As the velocity of money moving between providers begins to increase, wealth managers are gradually becoming more aware of the necessity of developing their brand to attract clients. Private banks are reporting increasing swathes of new money flowing in from initial public offerings, business sales and other so-called liquidity events, which essentially keep the industry going.
“You would assume this new money, coming from very informed, successful, educated entrepreneurs would just look at one thing: performance,” says Heinrich Adami, head of the London office at Swiss wealth manager Pictet.
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“But they are also somehow influenced by brand. Even though they may tell you they are only interested in returns, in reality, they are considering the whole package and that includes the history and culture of the bank.”
Picking and choosing
Recently enriched entrepreneurs are typically attracted by a variety of models. They lodge some funds with both traditional Swiss private banks and also with the brasher, investment banking-led US institutions. This new breed of private clients is informed enough to choose different providers to take on specific investment or banking functions. “They want to do a particular type of transaction with Goldman and another type with Pictet,” suggests Mr Adami. Unlike some of the old-style family money, the new client takes decisions backed by knowledge of the market rather than sympathy for the relationship manager.
Old vs new
Old vs New
Among wealth managers caught in an increasing spiral of competition for customers, there appear to be two approaches to branding, with proponents of both being slightly dismissive of the other.
Some maverick wealth managers dismiss the “white card and family crest” mentality common to old-style private banks in favour of a jazzier image, complete with interactive websites.
A good example is 7IM, which has achieved much success through its quirky approach, building up £5bn (Ä5.85bn) in assets under management. The city firm has recently hired the inventors of top-selling computer games ‘Donkey Kong’ and ‘Goldeneye’ in what it calls the ‘gamification’ of financial services communication. This is all about trying to simplify and refresh interaction with customers in a “grown-up” industry such as wealth management, using some of the techniques and technology developed in computer games over the last 20 years.
“Even half the retired people we come across use an iPad to read their newspapers,” comments 7IM founder Justin Urquhart-Stewart. “We need to make interaction for them more engaging.”
The image of wealth managers needs to embrace better access, innovation and a “lack of pomposity,” he says. “This is not the ‘silver bullet.’ But it’s a sensible application of technology from gaming to an area which is incredibly dull.”
In the opposite corner are old-school private banks such as Hoare & Co, based in London’s Fleet Street, founded in 1672. Bankers here are also trying to step up contact with clients, but in a more traditional fashion. “Clients are getting fed up with lack of personal contact and lack of flexibility,” says Annamaria Koerling, head of wealth management at the bank. Most customers, she says, are much quicker to spot a sales-driven agenda than their banks would realise.
“We try to offer a service proposition that is traditional, combined with investment solutions which are more modern. It’s not the history that counts, it’s what you learn from it.”
Enriched by social media or financial services success, the newly wealthy client is looking for an even closer relationship and identification with the provider’s brand than most observers would give credit.
“Newly wealthy customers are particularly interested in their relationships with favourite restaurants,” says Mr Adami. “This is not about showing off their money, but about a genuine interest in how the restaurant sources and creates the food. It is the same with us. Clients want to discuss the changing world with us and not purely about how it affects their asset allocation. This is something they don’t necessarily have in their own businesses.”
This latest trend flies in the face of predictions made by industry watchers five years ago about the death of the relationship, he says, recalling predictions that performance alone would win clients for wealth managers.
For Pictet, the discussion about brand is a particularly pertinent one, as the two century-old private bank strives to re-invent and renew its image in a world where much of the paraphernalia surrounding Swiss banks has been discarded.
As Swiss secrecy and tax advantages have become outdated, and forcibly squeezed out by the US authorities, Pictet has put the cap on its long process of reformation by divesting itself of unlimited liability status and pumping even more resources into expanding fund management internationally.
There was a feeling among Pictet’s partners in Geneva that the bank – which had already moved six years earlier from its former lakeside headquarters to a more functional home on one of the Swiss city’s main thoroughfares – also needed to put clear water between its own spruced-up brand and the image of Switzerland’s anachronistic, secretive, white-gloved institutions.
“We do have the image of a 200-year-old private bank rooted in Switzerland,” smiles Mr Adami. “But people who know us well also know we stand for something innovative, creative, bespoke and flexible,” he says, with the partners increasingly using the firm’s separate asset management capacity more explicitly, to increase its private client pulling power.
Brand importance
Leaders of some wealth and asset management franchises may need to pause before they tell you what their brand means to clients, but it is clearly a topic they are attaching more importance to.
Kleinwort Benson’s name stands for “service over sustained periods of time,” but in recent years this brand had faded and was punching below its weight, believes Paul Kearney, the bank’s board member responsible for family office business. “It was under-utilised and we had the opportunity to revive a brand which had been the victim of benign neglect,” he says.
Unlike some other major players in the UK, there had been no negative publicity associated with Kleinwort Benson, but marketing activity of a “stellar name” had simply been put on hold. “There is no doubt in my mind that brands are absolutely vital in wealth management,” says Mr Kearney, previously employed by big-name accountants Arthur Andersen and insurer Zurich Financial Services.
“I have worked for these global brands and also for firms with no brand,” he says. “Without a brand, you spend too much time talking to potential clients about who you are, rather than what you can do.”
Yet even when a private or retail banking brand is damaged by the activities of an investment banking-led parent group, as has happened with both US and European institutions, it can take more than this for clients to withdraw funds.
Poor performance
A client can however become uncomfortable when they experience a combination of poor performance, slipping service and some off-key mood music around the brand.
“When money moves banks, it is usually a final straw decision,” says Mr Kearney. “There are typically a number of issues involved, but you can only emphasise the importance of service. Where there have been changes to key staff, banks have often suffered.”
Despite some contagion to Citi’s private banking brand from the broader organisation following a US government bailout soon after the 2008 crisis, management decided to stick with the traditional name.
“We debated this, but the debate was a very short one,” confirms Luigi Pigorini, CEO of Citi Private Bank’s pan-regional operation in Emea. “Would we call the private bank anything else without the ‘Citi’ name? The answer is ‘no’.”
Mr Pigorini paints a picture of an increasingly global wealth management world now in a constant state of flux and soul-searching. He can reel off a list of big names disposing of country franchises, fattening themselves up for a sell-off, or going through face-saving strategic reviews. “There is a lot of talent out there, very uneasy about what is happening and clients are also wary,” says Mr Pigorini.
He claims to have seen a “major uptick” in Citi’s acquisition of new clients over the last six months, as rich families start to feel uncomfortable with some of their bankers. “Our name is becoming a lot more recognised and associated with stability,” he says. “Five years ago, we were at the receiving end of some of those same situations, but now we are at the opposite end and it feels very good.”
Citi is once again attracting those wealthy clients interested in working with a global bank with an institutional approach to managing private client wealth, he says. With large integrated institutions, this brand appeal is synonymous with offering capital markets expertise to create solutions such as structured products and offering the bank’s research on equities to private clients, says Mr Pigorini.
Shattered illusions
But Pictet’s Mr Adami sees a major, post-crisis change in how private banking brands are perceived by the wealthiest customer segment. “In the aftermath of the crisis, people were rightly disgruntled by the behaviour of banks and trust in them was shattered,” he says, with the perception that most just wanted to sell products at all costs, whatever the outcome for the client.
Between 2006 and 2007, during their heyday, many private banks became enormous distribution machines, leading to a backlash from clients when things eventually went wrong, agrees Kleinwort’s Mr Kearney. “Every day of the week we were being invited to new fund launches. Private banks would take $250m of a fund and then syndicate it to their clients,” with this practice particularly prevalent in alternative classes such as hedge funds and private equity.
Having been locked into illiquid positions, or sold whole tranches of loss-making investments, most private clients – who typically bank with four or five institutions – are now particularly wary of banks acting simply as distribution channels. It appears these are the brands which have suffered more than rivals.
Yet there is hope for even the most crisis-ravaged wealth manager, believe image consultants. Unlike other areas of business, financial consumers are tolerant of greater brand neglect.
BlackBerry, for instance, the pioneer in smartphone provision now considered as “clunky”, the ultimate insult in the mobile technology sector, has failed to keep up with the progress of Apple’s iPhone and is being put up for sale as a result.
Major banking names on the other hand, prone to periodic scandals, inappropriate product sales and problems with top management, always seem to bounce back. “A successful business is a successful brand and what sits behind them is a strong sense of self,” says Jim Prior, CEO of brand consultants the Partners. “The likes of Nike, Apple and BMW all manage to project themselves with single-mindedness. One cannot separate their products from their brands.”
This is in stark contrast to financial services companies. “People don’t care about banks’ products, because they are all generic,” says Mr Prior. “Numerous competitors offer exactly the same thing, with no differentiation. There is no distinctiveness at the brand level.” Although there is potential to get excited, most of the marketing campaigns, such as global banks for local markets, have little meaning or impact, he believes.
Brand contagion
But the flipside is that it takes a lot of fallout for a brand to become damaged goods. “How deep does brand contagion really go?” asks Mr Prior. Barclays has had its fair share of mishaps, he says.
Banking brands barely register with the public, he says, poor campaigns having very little effect on capital flows, while mismanagement of the bank similarly causes limited damage.
“In the financial services world, brand names do not carry a lot of stock or proposition,” says Mr Prior. “Big organisations think things they are doing are innovative, when they are really so mundane it’s scary.”
Awareness of this situation and gentle, gradual transformation of company culture is needed to brush up brand image and win customer affection, he believes.
Even those companies with apparently big, unassailable brands are becoming aware of the need for changes below the surface. Alex Hoctor-Duncan, head of retail business at BlackRock for the Emea region, recalls how his team of salesmen were getting too worried about volatile markets several years ago to effectively communicate their brand and the service behind it.
“I sat them down and said ‘stop worrying about the market going down. Concentrate on the conversation with clients about the long-term, not about which short-term products you can sell them.’”
Every wealth manager has the opportunity to reshape their image into a big brand, but it takes hard work to create a strong internal culture, consistency of returns and then to communicate this to clients.
“Big brands must display consistency in delivery of outcome and be very clear about what that outcome is going to be,” says Mr Hoctor-Duncan. “This marks a big shift from just beating the benchmark. We are taking skills from the institutional model and making them relevant to the retail sector.”
But there are those fund selectors who believe an over-reliance on brand gives investors false hope and the only way to appoint wealth and asset managers is through assessing the quality of talent, especially when it comes to management of alternative assets.
“The brand continues to be with the manager himself, not the company. This is a people business,” says Mattia Nocera, CEO of Belgrave Capital Management, a Swiss-based wealth manager.
“Some hedge fund managers have tried to establish their brand, but are not succeeding. Even with a big group like GLG, if you look under the brand name, some funds are good, others are not so exciting. Once key people move on, the whole thing can lose perspective.”
This article first appeared in The Banker’s sister publication, PWM (www.pwmnet.com).
