PBI’s London conference, Private Banking: London 2013, heard a fascinating range of speakers at City of London’s Guildhall on 2 July discuss everything from apprenticeships to resisting the urge to offer UHNW clients the ‘priceless’ exclusive events that some felt were unnecessary. Here we give an overview of some of the key takeaways. The full write-up of the event, along with photos from the day, will appear in this month’s edition of PBI.
Given the complexity of the market and the entrance of new global players, the conference looked to hone in on how London should improve to keep succeeding during a challenging period of transition for the industry, both globally and locally.
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Divided into four main sessions spread throughout the day, the conference saw nine industry experts give presentations, which led into panel discussions and audience Q&A.
Can London "outpunch" its competitors?
The conference’s first session focused on what London needs to do to keep up and ahead of its competitor wealth management centres. Coutts & Co CEO Michael Morley said maintaining the "vibe" of London – as referred to by Boris Johnson, was an important part of its new challenges. Despite its leading role among the top cities in the world for the wealthy, London wealth management and private banking industry had to face new and always changing HNW clients’ demands, adapting its services, maximising advice and regaining trust by prioritising efficiency.
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By GlobalDataIn particular, the discussion has put a big emphasis on the role of relationship managers and the necessity for them to develop their knowledge of clients’ businesses, analysing the details, carefully providing profiles and empowering interactions through technologies.
The central points of the session included:
– London has the winning formula as a centre of wealth management: unbeatable connectivity, top class education, technological brilliance, and a captivating culture.
– The debate centred on whether London had in fact "stolen a march" on other wealth centres with its push for transparency, post RDR.
– The financial service industry’s contribution to the UK economy cannot be underestimated. More than 20% of UK HNWIs’ wealth derives from the financial sector.
"London is setting an international gold standard in establishing a transparent financial advice industry", said Michael Morley CEO of Coutts & Co.
– Arbuthnot Latham CEO James Fleming said that client’s trust remains low. Banks need to rebuild the trust and make it the heart of their propositions.
– Fleming said that the new advisory model is getting back to basis: focusing on new clients, listening and be responsive to the client, putting the service at the heart of the business model.
"Clients want to be seen in a more bespoke service. Advisers should recognise that clients are becoming more knowledgeable and sophisticated, better informed and more fluent around their choices for advisers", added James Fleming CEO of Arbuthnot Latham.
– Private banks and wealth managers need to become client-centric for long term relationships through the industry. Relationship management is the core skill.
"It is not always easy to get to the bottom of the client’s story or to be able to have the right network of experts around you", said David Fletcher, partner banking & insolvency at Ferrer & Co.
Business "can’t have short term profits and long term relationships", Fletcher added.
– Barclay’s Stuart Cummins noted the rise of ‘private investment banking’ which calls for less discretionary management and more transactional services.
– Entrepreneurs will drive the wealth management market. 40% of HNWIs state entrepreneurship as primary source of their wealth. Only 20% inherited.
Industrialising investments, personalising philanthropy
Providing a strategic plan for HNW clients’ services remained a topical argument in the second session of the conference. After a insight into London HNW research conducted by Wealth Insight, which analysed London’s domination of the UK industry and the increasing participation of the Asian players, speakers discussed the importance of an effective chief investment office (CIO) organisation, post RDR and suitability.
The discussion stressed the importance of separating the CIO from sales pressures and the urgent need for wealth managers to understand the market’s dynamic in order to sustain performance. Regarding this matter, UBS’s speakers, Nick Tucker and Bill O’Neill, suggested the importance of working out which parts of the investment process could be ‘industrialised’ and those that had to be done by people. Process was the key aspect to watch.
The final focus was dedicated to philanthropy and its value for private clients, which got great audience engagement. In particular, it was pointed out the importance of having heartfelt conversations with clients and transferring philanthropic values to the next generation. In addition, speakers underlined the increasing participation in philanthropy from the emerging markets.
The central points of the session included:
– Singapore appears as London’s most significant fast growing competitor for UHNWIs. Singapore has seen the fastest growth of UHNWIs from 2007 to 2017. Should this trend continue beyond 2020, Singapore will overtake London as the multimillionaire capital of the world.
– Entrepreneur and investor visas issued in London skyrocketed 288% from June 2011 to June 2012.
– CIO research of UBS wealth management Bill O’Neill said that wealth managers have to look at the macro economy. They need an eclectic approach to the market.
– Clients need to have gatekeepers in regards to philanthropic giving. They want to see an objective approach to their passion.
"It all starts with conversations from the heart to understand the essence of what is dear to clients. Philanthropic advisers need to structure these conversations", John Canady director of philanthropy at CAF.
– Philanthropic advisers will let the donors think externally and understand the causes of the problems more than just managing their capital.
Politicising the industry, preparing for the M&A wave
The third session of the conference investigated how pressures from regulation and compliance were contributing to a redefinition of the shape of the industry. Speakers in this session outlined the major changes in the industry reflecting on clients’ evolution, changing demographics and specialised tax and regulation. Foreign firms were also in the spotlight as they are struggling and likely to quickly exit the market, especially the new comers to London, according to one commentator. Again, the attention turned to Singapore which was seen as having an advantageous regulatory environment.
The main results of this session included:
– In the global UHNW cross board segment, London remained top centre, followed by New York and Hong Kong. UK regulation sets the gold standard for consumer protection.
– To survive the increasingly competitive world, London needs stability and ongoing certainty – a environment of "no sudden movements", according to Dough Barrow, deputy chairman of the policy and resources committee City of London
"We don’t need other regulations. We need the right regulation", said Barrow.
– There is an increased divergence between local and global client segments because of different kinds of regulatory changes.
"London will remain the preferred centre of UHNW life, but with challenges", says Ian Woodhouse, Director PB and WM Practice PwC
– Client centric focus, conduct compliance and renewing complexity will be key.
"The wealth management industry is at inflection point, not everyone will survive," Ian Woodhouse, PwC.
– 50% of wealth managers in London will disappear in three years. Foreign firms are struggling. The non-core ones will exit the market or find some merger solutions.
– Valuations of private banking units are "in a cheap period", according to Ray Soudah.
"Private bankers and wealth managers are more resolution providers rather than product-focused advisers. Firms will disappear, but profits and wealth will continue to grow in the industry," says Ray Soudah, founder of Millenium Associates.
– Singapore has an advantaged location, great infrastructures, upgraded system and the ability to implement strict regulations quickly.
UHNWIs: Interest grows in alternative assets and non-bank providers
Considering the increasing number of family offices in London and the necessity of re-adapted services, the final session of the conference concentrated on the future demands of the UHNWIs and how banks must match them.
Speakers explored alternative investments for UHNW as a growing area calling for a lot of expertise. The importance of providing credit to UHNWIs was ranked as the most important service, by RBC’s Philip Harris. The increasing complexity of regulation and investments meant family offices are asking for clear recommendations.
The fourth and final part of the conference revealed that:
– In the UK, ultra HNW increased in number and wealth by 11% in 2012
– Investors are looking for solid returns. The alternative investment’s area is calling for more expertise and interaction with family offices. The UHNW are interested in consortiums and ‘non-bank’ financing.
– Among the services for UHNWIs credit is the number one, while investment management is way down the list.
"What do UHNWIs want? A de-retailed service", Philip Harris, head of UK Private Clients RBC WM.
– Family offices in London are known for their integrity. Now, they must consolidate by better delivery.
– The role of family offices is changing: there are more complex family offices in a more complex environment. So the request for more technical and professional advice is fundamental.
