PWM’s second annual Global Private Banking Awards have seen a strong focus among wealth managers in most regions on operational strength, asset allocation and how these topics are communicated by client advisers to their wealthy customers.
Enough time has now passed since the onset of the financial crisis for banks to make some sort of decision on how their business model will work in the future.
“This year’s submissions showed a huge degree of introspection in the wake of the credit crunch,” notes Amin Rajan, visiting professor at Cass Business School and CEO of the Create consultancy, advising banks and asset managers. “Wealth managers are developing a new narrative on what they stand for and what they can deliver.”
Our researchers contacted 350 institutions across Europe, Asia, the Middle East and North and South America in the four-month period prior to the judging of the awards. The judges first examined quantitative data from the entrants, including three years of figures detailing capital adequacy requirements, assets under management, asset flow patterns, net profits, cost-income ratios, adviser-to-client ratios and performance figures for managed portfolios.
Following this, submissions on business and growth strategies, portfolio management, innovation, communication with clients, socially responsible investments, technology, use of third-party products and remuneration and fee structures were all observed and compared. The banks’ relative approaches to operations and the level of seriousness with which they tackled due diligence and counterparty risk measures were also crucial.
After the shortlists had been drawn up, the panel debated and voted on the winners. Quantitative data was verified and augmented by wealth management think-tank Scorpio Partnership, which also deployed a proprietary formula to compute – using a series of Key Performance Indicators – which bank had employed the Best Leadership team. The winner was Credit Suisse. These figures were then compared with last year’s KPI numbers to find the bank with the Most Improved Leadership team, Clariden Leu.
The concept of regional expansion, of being close to clients in their financial and cultural needs, drew particularly keen responses from the judges. “Following the financial crisis, it has become increasingly evident to top management of the committed wealth management providers that despite previously miserable investment performances, they must strengthen not only their internal controls and service offerings, but also embed themselves more deeply with their clients, catering to their local, home-country needs,” says Ray Soudah, chairman of MilleniumAssociates, one of Europe’s premier M&A consultancies. “Providers who have local presences, especially in growing markets like Asia, the Middle East and other emerging regions, will increasingly feature as improving their rankings in these awards.”
A series of strong entries arrived from developing market-based banks operating in China, Taiwan, Latin America, Turkey and Central and Eastern Europe. Among the legion of home-grown banks in developing countries rising through the rankings were Itaú, China Merchants Bank, DBS and HDFC, who took the respective honours in the hotly contested territories of Latin America, China, Singapore and India. HSBC retained supremacy in the Middle East and Hong Kong, while still contending globally, in Asia and in Turkey.
“Banks in Asia have benefited from economic growth that has led the world and lessons learned from the region’s own financial crisis more than a decade ago,” says Simeon Fowler, CEO, Fox Partnership in Singapore.
If anything, the judges noticed a slight falling back and complacency from several institutions active in the back gardens of Europe’s private banking heartlands. That said there was a particularly strong line-up of candidates from the Americas, where private banks have set their sights on growth. Over the last 12 month, many banks there have tweaked their business models. Citi, for instance, has embarked on a huge hiring spree of North American advisers, while now focusing on $25m (€18m) plus clients.
Others such as Northern Trust have started to experiment with social media and new technologies to better reach their clients. “Clearly, many banks see the biggest opportunities at the higher end of the wealth segments,” says Alois Pirker of Aite Group, a judge known for his expertise in the North American market. “This is the area where most of the wealth creation has taken place in recent years.”
Also pleasing was the much larger range of institutions chosen by the judges, which reflects higher standards across the board and the willingness of many banks to create a regional niche for themselves, rather than trying to be all things to all people and having their efforts bulldozed away by the global juggernauts. It has become more difficult for smaller names, without global or deep regional presence, to fight their way through the process. Even the intense nature of the application process, with most banks taking several weeks to complete the questionnaire, immediately sidelines those institutions without the capability or desire to generate the type of market data and qualitative observations their clients, collaborators and counterparties would require.
Among those institutions with a particularly strong showing were Citi, selected as Best Global Private Bank, ahead of last year’s winner HSBC and challenger JP Morgan; Northern Trust, which not only retained its title as Best Private Bank in North America, closely tracked by Citi and JP Morgan, but also scooped the Best Private Bank for Innovation; Standard Chartered, judged Best Private Bank in Asia; and Julius Baer, beating Vontobel to Best Private Bank in Switzerland and retaining its Best Private Banking Strategy for Growth award from 2009.
UBS, a giant in transition, was hit hardest by the global crisis, reputation issues from its investment bank and a damaging dispute with US authorities, leading to significant customer outflows. Yet despite this turmoil, the global bank was highly commended in Switzerland, Central and Eastern Euope and the Middle East. Moreover, the bank’s recently recruited CEO, Oswald Grübel, previously responsible for successes at Zurich-based rival Credit Suisse, was voted Private Banking Personality of the Year, in recognition of not just his high profile in the Swiss market, but his persistent and successful attempts to turn the institution round, despite the tide often flowing against him.
Those banks entering the awards were asked to nominate favoured third-party service providers. Franklin Templeton won the coveted title of Best Emerging Market Fund Management Group hands down, iShares took the ETF Provider title in a similar fashion. But Schroders took BlackRock to a tie-break for Best Fund Management Group, with the US giant eventually beating the UK stalwart in a dramatic debate and judges’ final vote.
