to introduce an enhanced range of products to Belgian private clients, including private equity, real estate, credit and even vineyards.

Having acquired the BNL franchise in Italy back in 2006, BNP Paribas was able to learn from this previous experience and apply the lessons to the Belgian market. Rather than totally eradicate the Fortis brand, it decided to combine the two and offer clients services under the BNP Paribas Fortis wealth banner. “We need to be close to clients and show understanding, rather than just bring them a big brand which is not well known everywhere,” says wealth management co-head Sofia Merlo. 

Through the BNP Paribas model, private bankers can leverage on the IT systems designed for its retail network. BNP has also been one of the few banks with a serious philanthropy offering, setting up a specialist advisory service in 2008, including the Fondation de l’Orangerie, which offers clients access to pre-selected charitable projects.

• Best Private Bank for Customer Service
• Winner: Citi Private Bank

While Citi Private Bank seems to be in transition when it comes to its management, its customer service ethos and brand imprint seem as strong as ever. The end of 2012 saw the handover of power from Jane Fraser in London to Mark Mason in the US. Cathy Weir continues to play a key role in the ultra-high-net-worth segment, running the key family client business and maintaining responsibility for the Swiss business, while Europe, Middle East and Africa business continues to be overseen by Luigi Pigorini.

Despite some critical voices in the industry questioning the bank’s direction, its asset growth is well ahead of its peer group, growing $20bn to $192bn in 2012, with nearly all of this accounted for by client inflows. 

Unlike key competitor JPMorgan, which is moving down the wealth scale in search of greater profitability in the UK, continental Europe and Asia, Citi is betting on expansion in the highest wealth segment of all.

“We have so much room to grow in the ultra-rich segment, increasing market share year by year, that we don’t need to move down,” says Mr Pigorini, although he wishes his competitors well in the increasingly competitive high-net-worth space.

There has also been significant rationalisation, with Mr Pigorini keen to run a leaner, faster ship. With banker numbers shaved by 100, profits have increased by a huge $260m, although the bank will be challenged to maintain its high customer-to-banker ration, traditionally one of the highest in the industry.

Moving forward, Citi plans to target the next-generation segment, the under-40s, who will soon be inheriting wealth, and work with them to create a more modern private bank, powered by a system of digital engagement.

Mr Pigorini attributes Citi’s recent “major uptick” in business to the weakness of some competitor names as well as Citi’s improved brand strength. “Five years ago, we were at the receiving end of some of these situations,” he recalls, referring to the bank’s infamous US government bailout. “Now we are at the opposite end, and it feels very good.”

• Best Private Bank for Islamic Services
• Winner: Maybank Private Banking

Maybank Private Banking offers a comprehensive range of Islamic solutions, including banking, financing, takaful (the co-operative system of reimbursement for loss) and wealth management through its strong affiliation with Maybank Islamic Berhad. In addition to conventional solutions, innovative sharia-compliant solutions have been developed, such as a new variable rate mortgage financing under the concept of ‘commodity murabahah’ and an Islamic Ikhwan Visa Infinite credit card tailored to high-net-worth clients’ needs. Islamic product domains grew year on year, with deposits and financing being the most popular among customers. 

In the wealth management space, Maybank offers a portfolio of 19 sharia-compliant funds from nine managers. This is set to grow with more Islamic funds in the pipeline to provide greater breadth and diversity, and other sharia advisory services are also offered, such as estate planning in the form of wasiat (Islamic will) in accordance with faraid principles. 

 “Our private banking clients, regardless of faith and with deeper inclination towards socially responsible investing themes, continue to demonstrate keen interest in this area as evidenced by the diverse customer demographics within our Islamic portfolio,” says Nomita Shanmughanathan, a research analyst at Maybank. 

“As the largest Islamic bank with strategic focus on the high-net-worth segment in the Association of South-east Asian Nations region, we are uniquely positioned to capitalise on opportunities within this fast-growing segment. We continue to pave the way for innovative cross-border financial flows. One such example is our latest Islamic offering for foreign currency offshore property financing for London properties, being the first of its kind within Malaysia.” 

• Best Private Bank for Growth Strategy
• Winner: Bank Julius Baer

Bank Julius Baer,which boasts more than 800 relationship managers, clearly has one of the most impressive growth strategies among Swiss and global private banks, although critics claim this is entirely based on the acquisition of the non-US wealth management business of Merrill Lynch.

This is expected to add about SFr60bn ($65.96bn) in assets, serviced across 20 global locations, to the Julius Baer coffers once the process is complete at the end of 2015.

But figures show the bank, under the guidance of private banking dynamo Boris Collardi – one of the few true leaders among European wealth managers – has many facets to its success. 

Managed assets rose from $178bn to $198bn during 2012, including $10bn of net new money. During this time, profits spiked from $495m to $545m. Interestingly, income stayed almost identical, but Mr Collardi managed to strip out $100m in costs from the operation.

Over the past year, he has been criss-crossing the world, holding ‘town hall’ meetings, concentrating particularly on the newly acquired units and trying to enthuse the recently transferred private bankers with the Julius Baer culture. 

His bank sees this as a huge opportunity to markedly increase its position in key growth markets of the Middle East, Latin America, Europe and Asia. But even in the UK, Baer’s footprint is increasing hugely, with staff numbers jumping from 40 to 400, in effect bumping up Julius Baer from a marginal to a leading player. This transformation will be similar in some Latin American markets, particularly Chile and Uruguay.

But the bank still has unfulfilled ambitions in other parts of the world such as Turkey, Saudi Arabia and South Africa, where it is searching for strategic initiatives to mirror some of the partnership deals it has struck in Japan and China.

But Julius Baer is not ignoring business on its doorstep, still expanding both in its home city of Zurich, and in the region surrounding Geneva, home to French-speaking rival banks Lombard Odier and Pictet. The bank also stresses the increasing importance of Frankfurt as a cross-border booking centre for its business, following the Merrill Lynch transaction.

• Judges’ Award for Industry Leader
• Winner: Eric Syz, co-founder and managing partner, Banque Syz & Co

In an industry where there is little coordinationof initiatives to support private banking – and Switzerland as a centre of expertise in particular – Geneva’s Eric Syz has emerged as a vocal leader for this troubled business sector. Mr Syz went very much against the grain when he founded Bank Syz in 1995, together with two other disgruntled executives from Lombard Odier in Geneva.

While most were friendly and polite to his face, competitors privately ridiculed his business proposition, according to Mr Syz, while at the same time worrying that he might persuade existing clients to take money away from white-gloved venerable institutions and move it to his more modern, asset management-based proposition.

It has not been plain sailing for Mr Syz. Hedge funds were hard hit after 2008, although he blames private clients for selling up their businesses and investing excessively in these alternative vehicles, against his advice.

Mr Syz does not expect the former obsession with hedge funds for Swiss private clients to return in his lifetime, recalling recent pre-Madoff, pre-crisis allocations when many were investing up to 40% of their portfolios in search of 15% returns. Of the SFr30bn ($32.71bn) managed by his bank, as little as 10% is now in hedge funds.

But expertise in portfolio management needs to be further honed for Swiss banks to succeed. “If we are professional on the asset management side, we have a great future,” says Mr Syz. “We need to stop selling bank secrecy and show people we are competent at delivering service.”

He blames both the Swiss government and some larger banking players for mistakes that mired the industry in problems, particularly relating to over-exposure to US taxpayers. But with a clear strategy, he says, it is not too late to turn things around.

“A lot of people around the world still want to have their money in Switzerland,” adds Mr Syz.