Despite the wealth and asset management industry having suffered a drastic time in 2008 and at the beginning of 2009, when redemptions, falling profits and customers’ rising suspicions of unorthodox products became the norm, key players are once again talking about ramping up their operations in 2010.
“We are very much in expansion mode,” confirms Giles Keating, head of private banking research for Credit Suisse in Zurich, although the quest for new clients is likely to be selective. “We are enjoying a good inflow of net new assets and the plan, on the private banking side, is to continue promoting that.”
The role of governments, becoming tougher in keeping taxation revenues for themselves, has been a key structural development of the last decade, leading Credit Suisse to concentrate on accelerating the gathering of assets in major onshore, regulated markets, rather than purely in more controversial offshore jurisdictions, claims Mr Keating.
Credit Suisse has already put in place a substantial infrastructure to prepare for this, although officially there is a ‘multishore’ approach, servicing clients from wherever is the most efficient base, but the development has accelerated even faster after the pressures from the US on the Swiss government and the country’s banks during 2009.
Resources are being allocated to attract private clients in so-called emerging markets, such as China, where the bank’s business is growing up to 10 per cent annually, says Mr Keating. But he also sees strong growth and expansion of activities in India, Indonesia, Brazil and Turkey.
These views are confirmed by Bob Parker, long-serving vice chairman of the bank’s asset management department. “When we visit Brazil, Turkey and Asian countries, there is a huge contrast with the struggle to get out of the crisis in the West,” he says. “If you stand in Tiananmen Square in Beijing and talk to people about the recession, they will ask: ‘Who is this stupid Englishman?’”
Part of this strategy in asset gathering, says Mr Parker, is concentrating on distribution in those countries which have already suffered a serious crisis previously, and have been able to cope with the current economic difficulties a lot more comfortably. He cites Indonesia, which defaulted twice in the 1980s and once again in 1997, and other former “economic basket cases” such as Brazil and Turkey as particularly lucrative hunting grounds.
Traditional hunting grounds
Yet there are other groups stepping up their scouting for assets in the once vibrant European heartlands of asset management. Schroders, until recently, was suffering a gloomy spell in the Benelux region, seeing little appetite for banks selling third party funds. But this is slowly changing, reports Fred Van der Stappen, Amsterdam-based Benelux intermediary sales boss at Schroders, who has just secured the group ‘strategic partner’ status with regional banking group ABN Amro.
Schroders’ products, in particular its investment grade and high yield offering within fixed income, will receive prominent exposure on ABN Amro’s shelves, alongside funds managed by Fidelity, BlackRock and JP Morgan.
“We can see now that on the advisory side – but not in discretionary portfolios – private clients are making their first small steps, coming back into the arena,” says Mr Van der Stappen. “What helps is that interest rates on deposits are in free fall and clients are looking for alternatives. Clients are thinking: ‘what should I do?’ Depending on markets, the retail investor should become quite important again.”
Jörg Brock, the man who introduced guided architecture – the system where banks recommend funds and structured products managed by series of ‘preferred partners’ to retail and private clients – at Commerzbank, has recently set up as an independent consultant. Despite a reported recent retrenchment by banks, many of which have concentrated on house products to improve margins, Mr Brock has already been retained by several institutions who wish to proceed down the ‘guided’ route.
At the same time, he is working for family offices, looking for guidance in terms of which banks and asset managers to place their portfolios with. “One of my clients – a European bank – has traditionally had a closed shop, but is about to introduce open architecture, and needs advice on how to open up and sell third party funds,” confirms Mr Brock. “The situation in Europe has been changing quite dramatically. The EU regulator will take a much greater interest in recommendations being made by banks to private clients and open architecture must be taken into account.”
He also believes wealthy private clients are becoming increasingly suspicious about the financial link between a bank and its asset management arm, leading to greater pressure on banks to open up their product offering. “There is a perceived impression that the company’s interest and the bank’s interest come first and that customers’ interests are only secondary,” states Mr Brock.
