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May 1, 2008updated 04 Apr 2017 3:58pm

Memoirs of a private banking pioneer

Memoirs of a private banking pioneerWarwick Newbury, chairman of SG Hambros Bank, has spent more than 40 years in banking, all of them in wealth management In this article, he takes an expert look at the markets 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

By PBI Editorial

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.

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.

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