themselves from low-yielding UK private client accounts, often
based around brokerage services, in favour of business with more
lucrative higher net worth investors.
This repositioning extends a developing trend for discarding
brokerage-based accounts which are considered by growing numbers of
private banks to be uneconomic, and which take up too much adviser
resources. Often, the accounts are held by “legacy clients” who
have come with the brokerage operations acquired by private banks
in recent years.
Go deeper with GlobalData
Access deeper industry intelligence
Experience unmatched clarity with a single platform that combines unique data, AI, and human expertise.
In latest moves, HSBC Private Bank is to run down its lower-level
client business, including broking. The restructuring involves
discontinuing its service for smaller account holders – advisory
accounts with under £1 million ($1.95 million) under management and
discretionary accounts with under £300,000 under management.
Clients have until the end of October to find a new provider.
At the same time, UBS is continuing to absorb its UK wealth arm,
based around the Laing & Cruickshank brokerage operation, into
its main global wealth platform. As many as two-thirds of its
10,000 clients are expected to leave for other wealth
managers.
UBS is also moving to protect its Laing business after winning a
High Court injunction that will stop former employees now at UK
wealth startup Vestra Wealth from poaching its investment clients
or the bank’s staff (see UBS wins ‘poaching’ injunction).
“This legal action is to ensure that certain senior departing
employees abide by the contractual obligations that they agreed to
when they joined UBS,” the Swiss bank said in a statement.
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalDataAnother firm, Cheviot, which is extensively staffed with former UBS
employees offered last month to take over some of UBS’s British
clients in return for a share of the revenues – an invitation which
UBS declined.
Morgan Stanley has similarly exited brokerage-based advisory
activities in Europe in order to pursue the better
revenue-generating opportunities among the ultra-high net worth
sector. It sold its Quilter business in Britain to Citigroup in
2006 and its Spanish wealth management operations in 2007 to La
Caixa, which were centred on an earlier Spanish brokerage
acquisition.
Speculation is circulating that Citi may decide to divest itself of
the Quilter brokerage, particularly as the New York bank is
currently engaged in a major programme of asset sales to raise
capital to meet its subprime losses.
Barclays Wealth has also been grappling with the problem of making
money from clients with small amounts to invest, when the overhead
of adviser time in offering a full bespoke service frequently
results in slim returns. It has been integrating its Gerrard wealth
subsidiary into the main bank and discarding staff that are unable
to make the transition to a full advisory role from a largely
brokerage function.
Private bankers say that the industry is also trying to meet the
differing generational needs of clients. Older clients are often
perfectly content with the traditional stockbroking model with its
investment management focus. Younger clients, who represent the
fastest growing segment of the market, frequently want a range of
other services and facilities, such as tax efficient investing,
structured products and so on.
Rival banks and independent financial advisors are moving rapidly
to fill the vacuum of the big banks’ retreat from the smaller or
more traditional clients.
In a letter to its own clients to inform them of its action, HSBC
has suggested they use one of five alternative wealth managers –
Williams de Broe, Rensburg Sheppards, Rathbone Investment
Management, Killik & Co or Brewin Dolphin.
The bank will allow its investors a “reasonable” time to transfer
money out of its service. HSBC stresses that the accounts affected
represent less than 1 percent of its business and involve purely
execution only/advisory clients rather than typical discretionary
clients.
One regional broker and investment manager, Fyshe Horton Finney
Ltd, has gone public with a campaign to pick up HSBC client
business. As an introductory offer, all clients moving from HSBC to
Fyshe before the end of October will receive a 25 percent discount
on first year management fees.
Fyshe, which has more than £250 million worth of funds under
management, says it continues to see organic growth by “promoting
its high levels of personalised customer care in a world where
outsourcing and automation are becoming all too common.”
At UBS, the average client size for former Laing clients of about
£500,000 is now considered far too small to be worth its advisors
spending substantial time in constructing an individual portfolio.
UBS stresses that it remains “fully committed” to providing
discretionary investment management services for UK clients, even
as the Laing & Cruickshank business is integrated into the main
private bank.
In the US, Citigroup is also positioning to try and merge the
differing cultures of its brokerage-based advisors and private
bankers. Its wealth management arm will roll out a pilot ultra-high
net worth office in Chicago, where some brokers and private bankers
are expected to work together under the Citi Private Bank brand in
catering to clients with at least $25 million in net worth.
