Wealth managers are turning to a variety of surprising sources - such as online dating and charity – to persuade the world’s richest people to invest with them.
Such radical new strategies are needed to give the seemingly staid world of private banking a much needed facelift and win back disillusioned clients, an industry summit in Zurich heard this week.
Sebastian Dovey, managing partner at consultancy Scorpio Partnership, said the technology used to drive online romantic matchmaking services could be adapted to the needs of private banking.
“Internet dating sites are about matching one individual with another,” Dovey told swissinfo.ch. “We are looking at converting these capabilities to match individuals with specific wealth solutions.”
“Internet dating is an emotional sell and wealth is emotional too,” he added. “The idea behind dating websites is to bring people together for a lifelong commitment. Private banks are also looking for that type of commitment from their clients.”
Scorpio Partnership estimates that net new asset inflows to the 230 private banks it regularly surveys was down 54 per cent year-on-year in 2008 and a further 60 per cent in 2009.
Many wealthy clients are not just dissatisfied with the poor returns (or indeed losses) on their investments, but also with opaque fee structures. Another common gripe is that bankers had become more interested in hard selling their own financial products than providing a personalised client service.
Most private banks have taken the criticism on board, not least Switzerland’s UBS, until recently the world’s largest wealth manager. Shortly after taking over as head of Wealth Management Americas last year, Bob McCann condemned the practice of thoughtlessly distributing new products to clients.
“I don't know that any client likes to be on the receiving end of distribution. It must be a bit like being on the receiving end of a fire hose,” he said.
Private banks have also had to contend with the offshore banking market in Europe and the United States being severely cut down by a global crusade against tax evasion.
Many banks have had to build up onshore offices in these regions, lean more heavily on other offshore markets such as Asia or else upgrade tax compliance procedures – all of which cost money.
Giving cash away
But the Zurich summit heard that putting one’s house back in order may not be enough to win a share of the $10 trillion (SFr7.9 trillion) that Scorpio Partnership believes is hidden under the mattresses of wealthy people.
Struck with a new spirit of innovation, Switzerland’s oldest private bank, Wegelin, last year set up an online portal to allow clients to control their own portfolios by independently buying their own funds.
Bank Sarasin has for a few years successfully carved a niche in the popular domain of sustainable investing. Many banks are recognising the increasing importance of philanthropy to the world’s mega rich, and are more involved in backing charity events or offering advice on how to give money away.
Smaller and leaner enterprises, such as the recently arrived Helvetia Wealth, are also keen to add an innovative twist to their core traditional Swiss banking values.
“After the financial crash, big was not so beautiful anymore,” Helvetia chief executive Kamil Stender told swissinfo.ch. “This is a wonderful opportunity for niche players to come in and win some assets.”
Helvetia’s assets have blossomed in the five years it has been in operation also thanks to attracting “new money” – first generation millionaires from the sporting, business and celebrity arenas.
“We are innovative and dynamic enough to be better at attracting new money than some of our competitors in the field of traditional private banking,” Stender said.
“Being able to attract trend setters, such as new entrepreneurs, shows the potential of Helvetia Wealth in the broad market of asset management and private banking.”
The industry as a whole will have to start setting new trends to prosper in the changing world of wealth management, according to Dovey.
“Until now, the industry players have had the tendency to look at each other to compare and measure how well they are doing,” he said. “From now on, they will have to start looking outside of the box.”
Matthew Allen, swissinfo.ch
The wealth industry
There are believed to be in excess of 10 million millionaires in the world at the moment. Just 1% of the world’s population is said to control 40% of the total global assets.
Estimates put the combined investable wealth of the world’s richest people and families at around $39 trillion.
Private banks are currently thought to manage in the region of $16.5 trillion of those assets. This figure had risen from $14.5 trillion in 2008 thanks to more favourable market conditions last year.
Last year, Bank of America leapfrogged UBS as the world’s largest wealth manager after taking over Merrill Lynch. It was estimated to manage $1.7 trillion at the end of 2009 compared to UBS’s $1.6 trillion.
The top 10 banks (also including Credit Suisse and Pictet) are said to manage more than 64% of the total wealth invested in private banks.