Warwick Newbury,
chairman of SG Hambros Bank, has spent more than 40 years in
banking, all of them in wealth management. He is widely regarded as
the doyen of British private bankers. In this article, he takes an
expert look at the market’s phenomenal growth.

 

My career, I am happy to say, has covered the formative years which
have seen such dramatic change and growth in private banking,
particularly over the past two decades. I spent 30 years with
Coutts, rising to be the first Coutts Head of Private Banking, and
nearly ten years as the first CEO of SG Hambros Bank following its
acquisition by Société Générale.

Since I became a part of SG Private Banking in 1998, the SG Hambros
team under my leadership has built a strong and sustainable wealth
management business with very substantial growth over recent years,
both through the recruitment of top private bankers and through
acquisitions of businesses in Gibraltar and the Channel Islands
(and to which has recently been added the ABN AMRO Private Banking
London business).

Most financial market sectors have grown enormously in the past 20
years – investment banking, foreign exchange, corporate finance
and, of course, other relatively new segments such as hedge funds
and private equity. But I think that private banking arguably has
undergone the most stunning evolution of all.

For back in 1987, no UK bank, nor most continental European
institutions, had a private banking operation. The US banks also
had no systematic wealth sector apart from the brokerage industry.
This left the Swiss unchallenged as the purveyors of classic
private banking.

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Even Coutts was really largely a commercial and ‘red carpet retail’
banking operation. Back in 1987 I was the Coutts director in charge
of the Financial Services Division, which included all the
‘non-banking’ parts, ie, trust services, tax department, French
department and the discretionary investment management department.
In 1988, partly prompted by the new focus that Private Banker
International itself was just bringing to private banking, I
changed my title to Head of Private Banking and added a wealth
management department which Sir David Money Coutts generously named
Campbell’s Office (named after the original Coutts partner) to
differentiate this service from the excellent but standard banking
service then provided. This proved to be the bridgehead to create
the model for domestic private banking which the rest of Coutts was
to adopt some ten years later.

Now, of course, most banks have established or aspire to private
banking status – particularly in the emerging new wealth markets of
Central and Eastern Europe and Asia. Indeed, globally, there are
nearly $100 trillion of high net worth assets under management and,
unsurprisingly, private banking is the strongest-growing part of
many banks.

In 1987, the accounts of the wealthy were simply better-serviced
bank accounts. In more recent years, even mass affluent clients – a
vital source of new high net worth business as many become more
wealthy – were invariably managed out of the retail bank. Now,
increasing numbers of players seem, rightly in my view, to be
managing this segment out of the private bank.

Twenty years ago, banking high-flyers tended to chose corporate
banking as their favoured career path as private bankers were very
underpaid – a good CRM would have been on a salary of about £20,000
in Coutts 20 years ago, with little or no bonus!

I am delighted that during this last 20 years private banking has
come of age and is now seen as a very attractive career option with
quality candidates joining from top universities or from the other
professions as well as from other banking business lines. This, in
turn, has considerably raised the private banking game to a much
more sophisticated and added value business.

Most important driver

What has been the single most important event shaping today’s
thriving private banking market? One could argue over this
endlessly. But I would include the dotcom boom and then great bust
of 2001/2002. Clients were caught up in irrational exuberance and
most were on a roll with open-ended investments in the latest
techie concept of the moment.

Then the bust came and many clients were really shocked by the
ferocity of the markets’ downturn. They become convinced that we
private banks provided a genuine advisory service, backed by
classic advice including the diversification of assets. From that
moment, clients were much more inclined to listen to us. Happily,
this has also coincided with the bull market since 2003 so this has
definitely helped our image!

The marketing and selling of private banking is also much more
sophisticated compared with its early days as it is now a business
line seen, quite correctly, by all the large players including
Société Générale, as still offering huge opportunity for growth in
the years to come.

Looking to the future, private banking will surely see many new
challenges in coming years – from new regulations to intense
competition, particularly for the talent pool available. But I am
confident that this relatively new business line will
prosper.

In addition, investors demand ever-more transparency and clarity in
their portfolios, both discretionary and advisory. Increasingly,
people are smart and really do want to be sure that ‘it does what
it says on the tin’, so innovation and open architecture are both
key to winning the vital trust of clients.

PBI must be congratulated on its role in helping to support and
foster private banking since 1987. It is quite salutary to look
back to see just how much has changed, and for the better – in one
word, we are now truly professional.

So, best wishes for PBI’s next 20 years.