Local private banks in Australia have been taking market share from their international rivals and growing through acquisition in the last two years. They are still finding it hard, however, to expand organically because of the shortage of quality relationship managers in the country. Lachlan Colquhoun reports.
In the private banking industry, a common theme is that it is always hard to recruit appropriate relationship managers. According to Tim Chilvers, general manager of the Southern State regions for the National Australia Bank’s Private Bank, that comment is particularly appropriate in the Australian market, where private banking is still a relatively new phenomenon.
“The reality is that the private wealth industry has simply not grown enough people to meet the demand for client services,” says Chilvers, who returned to the NAB year, where he began his career, after stints with Citibank and local rival CBA.
“The number of candidates here is not in step with the demand. I hear that some of our competitors have large aspirational recruitment targets of upwards of 50 or 100 private bankers, but the reality of that is we are so discerning about who we recruit that we struggle to find a handful.
“We find it difficult to find the uncompromising service ethic and commitment to the delivery of exceptional solutions to private clients so the prospect of finding them en masse is somewhat puzzling to us.”
Chilvers says the NAB recently recruited two senior people from European banks: one from a privately owned Swiss bank and the other from Coutts, with the idea of these two hires “forming the background” of the bank’s “human strategy.” On average the NAB averages between 90 and 100 relationships for each client manager, though at the upper levels of wealth managers may have 30 to 50 clients.
“There are two types of candidates we see,” says Chilvers.
“There are those who have grown up in the private client areas of commercial banks and what we find is that they have a skill set that reflects the evolution of an immature segment.
“So when we start looking for people who are going to shift the perception of our brand and shift our capabilities from within and form the service ethic around which our private client business has to be built we need to look elsewhere, and sometimes that means bringing the very best people through the bank, and sometimes its about bringing in lateral hires from professional service organisations which have a similar philosophy to ours, which is a vision of partnership.”
The NAB’s search for suitable private bankers is emblematic of the growing pains of what is still a young industry in Australia. Despite the country’s affluence, Australians have long chosen to manage their own wealth and the local institutions have only recently embraced wealth management, not to mention the upper echelon of private banking services.
The NAB’s experience in private banking is fairly typical of how the industry has evolved among Australia’s Big Four domestic banks. The NAB is strong in business banking, so at its inception around 10 years ago the NAB Private Bank sat in the business banking area, where the thinking was that it could access the business owning entrepreneurs who are the backbone of that area of the bank.
Several incarnations later, and new NAB chief executive Cameron Clyne has a new model. Since early 2009 the private bank now sits in NAB Private wealth, a unit within wealth management arm NAB and NAB Wealth.
The idea is that the new division will draw on various arms of NAB Private Wealth, from estate planning to private custody and trustee services, and provide advice and investment solutions to high net worth clients.
In structure, Will Hamilton is general manager of the division, reporting to the general manager of NAB Private Wealth, Angela Mentis. Tim Chilvers, who rejoined the NAB just before the restructure, also reports to Mentis.
Chilvers says the private bank has a loose criteria to target clients who either earn A$250,000 ($230,000) a year or who have A$2.5m in total assets. But within that, he says the service offering is based on a segmented approach, not a “one-size-fits-all” strategy which may not have worked so well in the past.
“Seriously wealthy establishment families often have very different needs to high income 30-something professionals who are pay as they earn taxpaying employees with similar earning partners,” says Chilvers.
“These double income professional units are cash flow rich but time poor and typically not all that asset rich either, and their primary focus in selecting a private client service provider is ‘give me what I want and do it reliably’, reduce the personal administration with that and want you to participate in bringing ideas to me that can be implemented smoothly without too much of a time burden.
“At the other end of the spectrum when you get into the establishment families, because they have staff they are not so interested in one stop shopping or slick delivery, but they favour the best ideas in each segment more than they do the ease of execution.”
In terms of product, the NAB has formed a group called origination services within the wealth business which is mandated to find the best ideas for clients both from inside and outside the bank, ranging from tax and estate structuring to investment opportunities. At a retail product level, the NAB offers a high cash management product with a high rate of interest and linked to cheque, credit card and debit card facilities.
Chilvers says that by metrics such as customer satisfaction, retention and acquisition the NAB Private Bank is on track for growth. The global financial crisis, while disastrous for many institutions, has had an upside for the NAB.
“Operating a private client business under a brand like NAB, which is one of the safest banks in the world, has been very reassuring for clients who may have gone to boutique institutions in a different environment,” says Chilvers.
“It is a different form of risk aversion. It is not around thinking an organisation will go broke because there are many organisations less safe than NAB which won’t go broke and everyone knows it. It is really about the fact that people expect that NAB having called out reputation as a strategic priority will do the right thing at a time when others might make different choices.”