FT Private Banking report 10 June 2014 Source: http://www.ft.com/intl/reports/private-banking

1. Inside »
Asia’s rich mix
Everyone wants to
do business with
rising numbers
of billionaires
Page 2
Opportunity for
private equity
New regulations
prompt deals for
wealth managers
Page 2
London calling
A central timezone
and influx of
foreign money are
big attractions
Page 3
Sector plays
digital catch-up
The web now seen
as an opportunity,
not a threat
Page 4
Brands hatch
Rich petrolheads
fuel benefits from
the sponsorship
of motorsport
Page 4
FT SPECIAL REPORT
Private Banking
Tuesday June 10 2014 www.ft.com/reports | @ftreports
Wealth managers learn to wing it
At first glance, wealth manag-ers
and their clients appear
to be living in a much better
world. Last year, global pri-vate
financial wealth grew
14.6 per cent to $152tn, according to
data from the Boston Consulting
Group. This inflation of riches was
driven by a rise in equity markets and
other asset classes. As a result, wealth
managers’ assets under management
are up 11 per cent.
But despite such positive news, pri-vate
bankers continue to be wary.
They point to an environment that
continues to be characterised by cli-ent
inertia, low interest rates, lacklus-tre
economic growth and a wave of
regulation that increases costs and
complexity.
Bankers say their clients still see
higher risks on the downside than on
the upside, as they are worried about
diminishing growth prospects in
China and other emerging markets,
and the Federal Reserve’s decision to
start tapering its bond purchases.
“In the first quarter, we saw low
transaction revenues, as people were
not engaging in the market,” says
Jürg Zeltner, chief executive of the
wealth management arm at UBS, the
Swiss banking group. “They already
have their allocation plans in place.”
One clear sign for this trend is Wall
Street’s famous “fear index”, the Vix.
The index measures the implied vola-tility
of S&P 500 equities. While it
surged to more than 80 during the
financial crisis, it is now just above
11, a level not seen since 2007.
Yet there is one notable exception
to this inactivity: the richest clients –
called ultra-high net worth individu-als
in wealth management jargon –
who are much more willing to make
longer term bets amid a search for
double-digit returns. They buy prod-ucts
in areas such as private equity,
direct investments, hedge funds and
property.
Banks such as UBS and its rival
Credit Suisse – which are both con-centrating
their growth efforts on the
wealthiest clients – have adapted to
this change with a structure that
resembles an institutionally focused
asset manager rather than a tradi-tional
private banking business.
For UBS, this included setting up a
chief investment office and reinvest-ing
into the business, its people, tech-nology
and new markets.
“We are transforming ourselves into
an investment firm. We want to have
more discretionary mandates,” says
Mr Zeltner.
It comes as the wealth management
sector is facing one of the biggest
upheavals in a long time.
Private bankers say positive factors
such as a prospect of rising interest
rates, a shift from bond markets into
equities and a small reduction in cli-ents’
cash positions cannot counter
severe headwinds from tightened reg-ulation,
relentless pressure on costs,
and sluggish growth.
In the past three years, the overall
rise in global wealth managers’ costs
has, at 15 per cent, been only margin-ally
lower than the revenue growth
of 19 per cent, according to BCG. By
far the largest contributors to this
have been legal, compliance and risk
Continued on Page 2
The ultra-rich are
providing a counter to
client inertia and the
costs of regulation,
writes Daniel Schäfer
Spectre of post-UBS sanctions
gives way to settlement hopes
For five years since the US
forced Switzerland’s biggest
bank, UBS, to pay a $780m
fine for helping American
clients evade taxes, the
spectre of further punish-ments
has hung over the
Swiss private banking sec-tor.
There are now signs that
this limbo may be easing.
Last summer, the US
Department of Justice set
up a programme allowing
Swiss banks that had unde-clared
American customers,
but were not already under
investigation, to put the
past behind them in
exchange for paying hefty
fines and handing over
information about their
activities in the US. More
than 100 financial institu-tions
have signed up.
Then last month, Credit
Suisse, one of 14 banks
under investigation by the
DoJ, reached a $2.6bn settle-ment
that should allow it to
draw a line under its past
sins in the US.
Switzerland’s finance
minister, Eveline Widmer-
Schlumpf, believes the
Credit Suisse deal – as part
of which the Swiss lender
became the first large bank
to admit to criminal
charges for two decades –
could pave the way for
other Swiss banks to settle
with the US within “the
next few months”.
Although the guilty plea
and the size of Credit
Suisse’s payment shocked
the sector, the belated
progress is broadly wel-comed
by most bankers.
Not only should it remove
the uncertainty that has
been weighing on the sec-tor;
it should also allow
managers who have spent
years on regulatory prob-lems
to refocus on running
their businesses.
However, those busi-nesses
are likely to be
rather different in future. In
combination with European
moves to clamp down on
tax evaders, the protracted
dispute with the US has
greatly eroded the once
untouchable Swiss tradition
of keeping details of clients’
accounts secret from for-eign
authorities.
Last year, Switzerland
agreed to sign up to Fatca,
a piece of US legislation
that requires foreign banks
automatically to provide
information on the offshore
assets of American citizens.
And in May, Switzerland
agreed to sign up to
a new global standard on
automatic information
exchange.
The tearing of this veil of
secrecy – long a source of
competitive advantage for
Swiss banks – has put pres-sure
on the fees that lend-ers
can charge their clients.
At the same time, the cost
of ensuring customers are
compliant with the tax
rules of their home jurisdic-tions
has risen sharply,
meaning that banks’ mar-gins
have been squeezed.
As a result of this, many
observers expect further
consolidation of the Swiss
private banking sector, par-ticularly
once banks have
settled their problems with
the US.
“There is a very signifi-cant
benefit and operational
leverage in scaling up, and
putting more assets on
existing platforms,” says
FX (François-Xavier) de
Mallmann, partner at Gold-man
Sachs.
He expects the Swiss pri-vate
banking market to con-tinue
to consolidate with at
least “a few” transactions
each year.
Others go further. Zeno
Staub, chief executive of
Vontobel, said last year
that he thought that about
a third of Switzerland’s 300-
odd banks could either
cease to exist, or stop oper-ating
as banks in the wake
of the DoJ’s programme.
The Swiss banks that sur-vive
will still have a
number of residual advan-tages,
such as high levels of
capitalisation by interna-tional
standards, Switzer-land’s
political and legal
stability, and the strength
of the franc. But it will not
be enough to rely on these
alone, says Boris Collardi,
chief executive of Julius
Baer.
“I think this is going to
become a much more global
business than in the past,”
he says. “You need to
expand, you need to go
beyond Europe, because the
new pools of client wealth
are beyond Europe. You
need to go from a passive
regional client model to a
proactive global one.”
In the absence of secrecy,
Swiss banks will also have
to be able to offer clients
better investment perform-ance
and advice than in the
past.
UBS and Credit Suisse
have both set up units
whose job is to systematise
how the banks invest cli-ents’
assets, as well as pro-vide
clients with a unified
view across asset classes
and markets.
“There has been a shift
towards outcome-oriented
strategies,” says Michael
Strobaek, Credit Suisse’s
global chief investment
officer. “The single-asset
class orientation that you
saw in the 1980s and 1990s
has moved to the back-ground.
Clients are now
looking for a specific
return. They are not saying
‘Buy me a bond portfolio
and I will take whatever
comes out of it.’”
Another important source
of differentiation will be
improved technological
capabilities, says Frédéric
Rochat, a partner at Lom-bard
Odier. Banks with
computer systems that ena-ble
them to deal flexibly
and efficiently with wealthy
clients whose lives and fam-ilies
often sprawl across a
range of jurisdictions will
outperform those that can-not,
he believes.
“Technology is crucial to
enable you to service your
client at a lower marginal
cost for you as a bank, and
therefore be able to remain
competitive on the fee
side,” says Mr Rochat.
“Those banks that cannot
count on a strong techno-logical
platform typically
end up with a relatively
high cost base and limited
ability to expand interna-tionally.
For them, it can
become very tricky when
the revenue margin comes
down.”
Not all Switzerland’s
banks will be able to cope
with this range of chal-lenges.
But for those that
survive, the prospects are
appealing, Mr Collardi says.
“If you have a pool of
wealthy individuals that is
growing, and there are
fewer market participants,
and markets are efficient –
then you can return to
growth and make money
again,” he says.
Switzerland
A dispute with the
US may be nearing
an end, says
James Shotter
Boris Collardi (left) of Julius Baer and Vontobel’s Zeno Staub
‘I think this is going
to become a much
more global
business than
in the past’
Illustration: Daniel Mitchell

2. 2 ★ FINANCIAL TIMES TUESDAY JUNE 10 2014
Regulatory
shake-up starts
a flurry of deals
Private equity groups have
developed a taste for the
UK’s wealth management
industry.
In November last year,
Permira, the London-based
buyout house, bought Brit-ish
private client group
Bestinvest from 3i. A few
months later, the investor
acquired the regional busi-nesses
of Tilney in Birming-ham,
Edinburgh, Glasgow
and Liverpool from Deut-sche
Bank, bringing the
combined group’s assets
under management (AUM)
to about £9bn.
Permira is following pri-vate
equity rival Bridge-point,
which in 2012 pur-chased
Quilter & Co from
Morgan Stanley for about
£175m, and merged it with
fellow investment firm Che-viot
Asset Management.
The deal boosted AUM by
50 per cent, making Quilter
Cheviot the second-largest
independent UK wealth
manager.
Deal activity will con-tinue,
bankers and private
equity dealmakers say.
Towry Group, backed by
Palamon Capital Partners
since 2003, is expected to be
the next sizeable company
on the block and to attract
interest from financial
investors such as New
York-based Warburg Pin-cus,
which owns the Mutual
Fund Store in the US. Since
Palamon’s investment 11
years ago, Towry has made
10 acquisitions, expanding
its AUM from £250m to
£4.6bn.
A big reason for this bout
of deal activity has been the
regulatory shake-up
brought by the UK’s Retail
Distribution Review (RDR)
and its new set of rules for
wealth managers, which
came into force from the
beginning of 2013. “The
RDR has created a new par-adigm
where there are los-ers
and winners, and pri-vate
equity groups are try-ing
to figure out how to
back the winners,” says
Daniel Zilberman, a Lon-don-
based partner at War-burg
Pincus, who special-ises
in financial services
investments.
The regulator has
ensured wealth managers
have the qualifications to
advise their clients, and has
radically changed their
compensation. UK wealth
managers used to earn a big
chunk of their living
through commissions on
trades made by their cli-ents.
They are now paid on
the amount of assets they
manage. Similar rules are
expected to be implemented
throughout Europe.
Those who used to make
money by having their cli-ents
trade a lot and receive
commissions out of those
trades are the most affected
by the reform. The less
sophisticated, smaller advis-ers
are finding it hard to
survive and are either going
out of business or selling to
larger platforms. “It’s a sec-tor
that’s highly fragmented
and private equity sees a
potential roll-up opportu-nity,”
Mr Zilberman says.
Wealth management is an
industry that has been
growing steadily and which
is expected to grow further
as the economy and stock
markets recover in Europe.
Assets are increasing by
more than 10 per cent a
year, estimates James Fra-ser,
a partner at Permira,
who led the Bestinvest
acquisition.
“Underlying growth has
been strong, even during
the financial crisis,” Mr
Fraser says. “There are
more wealthy people and
the industry is managing
more assets because of the
ageing of the population.”
The recovery in stock
markets’ has automatically
boosted fees generated by
wealth managers as they
are based on a percentage
of assets under advice.
Private equity groups also
see an opportunity to fill
the void left by some of the
traditional players in the
wake of the financial crisis.
“Some retail banks have
pulled back while the inter-national
investment banks
have moved upmarket, leav-ing
a gap in the segment
targeting the middle class,”
says Mr Fraser.
The UK government’s lat-est
budget, which removed
the obligation to buy an
annuity at retirement with
pension funds, has also
been a “game changer”,
says Graham Marchant, a
managing director at Fen-church
Advisory, a bou-tique
advising on financial
services. “Without the
requirement to buy an
annuity, private client
wealth managers are now
more likely to retain client
assets through the accumu-lation
and decumulation
phase,” he says.
The changes mean wealth
management assets are
expensive. But in the past
few years, private equity
groups, which have replen-ished
their funds and are
hungry for deals in Europe,
have been able to compete
“on a level playing field
with strategic buyers” even
though the latter have syn-ergies,
says Mr Marchant.
While buyout groups
have snapped up wealth
managers, they have
largely stayed away from
full-service private banks,
which not only offer invest-ment
advice but also credit
lines and tax solutions. This
industry is more heavily
regulated and has been
more vulnerable to western
governments’ post-financial
crisis tax clampdown. Ital-ian
insurer Generali is in
talks to sell its private
bank, BSI, to BTG Pactual,
a Brazilian bank backed by
billionaire financier André
Esteves.
But wealth managers,
which are fragile organisa-tions
heavily reliant on
staff, are no easy invest-ment
either, private equity
dealmakers say. 3i lost 40
per cent of its investment in
Bestinvest after buying it
for £165m in a competitive
auction on the eve of the
financial crisis, with high
levels of debt.
Private equity
UK wealth managers
attract buyout
groups, says Anne-
Sylvaine Chassany
Private Banking
Self-made entrepreneurs stoke growth in assets
Asia
As the number of
clients rises, so do
their demands, says
Jennifer Hughes
Mention private banking in
Asia to anyone outside the
region and the industry,
and a stereotype of the clas-sic
Asian client emerges: a
self-made tycoon, still
actively managing his busi-ness
but financially con-servative
in the extreme –
to the frustration of his
children and grandchildren
who want to broaden the
family’s investments.
Couple that with a region
now experiencing greater
economic pressure than it
has for many years, and
the outlook could appear
grim.
But nothing, say the
region’s private bankers,
could be further from the
truth and trends back them
up. Assets under manage-ment
at the top 10 banks
grew by an average of
11 per cent last year –
helped by greater portfolio
diversity.
While clients vary, far
more typical are self-made
entrepreneurs – first or pos-sibly
second-generation
business owners – who are
constantly looking for
investment opportunities.
This presents great fee
potential but it comes with
a catch: these clients want
more and more from their
banks.
“Private banking has not
been very well defined in
emerging markets,” says
Olivier Pacton, co-head of
HSBC’s private bank invest-ment
group in the region.
“It can be brand more than
content in some cases.
Retail clients now want pri-vate
banking while private
banking ones want invest-ment
banking services. It
has become more and more
demanding and compli-cated.”
There is no single model
for private banking in the
region. Family office-style
operators do indeed favour
Asia’s tycoons, of whom
there are many. Others act
mostly as a product distrib-utor
for their banks’ other
Region’s new
generation of
billionaires is
spoilt for choice
Asia’s ultra-wealthy Private banks cannot
exercise much pricing power but still do not
want to miss out, writes Jeremy Grant
How do you meet a billion-aire?
For the many banks and
wealth managers chasing
business from Asia’s ultra-wealthy,
finding the answer to that
question makes the difference
between managing money for the
region’s biggest business tycoons and
merely aspiring to do so.
While the global population of bil-lionaires
– or ultra-high net worth
individuals, in wealth managers’ jar-gon
– has risen 60 per cent since 2009,
say Singapore-based consultancy
Wealth-X and UBS, the Swiss bank,
the number in Asia has grown faster
than anywhere else.
The region was home to 508 billion-aires
in 2013, marking a 3.6 per cent
rise from the previous year, according
to a survey by the two companies.
China now has the world’s second-largest
billionaire population after the
US (although the survey adds that the
combined wealth of German billion-aires
remains higher).
By contrast the number of Europe’s
billionaires fell by the same propor-tion
to 766. North America and the
Middle East saw slight increases. The
global total was 2,170, with combined
net worth exceeding $6.5tn.
In spite of the disproportionately
high growth numbers for Asia, track-ing
down this elite group of people
and winning their business is argua-bly
more difficult than it is elsewhere.
That is because billionaires in Asia
tend to be a relatively new generation
of entrepreneurs who have made their
fortunes only in the past 20 years.
In Europe, extreme wealth tends
to be in the hands of multiple genera-tions
of the same family, with wealth
built up over a far longer period.
Relationships are already established.
Asia’s billionaires are at the van-guard
of a breed of family-owned com-panies
that dominate the business
landscape. According to a Credit
Suisse survey, more than half the
listed companies in Asia with a mar-ket
capitalisation of more than $50m
are family-owned, while 38 per cent of
them have been listed only since 2000.
Singapore is arguably the region’s
fastest-growing wealth management
hub, capitalising on its role as south-east
Asia’s trading entrepot.
“More and more of the wealthy are
choosing Singapore as a base to do
business, due to its financial hub sta-tus
and ease of conducting business,”
says Sandeep Sharma, co-head of pri-vate
banking for southeast Asia at
HSBC.
But it is a fiercely competitive busi-ness,
and margins for many players
can be thinner than in the west as a
result, bankers say. Billionaires are
also spoilt for choice when it comes to
private bankers.
“These people are all quite over-banked.
Everyone’s looking to do
business with them,” says Munish
Dhall, executive director at the global
family office business for southeast
Asia at UBS.
Nor, on the face of it, is banking for
billionaires a business in which many
banks are able to exercise much pric-ing
power. Jay Jhaveri, Asia director
at Wealth-X, says: “There is abso-lutely
no billionaire who is paying
‘rack rate’ for a bank’s services. He
will be dictating pricing to a bank.”
Yet managing the money of the
ultra-wealthy – which includes a
bracket of wealth below $1bn – is still
of vital importance to the two biggest
players in the sector, UBS and its
Continued from Page 1 Rapidly rising expendi-ture
management, which shot
up by almost a third during
that period, thanks to
stricter rules affecting areas
from money laundering to
investment advice.
“The cost levels of private
banks remained high in
2013, with only a few able to
achieve a reduction. If
equity markets lose their
momentum for any length
of time, pressure will rise
again – putting some banks
under duress,” BCG
warned.
Such structural issues
have already triggered an
extensive shakeout in the
sector. In the past few
years, a number of large
banks have restructured
their wealth management
businesses and reduced
their global footprint.
to ensure banks do not
break anti-money launder-ing
rules are making it par-ticularly
uneconomic for all
but the leading global
wealth managers to remain
active in smaller markets.
Barclays last year said it
would pull out of more than
100 markets and cut staff in
its wealth management
business to boost the unit’s
profitability.
Also in 2013, Credit Suisse
said its private bank would
exit or withdraw from
about 50 markets worldwide
by this year to bolster prof-itability.
And HSBC wound down
its Irish private banking
arm in October 2012.
Some US banks such
as Bank of America and
Morgan Stanley, mean-while,
have sold most of
their European wealth man-agement
businesses. Increasingly the
biggest are, however, taking
a broader advisory
approach, offering private
banking as a gateway to
their other operations.
“The banks that can mar-ket
themselves as one
organisation will be win-ners,”
says Chris Harvey,
global head of Deloitte’s
financial services team. He
warns, however, that this
will not be straightforward.
“There’s a lot of opportu-nity
there, but current sys-tems
don’t necessarily
allow them to link, say,
Chris Harvey the individual
with Chris Harvey the MD
of ABC Industries. This
they need to work on.”
Overcoming technological
barriers is tough. But Mr
Harvey thinks improve-ments
can be made through
far simpler changes, too,
such as moving investment
bankers to sit with their
private banking colleagues
and vice versa. Self-made
entrepreneurs often want
to take their businesses
public at some point, mean-ing
they could appreciate
an introduction to invest-ment
bankers. In turn, the
‘The vast majority
of portfolios in
emerging markets
still tend to have a
strong home bias’
Swiss rival Credit Suisse. “We are
skewed much more to the upper end
of the market,” say Mr Dhall.
One reason for this is that billion-aires
typically are business owners –
indeed, about half in Asia have made
their money in property. So there is
plenty of advisory, merger and acqui-sition
and capital markets business
that can be won for other parts of the
bank, if it is as large and diverse as
the two Swiss institutions.
“Entrepreneurs are highly optimis-tic
and focused about the business
they run. Generally the first thing
they ask a bank is to provide balance
sheet [support] and partner with them
early on to help finance their business
growth,” says Francesco de Ferrari,
head of private banking, Asia Pacific,
at Credit Suisse.
Yet smaller Asia-based rivals are
muscling in and could be big players
eventually, bankers believe. DBS, Sin-gapore’s
March bought the private banking
business of Société Générale, partly
because it had a strong ultra-high net
worth presence.
One way to attract clients is to hold
seminars and workshops at which bil-lionaires
can learn about philanthropic giving –
an increasingly important element
operations to focus
on their vast home market.
Bankers point out that it
has become much more
expensive to do business
locally in every region, as
you have to be accustomed
to a regulatory environ-ment
that not only is much
stricter but also much more
internationally fragmented
than before the financial
crisis.
“If you do cross-border
business today, you have to
know and respect local
rules – unlike in the past
when frankly many banks
did not care much about
them,” a London-based pri-vate
banker says.
So unless a bank has
enough scale, it has become
uneconomic to serve many
markets. Analysts thus pre-dict
that truly global insti-tutions
will soon be few and
far between while many
owners of newly public
businesses have cash to
invest.
The biggest change in the
industry is to the well-es-tablished
role of relation-ship
managers. These are
expensive and often take
clients with them if they
move. Banks are working to
create systems that do not
rely on single points of con-tact.
“The relationship manag-ers
of tomorrow will have
to be much better trained
and equipped. It is no
longer about being the nice
chap who’ll walk the dogs.
It will be the well-read
banker who can’t know eve-rything,
but is very well
informed about their clients
and what their bank can
do,” says Mr Harvey.
largest bank by assets, in
and their family members
wealth managers will
become niche players.
A global crackdown on
tax evasion is another
costly issue, particularly in
Switzerland, where US fines
have already helped force
two private banks – Wege-lin
& Co and Frey & Co –
out of business.
An agreement last year
between the two countries
is set to trigger a wave of
penalties, with Credit
Suisse’s recent $2.6bn fine
and guilty plea for helping
US citizens evade tax being
seen as a harbinger of
things to come.
To tap growth remains a
challenge for all, and many
private banks continue to
look towards Asia in the
hope of catching a share of
a wealth market that is on
track to unseat North
America as the largest in
the world in a few years.
UBS, the largest private
bank in the region, is, for
example, positioning itself
more as an adviser. “We are
here to provide investment
advice for clients and we’re
moving away from being
based only around the rela-tionship
manager,” says
Kathryn Shih, chief execu-tive
of wealth management
in Asia Pacific for UBS.
The unit’s assets under
management rose 18 per
cent last year, to $245bn,
according to Asian Private
Banker, beating its parent’s
global 12 per cent AUM
growth and pushing it to
the top of the magazine’s
league table, ahead of
Citi Private Bank with
$218bn, up 4 per cent, and
Credit Suisse with $131bn,
up 7 per cent.
Relying less on invest-ment
managers, however,
does not mean costs are
free of pressure elsewhere
in the business.
More demanding clients
require more – and better –
research and a wider range
of products to meet this
growing interest in new
investments.
“The vast majority of
of the wealth management business.
“They [ultra-wealthy clients]
increasingly seek targeted and meas-urable
ways to directly address social
issues, without having to go through
middlemen, and they are willing to
establish the necessary infrastructure
to ensure this,” says Paul Patterson,
deputy chairman of the ultra-high net
worth division at RBC Wealth Man-agement.
UBS runs a “young successors pro-gramme”
in Singapore for the sons
and daughters of the ultra-wealthy.
Held at Command House, a former
colonial-era British military headquar-ters,
the two-week long event is
described by the bank as a “mini-fi-nance
MBA”.
“At some point in time they are
going to take over [from their par-ents].
Our average relationship with
UBS is 46 years so it goes from gener-ation
to generation,” says Mr Dhall.
But for any other bank wanting to
make connections more directly, the
Wealth-X/UBS survey helpfully
reveals key social events to which bil-lionaires
typically mingle every year.
They include the Wimbledon tennis
tournament, former US president Bill
Clinton’s Clinton Global Initiative in
New York and horse racing’s Mel-bourne
Cup in Australia.
$tn
60
50
40
30
20
10
Tim Monger, financial
institutions partner at BCG,
says: “In developed mar-kets,
the challenge is where
to go to find growth. If you
are in the emerging mar-kets,
you just stay at home
and capture the growth.”
Profitability also remains
a big challenge. Consultants
portfolios in emerging mar-kets
do still tend to have a
strong home bias,” says Mr
Pacton, who estimates up to
70 per cent of a client’s
portfolio will typically be
allocated to local invest-ments
and within that,
mostly to local stocks. “But
there is interest and grow-ing
allocation elsewhere –
to the developed world, for
instance. They are looking
at property and the finan-cial
sector first because
they know those areas.”
Advisers urging diversifi-cation
have been aided by
the region’s poorly perform-ing
stock markets. Tracking
the US S&P 500 last year
would have produced a 30
per cent return, compared
with just 3 per cent for Hong
Kong’s Hang Seng and an
even weaker 1 per cent from
Singaporean blue-chips.
“Business people typically
want to be more active with
their wealth,” says Ms Shih.
“Since the financial crisis it
hasn’t paid for them to sit
in cash, either. Our house
view has been for clients to
get invested and a lot of
them have been taking our
advice.”
Singapore bling:
the island state is
arguably the
region’s fastest-growing
wealth
management
hub Bloomberg
at Roland Berger, a German
management consultancy,
estimate that margins have
fallen 20 basis points in five
years, thanks to lower cli-ent
activity, less complex
products and a focus on the
super-rich – a clientele
notorious for demanding
low fees.
In the past few years, cli-ents’
large relative cash
holdings have caused zero
to negative returns for
many banks, as they had
to invest the cash in low-margin
repo markets and
with central banks.
This is unlikely to change
in the near future. “Unless
you see a rise in interest
rates, you will probably not
have a substantial increase
of the gross margin,” says
Mr Zeltner at UBS.
Yet all is not doom and
gloom in a sector, which –
compared with other areas
of banking – has fared rea-sonably
well in recent
years.
With overcapacity being
reduced thanks to restruc-turing
efforts of a number
of banks, hiring talent has
become easier and less
expensive.
And some private bankers
are confident that their
most savvy clients will be
able to grab pockets of
higher returns.
“It is actually a good time
to invest. There are a lot of
opportunities. You need to
be invested if you want to
compound returns,” Mr
Zeltner says.
Wealth managers learn to wing it as ultra-rich buck the trend
‘The industry is
managing more
assets because of
the ageing of the
population’
Global private financial wealth
Source: Boston Consulting Group Global Wealth Report 2014
* Estimates
0
North
America
Western
Europe
Asia Pacific
(ex Japan)
Japan Middle East
and Africa
Latin
America
Eastern
Europe
2011
Global total
2012 2013 2018*
122 132.7 152 198.2

3. FINANCIAL TIMES TUESDAY JUNE 10 2014 ★ 3
Private Banking
Capital gains from foreign money and timezone
London is in the middle of a
wealth management renais-sance.
Private banks and
their clients alike are rushing
to come to the UK capital as
they seek to participate in the buzz of
one of the richest and most interna-tional
cities in the world.
New institutions such as Edmond
de Rothschild (see sidebar), Reyl & Co
as well as established US and Cana-dian
banks are developing private
banking units in London, while others
such as Credit Suisse are expanding
existing operations through acquisi-tions.
“If you want to be taken seriously
as a wealth manager, you can’t afford
not to have a presence in London,”
says Heinrich Adami, group managing
director at Pictet & Cie, the Swiss
private bank and fund manager.
“In the past two or three years it
has become quite clear that London
no longer is the third centre behind
Switzerland and New York. It has
replaced New York. Everything that
is in New York, you also have here
nowadays,” he adds.
The advent of new groups is only
partially driven by a wealthy UK
home market. The dominant reason is
the continuous influx of international
money to London, mostly from
regions such as Russia, the Middle
East, South Africa and India, but also
from countries such as France and
Italy.
Phil Cutts, chief executive of private
banking at Credit Suisse in the
UK, says: “London has a strategic
advantage because of its central time-zone.
You can talk to every client
around the world within a working
day.”
As a result of the inflow of foreign
money, London has more billionaires
than any other city in the world,
according to the Sunday Times Rich
List.
And it continues to grow. In its
most recent global wealth report,
Credit Suisse estimates that the
Room for expansion: the Franco-Swiss private banking group’s Mayfair office could accommodate additional staff Charlie Bibby
Loans add to income and help
build relationships with clients
Private banks have spent
much of the time since the
financial crisis on the back
foot, as declining fees and
mounting regulatory
demands have made the
business of looking after
rich people’s money consid-erably
tougher than it once
was.
One area of activity about
which private bankers are
particularly optimistic,
however, is lending to
wealthy clients.
UBS has boosted lending
in its non-US wealth man-agement
business by 36 per
cent to SFr102bn ($114bn)
since 2011, and in its US
business by 25 per cent to
SFr35bn over the same
period. Analysts reckon
Credit Suisse could boost
lending by SFr50bn over the
next couple of years. And
last week, Goldman Sachs
joined the throng, identify-ing
lending to the super
rich as a future priority.
“Ultra-high net worth
lending has become a
growth driver for the bank,
and key to expanding busi-ness
with this client seg-ment,”
says John Zafiriou,
global head of solution part-ners
at Credit Suisse.
“When you look at the
ultra-high net worth busi-ness,
every bank has very
aggressive targets right
now.”
This lending is composed
mainly of mortgages and
Lombard loans, when banks
lend money to individuals
who offer assets – typically
shares and bonds, but some-times
other financial prod-ucts
– as collateral.
While some clients use
Lombard loans to fund lux-ury
purchases such as
yachts or ski chalets, most
typically use them to diver-sify
their portfolios, or, in
the case of entrepreneurs,
to invest in their own busi-nesses.
“I would say that the
most active clients are
entrepreneurs. They’re bor-rowing
because they want
to grow, because they want
to diversify their asset port-folio,”
says Mr Zafiriou.
“For instance, the individ-ual
who has 80 per cent of a
company, who may want to
leverage his shares to
acquire other assets.”
For private banks, such
lending has a number of
advantages. The first is that
the interest payments pro-vide
an additional income
stream.
“In the US, only 30 per
cent of assets under man-agement
at the big wealth
groups earn monthly fees,”
says Christopher Wheeler,
an analyst at Mediobanca.
“A lot of their revenues
are still down to transac-tions.
But if you can get cli-ents
to borrow money, you
have a trailing income
line.”
A second advantage, says
Dieter Enkelmann, chief
financial officer of Julius
Baer, a Zurich-based bank,
is that clients who have a
loan, and in particular a
mortgage, with a bank are
less likely to leave than
those who merely have
deposits.
“Mortgages are clearly a
retention tool, because it is
cumbersome to move a
mortgage from one bank to
another,” he says. “Even if
you lose the rest of a cli-ent’s
business, if they have
a mortgage with you, you
still have a relationship
with them and maybe you
can win them back.”
Another attraction is that
collateralised lending has
been less heavily penalised
than other areas of banking
by the wave of regulation
that has hit banks since the
financial crisis.
Perhaps the main appeal,
though, is that lending can
serve as a hook to work
with a client in other areas,
says Mr Zafiriou.
“The US is a very compet-itive
market where spreads
are low. If you’re dealing
with some of the very
wealthy families, you have
to be competitive.
“Lending opens a
dialogue around their
broader needs: once you
provide funding to the cli-ent,
you may follow up with
a hedge of his interest rate
or currency risk, and so
on,” he says.
“It’s not a matter of
extending a loan and disap-pearing,
the bank strives to
deepen the relationship fur-ther.
What you ultimately
want to achieve is that
whenever a client has a
need, they think of you,” he
adds.
Viewing lending as a
means to an end makes
sense, because one obvious
limitation of lending as a
growth strategy is that at
some point it becomes risky
for banks to lend more to
any given individual.
Another limitation is that
when markets turn bad,
banks can find the value of
their collateral has plunged.
In the case of Lombard
loans, this typically means
that clients have to stump
up extra collateral, which
they are not always in a
position to do, as a number
of banks found in 2008.
Mr Enkelmann recognises
that there is a risk to Lom-bard
loans, but says it is
small, pointing out that
Julius Baer suffered losses
of just SFr10m on a loan
book of SFr10bn in 2008.
In the case of mortgage
lending, he adds, the risk is
also minimal.
“The advantage of mort-gages
– particularly in
prime locations such as
Monaco and London – is
that the loss experience is
very low,” he says. “They
are fully collateralised, we
know the position of the cli-ent.”
The key is for private
banks to ensure that their
risk controls around mak-ing
loans are watertight,
says Mr Zafiriou. As long as
banks get this right, lend-ing
offers huge potential, he
adds.
“Last year we executed
about 200 highly structured
transactions for ultra-high-net-
worth clients. A decade
ago, when we started, we
executed less than 20,” he
says.
“This whole segment is
very active. It is one of the
areas of banking that is
very profitable overall and
has huge upside.”
Lending
The practice has
benefits for wealth
managers and risks
are relatively low,
says James Shotter
number of people in the UK with $1m
or more of financial and non-financial
net wealth will rise 55 per cent to
2.38m by 2018.
Jürg Zeltner, chief executive of
UBS’s wealth management arm, says:
“For wealthy individuals, London has
become the go-to place. It is clearly
becoming the hub for ultra-high net
worth people.”
One big reason for this is that once-favourite
offshore financial centres
have lost their appeal for wealthy
individuals. Switzerland has been hit
by the end of banking secrecy and
locations such as Cyprus have suf-fered
a banking and sovereign debt
crisis.
Private bankers say that money is
also flowing into London accounts
thanks to the longstanding affinity
that many wealthy foreigners have
with the UK.
Russians and Arabs often send
their children to London schools, own
properties, buy businesses and, in
some cases, have UK citizenship. They
also like the strength of the jurisdic-tion,
enabling some to shield their
assets against the political vagaries
and risks in their home countries.
“The wealthiest families want their
assets spread globally,” one banker
says.
In recent years, many Italians and
other southern Europeans have also
moved some of their money to Lon-don,
because of the economic and sov-ereign
debt risks at home.
The fast inflow of money is behind
banks’ expansion of their wealth man-agement
offices in London.
Tim Monger, financial institutions
partner at Boston Consulting Group,
says: “I have received many more
calls over the past year or so from
people who look at this market and
see it as an opportunity.”
Mr Adami at Pictet says he has a
dozen relationship managers in Lon-don
but wants to expand that to 20 in
the next 12-18 months.
The venerable Swiss private bank
has had a presence in London for 25
years. But this April, the private
banking arm moved its offices away
from the asset management side’s
base in the City to the upmarket dis-trict
of Mayfair.
“The City has become predomi-nantly
institutional,” Mr Adami says.
Many banks have already estab-lished
London as a booking centre,
but they are expanding their opera-tions
in a move to capture some of the
new client money coming in.
Essentially, they have two options:
either buy a rival business or hire
relationship managers.
Most do the latter but Credit Suisse
last year went for the former option,
snapping up the wealth management
operations of Morgan Stanley in Lon-don,
Milan and Dubai in a deal that
doubled the Swiss bank’s UK business
with rich clients.
It gave Credit Suisse a top-10 rank
in the UK, where the group lacked the
strong foothold it has elsewhere.
Others, such as Swiss rival UBS, are
simply hiring further staff in a move
to attract more clients. Mr Zeltner
says: “We are building out in London.
We are growing our international
booking centre, our family office
centre and our ultra-high net worth
business.”
Such expansion has already had an
impact on the market for wealth man-agers,
with swathes of US and Euro-pean
banks seeking to hire private
bankers for their London-based Rus-sia
or Middle Eastern desks.
“If you are a relationship manager
targeting Russian, Chinese or Middle
Eastern clients, you will have seen
your salary rise significantly,” one
banker says.
London The city’s
emergence as a hub for
the rich has prompted
a response from
wealth managers,
writes Daniel Schäfer
One of the most prominent examples of
a venerable private banking name
setting up shop in London is Edmond
de Rothschild, the Franco-Swiss private
banking group chaired by the late
Edmond’s son, Baron Benjamin de
Rothschild.
The private bank’s chairman, who is a
sixth-generation scion of the banking
dynasty started by Mayer Amschel
Rothschild more than two centuries
ago, launched a London-based
merchant banking business last year
in an effort to turn the City into the
group’s fourth main business centre.
The bank, which operates separately
from David and Eric de Rothschild’s
banking group, has hired 20 senior
advisers, mostly from large banks, to
help start a private banking and
corporate finance business in the City
alongside its existing asset management
unit.
The Geneva-based group has had a
presence in London for three decades
but that has not included its core
business of serving the investment
needs of entrepreneurs and families.
Given that focus, its merchant bank
is not at risk of a clash with other parts
of the sprawling group, such as the
corporate finance advisory firm – one
of the UK’s largest – that belongs to
Paris-based Rothschild group.
Led by Richard Briance, Edmond de
Rothschild’s UK head and a former chief
executive of Hawkpoint Partners, the
group now has nearly 100 staff in
London but has plans to expand further.
Christophe de Backer, Edmond de
Rothschild’s chief executive, recently
told the Financial Times that the private
banking and asset management group
could accommodate 150 people at its
Mayfair office and was considering
taking an additional building if
necessary.
“At present, we have three main hubs
in Paris, Geneva and Luxembourg.
London will become the fourth hub,” the
former HSBC banker says.
“London is the place where we can
find talent, it is the place to be,” he
adds.
Daniel Schäfer
Fourth hub Edmond de Rothschild adds private banking to its City activities
Daniel Schäfer
Investment banking
correspondent
Anne-Sylvaine Chassany
Private equity correspondent
Sharlene Goff
Retail banking correspondent
Jeremy Grant
Asia region corporate
correspondent
Jennifer Hughes
Asia financial correspondent
James Shotter
Zurich correspondent
Sarah Murray
Freelance writer
Andrew Baxter
Commissioning editor
Andy Mears
Picture editor
Steven Bird
Designer
For advertising details,
contact: Robert Grange,
tel +44 (0)20 7873 4418,
email robert.grange@ft.com.
All FT Reports are available
on FT.com at ft.com/reports
Follow us on Twitter at:
@ftreports
Contributors »
Some clients
use Lombard
loans to fund
purchases
such as
ski chalets

4. 4 ★ FINANCIAL TIMES TUESDAY JUNE 10 2014
High-octane
deals propel
brands into
pole position
Motorsport sponsorship Groups are
attracted by the intense concentration of
wealthy petrolheads, writes Daniel Schäfer
When David Coulthard
drove racing legend Jim
Clark’s Lotus 25 at Sil-verstone
motor circuit
last year, it was not only
the former Formula One driver‘s
heart rate that started beating faster.
Paul Denman’s did, too. The direc-tor
responsible for media and sports
at Arbuthnot Latham, a UK private
bank, was excited to see Mr Coulthard
racing in a car that sported the
wealth manager’s logo on its side.
The picture of Coulthard in a 1960s
car – the first to be built with a mono-coque
chassis – was on the front
pages of several motorsport enthusi-asts’
magazines, in newspaper articles
and on television.
For Arbuthnot Latham, it marked
the high point of a decade of motor-sport
sponsoring.
“In the past, not many historic rac-ing
cars carried logos,” Mr Denman
says. “But now there is more of that
and cars with our logo end up in
races, museums and on TV.”
Motorsport sponsorships have been
used by a number of private banks as
a tool to enhance their brand name
as well as to attract and entertain
clients. It seems a natural fit, as many
wealthy clients like motorsport.
But are there tangible benefits to
sponsorship of such high-profile
sports; and is it worth the large
amounts of money?
For Jürg Zeltner, the answer is an
emphatic “yes”. UBS, the Swiss bank-ing
behemoth whose wealth manage-ment
arm he runs, is supporting the
high-octane world of F1 as a global
partner.
The bank’s logo is plastered on the
sides of circuits that include Silver-stone,
Buddh International in India
and Interlagos in Brazil, and
can be seen by 450m people on televi-sion.
When UBS started to sponsor the F1
Grand Prix series in 2010, its main
ambition was to find a platform that
could raise its brand awareness in
emerging markets, the centres of
growth in wealth management these
days. As the largest wealth manager
in the world by assets under manage-ment,
the Swiss bank’s brand had
huge strength in the west, but had not
achieved the same recognition in
countries such as China, Mexico or
Turkey.
“We were looking for a global plat-form
with high visibility and reach.
There are very few of those,” Mr Zelt-ner
says. Other possibilities would
have included the Olympic Games,
the Fifa World Cup or maybe tennis.
But the huge crowd attracted by F1,
its high frequency and its expansion
into emerging markets were decisive
factors behind UBS’s decision to back
the motor sports.
UBS acts as a global partner to F1,
which for the private bank has advan-tages
over sponsoring an individual
team. For one thing, it does not hinge
on the success or failure of a particu-lar
team or driver. And second, it does
not upset any of its clients who may
be passionate supporters of a different
team.
While the initial motivation was to
raise brand awareness, UBS soon
found there was an additional benefit
from the sponsorship: client hospital-ity.
“Our clients have responded posi-tively
to our F1 engagement,” Mr Zelt-ner
says. “So we have built out the
client experience by taking them to
the races.
“Today, our focus in F1 is on
hosting high-profile client events, as
opposed to further building our brand
awareness,” he adds.
The bank now shepherds about 110-
120 wealthy clients to each race –
offering experiences such as flying
them in on helicopters, a trip on the
racing circuit with one of the drivers,
a visit to one of the team garages or
the chance to handsign one of the
racing cars.
But supporting a high-profile sport
such as F1 comes at a huge cost, with
experts estimating that UBS’s spon-sorship
bill is tens of million dollars
each year.
The Swiss bank’s entry into F1
already went against the grain in the
banking sector. Dutch financial group
ING severed its financial ties in the
wake of the global banking crisis,
while Royal Bank of Scotland stopped
being a leading sponsor of the sport
after it had to be bailed out by the
state.
UBS does not comment on
speculation that it might drop
out as well. But bank insiders
stress that so far the deal has
been worth the money.
According to Mr Denman,
the same applies to Arbuthnot
Latham with its much lower budget
for sponsorship of the UK’s Historic
Grand Prix Cars Association. He says
its involvement in classic motorsport
has generated a lot of new business
and continues to enlarge the bank’s
client base among petrolheads.
“The primary aim for us is to meet
new high net worth individuals,” Mr
Denman says. “It is a wealthy per-son’s
sport.”
Its intensive network among motor-sport
enthusiasts has even helped it
to attract some professional drivers as
clients.
But because of the private bank’s
discretion, it remains unclear whether
Mr Coulthard is among them.
Scramble to improve mobile
apps as sector warms to web
Seats at a Parisian catwalk
show or a chance for the
kids to be zookeepers for a
day are some of the perks
available through an online
portal for a select group of
private banking clients at
Barclays.
The “Little Book of Won-ders”
service – a digital
take on the traditional pri-vate
banking concierge – is
one of the latest attempts
by private banks to boost
their online offerings for
higher earners.
Regularly criticised for
lagging behind other parts
of financial services – par-ticularly
mass market retail
banking – in terms of their
digital capability, consult-ants
say private banks are
now trying to catch up.
As a younger generation
of tech-savvy wealthy inves-tors
emerges, IT experts
point to a growing demand
for conducting private
banking and investing on
mobile devices and online,
rather than traditional face-to-
face meetings.
Most big private banks
have launched mobile appli-cations
in the past couple of
years – but with limited
functionality. Consultants
say they are now scram-bling
to launch new apps
that will better enable cli-ents
to review their portfo-lios
and make trades, as
well as receive market
information, quotes and
news that might be relevant
to their investments.
Shaking up often time-consuming
and old-fash-ioned
private banking proc-esses
presents a significant
opportunity for wealth
managers. Recent research
by Temenos, the IT services
company, found that about
$1tn is being transferred to
the next generation every
year – taking significant
funds into the hands of the
under-40s, who are more
willing to conduct their
affairs digitally.
But Temenos found that
many wealth firms consid-ered
the move to digital as
a threat to their business
models, as it improves
transparency around pric-ing
and increases competi-tion
from online brokers.
“Today what they see is
more of a threat than an
opportunity,” says Pierre
Bouquieaux, product direc-tor
at Temenos. “Private
banks are quite behind with
their digital strategies.
Some are struggling as they
are starting from a blank
page.”
Consultants say there is a
perception among some
firms that digital services
are relevant only to
younger or “lower tier” cli-ents
who want to invest for
themselves.
“One of the core reasons
for the slow uptake of dig-ital
capability in wealth
management is because
many executives have held
a belief that digital is not
relevant in the private
banking model,” says Jean
Lassignardie, chief sales
and marketing officer at
Capgemini Global Financial
Services. “Firms need to
understand that digital is
relevant for all groups.”
Improving technology has
been a key priority for big
banks in western markets
after years of underinvest-ment
that has left many
with decrepit systems that
are struggling to cope with
a surge of online and
mobile transactions.
IT specialists say smaller
lenders and those operating
in emerging markets are
leapfrogging established
western rivals in technol-ogy
as they build new state
of the art systems.
Retail banks in the UK
have been caught out by a
number of severe IT crashes
that have underlined the
necessity of upgrading their
systems.
Private banks tend to run
on independent systems
that are not so prone to
problems; during a damag-ing
power cut at Royal
Bank of Scotland in 2012, its
wealth arm Coutts was
unaffected, for example.
But consultants say pri-vate
banks and wealth man-agers
have also spent far
too little on their systems.
“Over the past couple of
decades, wealth manage-ment
institutions have
chronically underinvested
in technology because they
have lived off low customer
volumes and customised
offerings (which do not
require large processing
power),” Temenos said in
its report on the transfer of
wealth between genera-tions.
It found that during the
1990s, as most businesses
started engaging with the
internet, private banks
“mounted their defences”
instead: “Email was tightly
controlled, attachments
were banned, codes and
secure ID cards were
required to access the inter-net.”
Some bankers admit that
some of that nervousness
remains within private
banks. “There has been a
perception that the value
added by a good banker is
hard to digitise,” says Anne
Grim, global head of client
experience at Barclays.
“Can technology complete
day-to-day activities with
the same quality and same
oversight?”
Activities that can be eas-ily
digitised include sharing
information with clients –
through charts, research,
commentary on financial
markets and streaming
quotes, for example – and
basic transactions such as
opening accounts, money
transfers and simple trades.
Consultants say provision
of financial advice is more
difficult as bankers are con-cerned
about breaching reg-ulatory
requirements when
operating through channels
such as mobile apps and
social media.
Mr Lassignardie at
Capgemini says one excep-tion
is UBS, the Swiss bank.
“While other firms appear
to be taking tentative,
experimental steps, UBS
has been piloting signifi-cant
mobile investments
since at least 2011, and has
taken the forward-looking
stance that mobile applica-tions
are the adviser desk-top
of the future,” he says.
To avoid falling behind,
other banks are likely to
follow suit in coming years.
Technology
The net is seen as an
opportunity but
some nervousness
remains, says
Sharlene Goff
For staff at a private bank,
advising clients on how to
distribute their largesse
was once relatively simple.
But as today’s donors pur-sue
more complex giving
plans – some even using for-profit
investments as a way
to fulfil their social mission
– advisers find they need to
beef up their skills.
In one study, 57 per cent
of professional advisers said
they were planning to
increase their knowledge
about philanthropy so that
they could advise their cli-ents
better.
“Donors are looking to be
more strategic, focused and
intentional versus merely
responding,” says Gillian
Howell, managing director
at the philanthropic solu-tions
group of US Trust, the
wealth management divi-sion
of Bank of America,
publisher of the research.
According to the study,
not all wealth advisers offer
the kind of strategic advice
philanthropists seek.
Almost two-thirds of
wealthy individuals said
discussions with their
adviser about giving tended
to focus on technical issues.
Only 27 per cent said they
talked with their adviser
about charitable goals, val-ues
and interests.
Yet philanthropic goals
are being pursued increas-ingly
through long-term
plans rather than a scatter-gun
approach.
For this reason, many
wealthy individuals estab-lish
a private foundation or
a donor-advised fund, where
the donation is tax deducti-ble
immediately, but funds
can be distributed later, giv-ing
donors time to design a
giving strategy.
“They’re not just looking
to write a cheque, but they
want to have these vehicles
so they can plan their phi-lanthropy,”
says Ms Howell.
Helping donors plan
means asking the right
questions. These could
relate to the proportion of
wealth clients would like to
give away or whether they
want to make the biggest
impact in the coming years
or after their death.
“The answer to questions
like these can yield widely
different strategies,” says
George King, head of portfo-lio
strategy at RBC Wealth
Management, part of Royal
Bank of Canada.
At the same time, donors
are looking for greater con-trol
over their giving and
the difference it is making.
“It’s a very personal set of
decisions and motivations,”
says Mr King. “But increas-ingly
what unites them is a
desire for greater involve-ment,
and to see and quan-tify
the material impact of
their investments.”
This means advisers have
to help donors find causes
and organisations where
they can, say, take a seat on
the board or offer their
skills and time as well as
their funds.
However, private bank
philanthropy advisers are
venturing into uncharted
territory, as wealthy indi-viduals
harness some of
their for-profit investments
to solve social and environ-mental
problems.
Impact investing, for
example, is a way to gener-ate
social and environmen-tal
improvements as well
as financial returns. Invest-ments
might be in anything
from clean technology
to a company providing
affordable healthcare to
poor communities in India.
For those who have made
their pile in business, such
investments are appealing.
“For entrepreneurs, social
enterprises are very excit-ing,”
says Maya Prabhu,
managing director and head
of the UK-based Coutts
Institute, which advises
individuals and families on
wealth management, in-cluding
giving strategies.
“They can look into the
eyes of a social entrepre-neur
and see the spark they
might have seen in them-selves,”
she adds.
Other investment vehi-cles
are emerging, too.
Through social impact
bonds, also known as pay-for-
performance invest-ments,
individuals can
invest in services tackling
things such as prison recidi-vism
or low school perform-ance.
They receive returns
when the intended savings
and social goals have been
realised.
Many of these investment
vehicles are designed to tap
into private capital as a
means of doing more to
address social and environ-mental
challenges.
Ms Howell says: “It recog-nises
that the pool of phil-anthropic,
government and
aid money is not enough
to tackle these issues and
that we need to be more
creative.”
As wealthy individuals
become more comfortable
with the notion of making
money while also contribut-ing
to society, advisers need
to arm themselves with
even broader knowledge.
Nor can they go it alone.
After all, in most markets
only registered financial
professionals can give
advice on for-profit invest-ments.
“We work closely with
our investment team,” says
Ms Prabhu. “They might
look at the financial and
due diligence side of things
and we’d comment on what
this means from a social
and environmental impact
point of view.”
All this requires more col-laboration
between the phi-lanthropy
advisers in pri-vate
banks and their invest-ment
colleagues.
“Wealth management
firms looking to position
themselves for the future
need to be ambidextrous,”
says Ms Prabhu.
She believes that, as the
lines between philanthropic
and investment capital con-tinue
to blur, a time will
come when most advisers
will be able to cross the
divide.
“Eventually, we’ll have
investment professionals
who also understand the
social and environmental
issues,” she says. “And how
exciting would that be?”
Advisers realise
charity is more
than just giving
Philanthropy services
Clients’ demands are
becoming more
complex, writes
Sarah Murray
Impact investing: a way to generate both social benefits and
financial returns Getty
‘Management firms
looking to position
themselves for the
future need to be
ambidextrous’
‘We were looking for a
global platform with high
visibility and reach. There
are very few of those’
Private Banking
Only connect Independents lag behind
The surge in demand for
digital banking services is
prompting private wealth
managers to follow high-street
lenders into the world
of mobile applications and
online services.
IT experts say global
private banks that are part
of big retail banking groups
tend to be more advanced
in this field than their more
traditional, independent
counterparts.
Most large private banks
have mobile apps that allow
clients to carry out basic
services such as reviewing
their portfolios, researching
investments, opening
accounts and moving
money. However, some have
regional restrictions.
Some have specialised
apps for sharing financial
information. HSBC Private
Bank, for example, has an
“Investment Outlook” app
that provides quarterly
information on the global
economy.
Meanwhile, Coutts, the
private bank owned by Royal
Bank of Scotland, offers the
“Knowledge Exchange”, an
online network that provides
clients with information on
markets, entrepreneurship,
family business and
philanthropy.
Consultants say they are
working with a number of
banks that want to use their
app to improve
communication with clients.
Private banks are also
looking at communicating
through social media
channels such as Twitter,
Facebook and YouTube.
Sharlene Goff
Profile-raiser: UBS (above)
started sponsoring Formula
One in 2010; (below) a Lotus
25 from the 1960s –
Arbuthnot Latham has been
involved in classic motorsport
for more than a decade Getty