The past five years have seen a number of ultra high net worth, family office and even megawealth initiatives launched by private banks across the world. Many of them have since been revised or even scrapped as banks develop a better idea of the requirements of these clients, reports Will Cain.
Ultra high net worth and family office initiatives have given way to a focus on segmentation at the lower end of the wealth spectrum during the course of 2010 and 2011.
The focus on Asia’s emerging affluent population has created a growing desire among private banks to segment their affluent and lower end private banking clients. At the same time, projects to court or improve service to wealthy families and ultra high net worth clients – often launched three, four or five years ago – are starting to be gradually revised.
Known as megawealth, this segment focuses on clients with net worth of $250m and above, although many clients have a net worth that is substantially higher.
Citi’s launch of a megawealth proposition in 2007 is a case in point. The service was replaced last year when Citi launched its Global Office, headed by Catherine Weir. The main difference between the two services is that megawealth was primarily part of the private bank while Global Family Office is a project which aims to provide access to the entire bank.
“Megawealth was for the very wealthiest clients around the region and we still deal with them,” says Richard Straus, head of the Global Family Office, North Asia region. “Basically it was really our private bank offering for those clients. Global Family Office still provides the megaweatlh offering for our clients but we’ve actually set up a network in Citi which is not just the private bank, it’s bringing everything in Citi to these clients.”
A team of 15 people work in the Citi Global Family Office team in Asia, with other teams also located in Europe, the Middle East and Africa, the US and Latin America. Straus says the main role of the division is to provide a “window” into the bank, allowing clients to access the individuals and business lines within Citi that are most relevant to them, reflecting their diverse requirements.
It also avoids duplication when clients already have a number of relationships at the bank. For example, a business owner might already work with the corporate bank for their business’s trade finance requirements and use Citi’s trust and custody services for their family office. The Global Family Office staff work to ensure these needs are looked after and to avoid duplication so that a client does not need to re-explain their needs to different bankers working in different divisions.
The evolution of the private bank-based megawealth offering to the cross-bank global family office service fits in with the wider industry shift towards a one-bank type model already employed by UBS, Credit Suisse and HSBC. Citi’s Global Family Office looks very much like Credit Suisse’s Solution Partners division, which aims to recognise synergies between the private bank and investment bank, although Straus says Citi’s solution is a little different. The bank already has an initiative called Client First, which is Citi’s version of Solution Partners or One HSBC.
“I don’t want to talk about any particular competitor, but they will bring their private bank and their trust capabilities, or their private banking and investment banking capabilities together.
“Citi is strong because whether you’re talking about trust, global custody, investment banking, commercial banking, capital markets, managed investments or risk management – we are a significant player, not just in product areas but across all of the geographies.”
The universal bank advantage in dealing with the complex requirements of family office and megawealth clients is borne out by the experience smaller banks have had in rolling out their family office offerings. One European private bank spoken to by Private Banker International, that did not want to be named, admits it has had some problems attracting these types of individuals and making their family office division work internally.
One of the bank’s senior management says that megawealthy clients are very product focused. If the bank has the products they want, they have an entry point to set up a meeting. If not, it’s hard to get access, making it difficult to acquire new clients.
Universal banks like Citi have the advantage of already having these relationships and are better placed to respond when clients need new services. Smaller banks need a specific product or advisory opening before they can start building their family office business.
“From a bank perspective, it is not easy to know what is the best approach,” says the senior banker. “Maybe it would be a product approach, maybe it should be a more holistic approach. It’s tricky to know.”
For the bank’s existing megawealth clients, there are also internal issues to get over. As the individuals are particularly high profile, different departments in the bank have different views about what the best approach to take with them is. Relationship managers may also be protective over the clients which they have brought to the bank and typically deal with.
This makes it more difficult for specialist family office teams to operate effectively. The senior banker remains optimistic the offering will be successful in the longer term. He says that the unit, set up two or three years ago, is now profitable, but admits the service requires more management attention than originally envisaged.
“We are not in a hurry, not at all,” the European banker says. “We don’t need a team of 20 people. It can be for quite a while be a small team with the full support of management. So this can be a very powerful team – it’s not a quantitative approach, it’s a qualitative approach.”