www.privatebankerinternational.com Issue 358 / july 2018 PRIVATE BANKER

FAMILY FORTUNES

MAKING A UHNW SUCCESSION PLAN COME TOGETHER

FEATURE COUNTRY FOCUS TECHNOLOGY

UHNWI HNW demand for tax Blockchain tech propels Rawinder Binning on advisory services in crypto assets into bypassing private banks Australia is growing mainstream

PBI July 358.indd 1 11/07/2018 14:04:34 contents this month

NEWS COVER STORY 05 / EDITORIAL VIEW 08 06 / NEWS ROUND-UP • Quilter completes single strategy fund business sale • Assets in UK wealth industry approach £1trn mark • Dispute over Rothschild family name resolved • BOC Hong Kong unveils wealth business hiring plans 07 / NEWS ANALYSIS • Blockchain tech propels crypto assets into the mainstream 07

UHNW SUCCESSION

Editor: Group Editorial Director: Head of Subscriptions: Ronan McCaughey Ana Gyorkos Alex Aubrey +44 (0)20 7406 6540 +44 (0)20 7406 6707 +44 (0)20 3096 2603 [email protected] [email protected] [email protected]

Correspondent: Sub-editor: Director of Events: Saloni Sardana Nick Midgley Ray Giddings +44 (0)20 7406 6627 +44 (0)161 359 5829 +44 (0)20 3096 2585 [email protected] [email protected] [email protected]

Contributor: Publishing Assistant: Oliver Williams Mishelle Thurai +44 (0)20 7406 6592 [email protected] Customer Services: +44 (0)20 3096 2603 or +44 (0)20 3096 2636, [email protected] Financial News Publishing, 2012. Registered in the UK No 6931627. ISSN 0956-5558 Unauthorised photocopying is illegal. The contents of this publication, either in whole or part, may not be reproduced, stored in a data retrieval system or transmitted by any form or means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publishers. For more information on Verdict, visit our website at www.verdict.co.uk. As a subscriber you are automatically entitled to online access to Private Banker International. For more information, please telephone +44 (0)20 7406 6536 or email [email protected]. London office: John Carpenter House, John Carpenter Street, London, EC4Y 0AN Asia office: 1 Finlayson Green, #09-01, Singapore 049246 Tel: +65 6383 4688, Fax: +65 6383 5433 Email: [email protected] twitter: linkedin: private banker PRIVATE BANKER @bankerNews international

2 | July 2018 | Private Banker International

PBI July 358.indd 2 11/07/2018 14:04:40 contents july 2018

WEALTH MANAGEMENT FINTRACKER 16 / NORTHERN TRUST Northern Trust received two US patents in June 2018. The first was for using one- directional cryptographic hashes to log biometric client data, and the second was for recording meeting minutes 17 / HSBC In June 2018, HSBC launched a concierge service for members of Jade, the bank’s invitation-only non-financial benefits programme that provides access to luxury restaurants, entertainment and travel experiences

14 18 FEATURES COUNTRY FOCUS ANALYSIS 08 / UHNW SUCCESSION 14 / AUSTRALIA 18 / GLOBALDATA Succession planning is a key concern for the The majority of wealth managers in Australia With the concept of investment back into world’s growing UHNW population. PBI are missing an opportunity to service HNW society growing in importance among the benchmarks the succession-planning strategies demand for pension and tax planning, young and wealthy, millennials are poised of major private banks, and examines according to a recent report by GlobalData to drive a philantrophic boom, according to UHNW investment attitudes and needs Financial Services. Ronan McCaughey reports GlobalData Financial Services 11 / LOMBARD ODIER 19 / WEALTHINSIGHT Wealthinsight head Oliver Williams reviews Duncan MacIntyre, UK CEO at Lombard how MFOs are responding to generational Odier, talks to Ronan McCaughey about the and technological challenges. Like other areas Swiss private bank’s new My LO platform, its of the sector, MFOs increasingly recognise broader international strategy, and how the that they must adapt in order to flourish bank’s 222-year history benefits its clients NEWS 12 / UHNWI VIEW Co-founder of UK-based peer-to-peer lender 20 / TECHNOLOGY Kuflink, Rawinder Binning tells Saloni Sardana why he stopped using private 21 / REGULATORY NEWS banking – and why his family now prefer to manage their wealth internally 12 22 / PEOPLE MOVES

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PBI July 358.indd 3 11/07/2018 14:04:42 HEAR ∤ NETWORK ∤ DISCOVER ∤ CELEBRATE SHAPE THE FUTURE OF PRIVATE BANKING Private Banking & Wealth Management: Switzerland 2018 12th December 2018 ∤ Marriott, Zurich

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Page 1 Vicki Greenwood on [email protected] or call +44 (0) 20 3096 2580

PBI July 358.indd 4 11/07/2018 14:04:42 editorial view

making a success of succession

Saloni Sardana, Correspondent

or any private banker, succession planning Aside from succession planning, this month’s issue is about working with the children of their profiles the multimillionaire founder of UK-based peer- F wealthy clients to ensure a successful and to-peer lender Kuflink, to gain an insight into the world of effective intergenerational transfer of wealth. private banking through the eyes of a millionaire. This makes sense, as the UHNW community is Despite being an UHNWI, Binning chooses to manage expected to transfer about £4trn over the next decade, his wealth internally within the family, as he considers and since a lot of this wealth is self-made, this is leading private banking fees to be unnecessarily high for the to many dealing UHNW clients with succession issues for services on offer. the first time. Binning argues: “With private banking and execution But succession planning is not just about transferring only, the bank was taking a huge percentage of the trade. money. It is also about preserving and continuing each Since you can now pay approximately $16 or $20 online family’s unique culture and values. on a simple platform to get the same trade, why not just As Mark McMullen from family office Stonehage do it yourself?” Fleming points out, succession planning best practice This successful UHNWI makes an important point. begins by identifying these values. McMullen comments: With the growth of digital wealth platforms and DIY “Despite all family cultures being different, there is a investing, private banks and wealth managers need to ask common theme that rests on the belief that culture brings themselves what value they are adding? the family together to identify common values.” In today’s financial environment, savvy customers will Wealth managers should engage the next generation quickly dispense of wealth managers for an alternative by specifically devising programmes intended to capture solution. a family’s unique culture from generation to generation. Finally, this month also profiles the Australian wealth What is the point of wealth flowing in the right direction management sector. This shows that demand among with no remnant of the values unique to the family Australian HNW investors is particularly pronounced for business that created the wealth? That would amount to pension and tax planning thanks to the government’s a poor succession, where the money has continued but changes to the superannuation system, which came into the strategy ceased to exist. effect in mid-2017. <

Get in touch with the editor at: [email protected]

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PBI July 358.indd 5 11/07/2018 14:04:43 News | Round-up

round-up

Quilter completes single Wealth managers also achieved £104bn BOC Hong Kong unveils wealth strategy fund business sale of assets inflows in 2017, with collective- based investments representing 40.7% of business hiring plans Quilter, previously Old Mutual Wealth, has all assets. completed the sale of its single strategy arm to James Brown, head of client services the division’s management team, led by CEO at Compeer said: “This move towards Richard Buxton, and private equity firm TA collective-based investments suggests Associates. The deal is worth £583m ($768m). further caution in investment decisions, The deal consideration includes an up-front which is to be expected in light of cash payment of £576m, and a deferred the uncertainty surrounding Brexit consideration of £7m. negotiations.” TA Associates MD Christopher Parkin said: Brown added: “However, the latest “Old Mutual Global Investors’ single-strategy report shows that the wealth management business is among the UK’s fastest-growing industry is continuing to grow and deliver retail and institutional asset managers, and we record profits. This is fundamental to the believe the firm has tremendous potential to UK industry as it seeks to strengthen its capitalise on strategic opportunities, both in global relationships with emerging markets the UK as well as internationally.” in a post-Brexit world.” Old Mutual Wealth announced plans to The annual UK wealth management split its fund management operations into industry report involved benchmarking two parts as part of a managed separation survey by Compeer tracks 176 firms strategy in September 2017. The agreement to consisting of execution-only stockbrokers, offload the single business Old Mutual Global full-service wealth managers, investment Investors (OMGI) was signed in December managers and private banks. 2017. The single-strategy unit will currently retain Dispute over Rothschild its name, while the multi-asset business will family name resolved continue to be part of Quilter. Rothschild’s dispute over the names of its Quilter and OMGI will continue to offer French and Swiss units is now over, settling commercial services to each other for up Bank of China (Hong Kong) has announced a long-running process of litigation over the to three years. Quilter also expects costs of a new hiring plan to strengthen its wealth family name. £20m to establish the multi-asset division as a “The two groups have also agreed to work business. separate unit. together to protect the family name in the In an interview with Bloomberg, BOC Assets in UK wealth industry banking sector. They are thereby putting a Hong Kong private banking MD Wendy definitive end to the litigation between them, Tsang announced plans to increase the approach £1trn mark before the Tribunal de Grande Instance in business’s pool of relationship managers by UK assets under management have almost Paris,” Rothschild said in a statement. around 20% from 120 to 144. The increase reached the £1trn ($1.32trn) mark for the The dispute began in 2015, when Geneva- first time. based Edmond de Rothschild took legal may eventually reach 50%, based on the This was the key finding of a survey action against Paris-based Rothschild & Co., availability of competent resources, Tsang conducted by Compeer, a provider of accusing the latter of creating confusion said. The plan includes hiring resources business performance benchmarking through use of the Rothschild name alone. from both within the company and for the wealth management and private The businesses have now signed an externally. banking industry. agreement that restricts them from using Tsang told Bloomberg: “In view of the The research showed that assets in the Rothschild brand by itself. Edmond de the UK reached £957bn in 2017, a 13% Rothschild Group will operate under its market, I hope we can have another at increase on 2016, primarily as a result of existing name, while the Rothschild & Co. least 20% or 30%, but if we can get 50%, growth in discretionary and non-managed Group will also retain its corporate brand. perfect.” services. Discretionary services increased However, Rothschild & Co.’s private banking BOC Hong Kong launched its private by £57bn to £549bn. and asset-management operations in France, banking business in 2012, with a workforce The implementation of recent new Belgium and Monaco will operate under the of three. In the last 20 months, the bank regulations has put pressure on cost name Rothschild Martin Maurel. margins. Some £5.07bn was spent on costs The two businesses also agreed to unwind has acquired Bank of China’s businesses in in 2017, a 5% rise from the previous year. the stakes they hold in each other. six different countries <

6 | July 2018 | Private Banker International

PBI July 358.indd 6 11/07/2018 14:04:45 News | analysis

Blockchain tech propels crypto assets into the mainstream Philipp Pieper, CEO and co-founder of Swarm Fund, which describes itself as the ‘blockchain for private equity’, explains why new investment models based on blockchain technology are set to revolutionise the wealth management landscape, offering radical new ways of investing in crypto assets The crypto asset market currently stands at $265bn, so there is a long way to go before it can be considered a mainstream asset class, but blockchain and crypto are here to stay. Switzerland has its own Crypto Valley, the UK has a vibrant fintech sector and trails only the US – the largest market – in blockchain startup activity. Singapore, meanwhile, is considered a leading ICO hub in Asia. Blockchain is fundamental to the existence of cryptocurrencies and crypto assets; the technology underpins all crypto activity. They have until now operated in parallel to the investment world, but as the technology evolves, we are seeing a blurring of the lines.

Blockchain underpins the future of wealth management The CEO of UBS Group, Sergio Ermotti, recently stated on CNBC that blockchain technology is “almost a must-have for business”. He is right. There are compelling operational efficiencies; it will be an integral part of the operations process for wealth and asset managers. But there are even more compelling reasons why blockchain will revolutionise the way we manage our assets. Last year, there were two main developments that brought blockchain a step closer to mainstream investment: firstly, latest Philipp Pieper, Swarm Fund technology enabled the creation of new blockchain platforms such With returns reported by some funds to be as high as 30-50% – in as Ethereum, Stellar and Hyperledger. These are completely new some cases higher – the surge in popularity is no surprise. decentralised business models, and through the use of ‘smart contracts’ – software that mimics the logic of a business agreement – they enabled What about the risks? the tokenisation of assets. Because they are based on the value of real assets, the risks associated Tokenisation of assets is similar to the process of securitisation, with cryptocurrencies do not relate to asset-backed tokens. except the assets are represented digitally rather than on paper. Using They offer liquidity in many investments that are usually illiquid in blockchain, asset-backed tokens represent what are described in the fiat currency and, crucially, are not directly affected by the volatility of crypto community as ‘real-world assets’. They are issued by tokenised Bitcoin or Ether. These tokens are not correlated with any other digital investment funds and operate like a traditional share or stock. They assets, or the crypto market, because they are based on the value of provide investors with digital ownership, tradeability, fractionalisation – tangible assets. They operate in the same way that one buys a share, and where unrelated parties can share and mitigate the ownership and risks are regulatory-compliant and traceable. of a high-value tangible asset – and strict governance. The funds have a proven track record and investors will still be Secondly, and as a result of these technology developments, there was required to go through the same due diligence and accreditation a massive increase in the number of tokenised assets launched via initial processes as for any other regulated funds and, where applicable, they coin offerings (ICOs), resulting in significant inflows of capital from a will own a share of the physical assets. more diverse set of investors. ICOs, which provide funding for startups and projects, last year Bridging the gap between digital and real assets raised $5.6bn in capital; this compares to $240m in 2016, according to Traditional investors want access to these highly lucrative markets, but Fabric Ventures and TokenData. Almost one-third of the ICO launches do not want to put their capital at risk. funded blockchain infrastructure projects. Using blockchain-based investing platforms to invest in tokenised and innovation-led investment funds offers a practical and prudent New investment platforms way to invest in crypto and alternatives – and with most crypto The explosion in ICO launches has also resulted in the emergence investors having between 70% and 90% of their net asset value in of blockchain-based investment platforms. These platforms accept cryptocurrency, many are looking for opportunities to diversify into both cryptocurrencies and asset-backed tokens as a form of payment. more-secure and non-correlated assets, the platforms provide crypto They also accept fiat currency, although this requires a high minimum investors with outlets for de-risking their portfolios investment. Although, it is still early in the market cycle, there is no doubt that These platforms offer opportunities that are usually only accessible to blockchain and the crypto market are set for exponential growth. These venture capitalists and institutional investors, and the funds range from investment platforms bridge the gap between digital currency and real pre-IPO technology and crypto hedge funds to renewables, agriculture assets, offering a revolutionary investment solution to those inside and and impact investments. outside the crypto community. <

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PBI July 358.indd 7 11/07/2018 14:04:47 feature | uhnw succession

benchmarking private banks’ succession planning strategies

Succession planning is a key concern for the world’s growing UHNW population – defined as those with $30m or more in net worth – and private banks are reacting by offering numerous programmes. PBI benchmarks the strategies of major private banks, and examines UHNW investment attitudes and needs

uccession planning is more important According to Credit Suisse over 80% of Kucher, says: “Asia is also highly promising in than ever before for the growing Asian family businesses are in first and second- terms of growth, as the UHWNI population SUHNW community worldwide. generation ownership, compared with around in China will be growing steadily in the next The fifth edition of the World Ultra Wealth 50% in Europe and the US. years. Banks in Asia invest in further growth Report, published by Wealth X in June The spokesperson adds: “Family-owned regions like Thailand, India, Indonesia and 2017, revealed global growth of the UHNW companies across global emerging markets are Malaysia.” community of 3.5% to 226,450 individuals, much younger than their peers in developed Kevin Herbert, managing director at HSBC and a 1.5% increase of their total combined markets, at an average age of 37 years in private bank, says: “As these UHNWs grow wealth to $27trn. Asia-Pacific ex-Japan, compared to 82 years in older, the average age is coming down overall, Despite heightened geopolitical instability, Europe. Hence, the private banking business given new wealth generation in Asia. They the Wealth X report said the global ultra- model has to be highly correlated to where we want to talk about succession planning and wealthy population is forecast to rise to are in the cycle of wealth creation in Asia.” children and branches of the family and how 299,000 people by 2021, representing an they provide for the future. increase of 72,550. BIGGEST CHALLENGE “Sometimes it is a dynasty of the business, Asia is a particularly important UHNW and what their aspirations are for the market, given that the region is projected Michael Yong, private banking managing company, and what they have created to to accumulate another 14,400 UHNWIs to director at Standard Chartered Private Bank, continue through to the generations.” reach a total of nearly 52,000, by 2022 – 49% says: “Intergenerational wealth transfer is David Shick, head of private banking, of whom will be from China, according to the biggest challenge in serving the UHNW. Greater China at Julius Baer bank, says: “In Credit Suisse. For the UHNW sector in Asia, Eighty-five percent of the billionaires in Asia this region, they are going through succession a major challenge facing private banks is that are actually first-generation.” planning issues. Most the wealth is first- much of the wealth is still held by the first Yong adds: “For the first time we are seeing generation, unlike Europeans who have generation, unlike the West where it has often a handover of this billionaire wealth. The gone through several generations of wealth passed down many generations. impact of this on the industry is that 90% of transfers.” A spokesperson for Credit Suisse says: “In the heirs would choose to change their wealth Shick adds: “They are relatively young at Asia, much of the wealth and most of its adviser. this stage now. They look towards private significant family businesses were created in Yong warns: “For these UHNWs going banks to give them advice on how they can the second half of the 20th century, and are through transition in terms of wealth transfer, maintain this family legacy by setting up therefore just beginning to experience the wealth managers need to be able to engage the family offices. multi-generational issues that European or US next generation.” “A key challenge is whether the second industrial families had to contend with one or Silvio Struebi, banking specialist and generation sees relationship managers as their two generations ago. partner at pricing strategy consultancy Simon- own relationship managers. How do we make

8 | July 2018 | Private Banker International

PBI July 358.indd 8 11/07/2018 14:04:50 feature | uhnw succession

the main sponsor of the Young Investors Organisation – a global community of over 1300 future leaders from influential families in 55 countries. A spokesperson for Credit Suisse comments: “Our close interaction with the YIO helps the bank understand the needs and challenges millennials face and provides targeted solutions for their own personal growth, that of their family or the broader community.” On the issue of family offices, the spokesperson says: “The family office services team works with our relationship managers Josef Stadler, UBS and their UHNW clients across the region Michael Yong, Standard Chartered our millennial programmes as they go from who recognise the importance of managing Odier comments: “It’s interesting that first-generation to second-generation?” transitional or generational issues proactively, succession planning remains the top concern or who wish to develop their own single- for UHNWIs and HNWIs, as shown by a SUCCESSION PLANNING family office but need help. Wealth-X survey looking at the key needs of “They could have embryonic ideas about the wealthy over the past and next 10 years. Here is a round-up of the succession-planning setting up a single-family office, or they may But Vanhoenacker warns: “However, strategies of key players in the industry: have an existing setup which the family would according to this same survey – based on like to improve because it no longer fulfils the feedback from 400 of the world’s leading UBS Wealth Management needs of the family.” private bankers and wealth advisors who, Josef Stadler, global head of UHNW at between them, manage assets for about UBS Wealth Management, says: “We offer Standard Chartered Private Bank 45,000 UHNWIs with a combined wealth of multiple platforms and initiatives for our Yong says: “In a nutshell, our strategy is to over $500bn – globally only 53% of UHNWI clients to prepare for the next generation. be the bank for entrepreneurs,” adding that clients have a robust succession plan in place. These programmes are now in their 15th year, helping prepare the younger generation for responsible ownership and management of Succession is a very much a hot topic, and family wealth. “They have also acted as platforms through an area of interest where we feel we can which the participants may learn from their peers and establish ties with families from add a lot of value in terms of our business different countries and cultures.” Stadler adds that UBS Wealth Management has an annual Next Generation Foundation succession planning is a core part of the bank’s Our own experience totally confirms that.” – a six-day programme catered to next- strategy aimed at the UHNW. Vanhoenacker continues: “We have generation successors between the ages of Yong adds: “We offer family trusts. Quite made it part of our [business] to provide 20 and 27 that “helps participants gain a few banks are winding down trusts in the ongoing training and educational sessions on knowledge, discover and enhance their impact industry; we have made a strategic decision to succession planning for our business partners, as an entrepreneur team leader”. keep that trust business, because we feel it is that include private bankers, family officers really important – especially for the UHNW – and other key advisers to UHNWIs and Credit Suisse Private Bank to help them with that.” HNWIs.” Credit Suisse Private Bank hosts a series Yong continues: “The second part is how of regular events and thought-leadership we help nurture the next generation. We have HSBC Private Bank forums, where investors have the opportunity this future global leader programme: this is Herbert says: “Succession is a very much a hot to connect with privately held pioneering to help our UHNW clients groom the next topic, and an area of interest where we feel we ventures such as the Private Innovation Circle generation. These next generations can be in can add a lot of value in terms of our business. or High-Tech Forums. These programmes their 20s or even in their early 30s.” “Our trustee is 70-plus years old now; it are intended to bring together global opinion The next annual one-week programme, in is one of the largest of any bank. When you leaders and UHNW clients to discuss the Hong Kong, will focus on five development get in this space, yes it is product and access current economic, financial and social areas: leadership, entrepreneurship, to liquidity and loans for the strength of the landscapes, as well as relevant themes in the philanthropy, sustainability and bank’s balance sheet, but then succession industry. communication skills for the next generations. comes into it very much. Since 2005, the Swiss bank has provided “The larger and more complex the family financial education and peer-to-peer Lombard Odier becomes, there are different opinions on how networking opportunities for young investors. Jurgen Vanhoenacker, executive director, things should move forward in terms of the Credit Suisse also co-founded and has been sales and wealth structuring at Lombard business or the wealth. We do a lot around

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PBI July 358.indd 9 11/07/2018 14:04:51 feature | uhnw succession

trust structuring; we do a lot around family 2017 Credit Suisse Global Wealth Report, Michael Parsons, CEO of Wren Investment governance and business succession. Vanhoenacker says: “This increasing Office, part of a global alliance of multi-family Herbert continues: “If you think of every population will continue to have a similar offices, comments: “From an investment corporate, they would have a board meeting set of needs requiring sustainable solutions, standpoint, we see more and more UHNW and governance in terms of how they run including wealth planning and succession capital being allocated to private equity, the company. We do the same in the family planning.” with a greater focus on direct deals and co- context. The family would have governance, While the amount of wealth held by the investments. and each branch would have a representative UHNW community is massive, it is not “We are strong believers that private equity at the family board. If somebody passes away, always easy to serve them. Several of the is a key component of a long-term investment then [we help construct] the succession plan wealth managers interviewed by PBI say the strategy, but one has to be particularly for that branch.” biggest challenge in serving them is the fact selective in the current environment where that they are a very demanding audience. valuations and leverage are being pushed to Progeny Wealth Management Yong comments: “I think the key message levels last seen prior to the global financial Neil Moles, managing director of Progeny in the outlook is this segment has huge crisis.” Group, says: “We are focusing on the next upside opportunities, but they are also very On a more gloomy note, market generation, offering classes and one-to-one demanding as a group of clients. participants believe a spate of recent stringent sessions with our UNHW clients’ children, “We need to provide them with very senior regulations mean UHNWIs are more inclined helping them to approach and understand experience, advisors and bankers. This is also to preserve their assets. Simone Westerhuis, their wider financial responsibilities. Through how we have tilted our hiring strategy, which managing director at LGB Investments, this we can introduce them to the right is focusing on hiring senior bankers.” comments: “There is still a negative sentiment people, and ease them in by asking for their However, Sando Forte, managing partner towards offshore financial centres being input and even giving them small areas of at Forte Financial LLP comments: “UHNWs perceived as reluctant to embrace transparency responsibility, ultimately preparing them for can be more demanding, but they can also be and absorb standards set by onshore their future.” extremely fair, taking a view they will happily governments. pay for something that has an actual or “There is also growing pressure on financial OUTLOOK perceived value. Personally, I think it is clear firms from increased regulation such as the market is going to expand rather than get MiFID II, GDPR and the forthcoming Senior According to Credit Suisse, “No part of the smaller.” Management Regime, as well as the issues of wealth pyramid has been transformed as much cross-border tax compliance laid out by The since 2000 as the millionaire and UHNWI INVESTMENT ATTITUDES Foreign Account Tax Compliance Act.” segments”. The spokesperson comments: Westerhuis adds: “Against this backdrop, we “Assuming no change in global wealth Brett de Bank, co-founder of private would expect financial institutions to become inequality, the global economy is projected to investment platform Capitama, identifies more and more selective with regard to the add another 719 billionaires in the next five alternative investments as a key challenge individuals to whom they offer services and years, meaning that their number will rise to for wealth managers serving the UHNW the structures of investments. nearly 3,000.” community. “From the perspective of the UHNW The spokesperson adds: “This difference in “In alternative and unlisted private individuals, services may become more favour of Asia-Pacific will increase further and, equity and debt markets, the UHNWI expensive, and there may be fewer investments by 2022, the region is projected to accumulate community is underserved both in terms of from which to choose.” another 14,400 UHNWIs to reach a total of the infrastructure providing access to such Forte says: “Succession planning for nearly 52,000, 49% of whom will be from opportunities, but also how traditional wealth UHNW clients has become more relevant in China.” managers deliver potentially ancillary services recent years. The changes in tax rules, GDPR Responding to the predictions of the as a part of their offering.” regulation and Brexit mean more UHNWs are billionaire growth looking closely at ways to preserve assets and then pass them down to the next generation.” Net change in billionaires per region, 2015-2016 US Europe Asia Overall, private banks are actively engaging +23% in strategies to engage the next generation of +5% UHNW clients and avoid a scenario where families and individuals go from ‘clogs to clogs -14 +39 in three generations’. -45 +162 +1% Wealth managers are focusing on engaging 637 future successors by hosting networking 538 563 520 -21 +24 events, financial education classes and investment seminars. 339 342 This makes sense, as several private banks fear that the heirs of the super-wealthy may

New Drop New New not recognise the value of a private banking 2015 Dropoffs 2016 2015 offs 2016 2015 Dropoffs 2016 entrants entrants entrants relationship – especially as the industry is Source: UBS/PwC Billionaires 2017 disrupted by challengers. <

10 | July 2018 | Private Banker International

PBI July 358.indd 10 11/07/2018 14:04:51 feature | lombard odier

continue building the team based in London. We have been in the UK since 1973, and there is a real group of clients in London that look at the world in a very international way. Those are the clients that we think we can London’s Appeal for serve very well. London is a very attractive wealth centre, and I predict it will become the biggest offshore/onshore centre of the world. It’s Lombard odier perfectly located between so many different time zones and areas, and there is the rule of law and there is an established infrastructure. Duncan MacIntyre, CEO UK, at Lombard Odier, tells So am I worried about the wealth Ronan McCaughey why London is so important for the management business here? Not at all, and we are seeing big demand. private bank, and how it plans to continue to building the With the inherent wealth of the clients that team in London. we have, they tend to have their core wealth relationship in London. As a result, we don’t have a presence in the UK regions; that is a rivate Banker International (PBI): strategic decision because we are not trying to How is Lombard Odier using compete in the retail space. P technology to engage with clients? Duncan MacIntyre (DM): We have a PBI: If the UK crashes out of the EU fantastic system called My LO, which offers without a Brexit deal, would this not be complete tablet and phone-based access to very harmful for the private banking and clients. It allows our clients to access all of wealth management market? our research, create and export a consolidated DM: Yes, but remember there is not very view of portfolios, customised reporting and a much cross-border European private banking. secure messaging system. For financial services as an industry, The platform is designed to improve clients’ absolutely, [no deal on Brexit] would not interactions with the bank, rather than replace be great because we provide much of the any direct contact with their relationship infrastructure for European finance. manager. It is not an advice platform, but Where the wealth management industry solely designed to provide clients with tends to be successful is where clients use greater interrogation and oversight of their London or the UK as their financial centre. investments. No transactions take place on the Duncan MacIntyre, Lombard Odier platform. value because we are able to do things other PBI: What are the most important factors My LO is based on our in-house private institutions cannot. in building a long-term relationship with banking platform. We have been developing We deliberately do not commoditise wealth clients? our own banking technology for 25 years and offerings for clients. When a wealth offering DM: To form really good private banker are currently working on the next generation. is commoditised, the only way to make that relationships, you have to be emotionally We have made a strong commitment to it, as successful is to build scale. engaged. You can’t form a relationship based it is such a key strength for us. This will clearly on: ‘is my hedge fund bigger than yours?’ involve some different and new tools, but I PBI: What is Lombard Odier’s business That’s not a true private client relationship; can’t give you much more detail than that at strategy going forward? that’s a B2B conversation. this stage. DM: In the UK, we have four principal We want to engage people on what their Being a Swiss bank, we are obsessed with coverage areas, which include Russian and values are and what they want to stand for. security. We have full control of My LO and Middle East clients, Francophone and You have to reflect those values back yourself. so it is completely ring-fenced and entirely Germanic clients, UK clients and an external I think that goes back to the nature of secure. One key benefit of My LO is that asset managers business. being a private business – you can see those a client may have portfolios in different I am excited about the external asset values reflected through the partners in the locations, but with My LO they can view managers business. Technology is a very way that the business itself is run: it is run in a portfolio performance in one place. important component of the future and I do sustained way. believe there are many banks out there with Two hundred and twenty-two years is not PBI: What is the wealth bracket for a small asset management businesses that really a short time to be in the private banking UHNW individual to become a client of need us and the award-winning banking industry, and to have ridden all those crises Lombard Odier? infrastructure we have created. means you have thought a lot about the way DM: Our base minimum is CHF5m The other thing we are doing is really you respond to things. I think clients benefit ($5.03m). Beyond CHF10m, we can add real strengthening our UK business and plan to from that, actually. <

www.privatebankerinternational.com | 11

PBI July 358.indd 11 11/07/2018 14:04:52 feature | hnw profile

private banking: from the eyes of a multi-millionaire

Multi-millonaire and co-founder of UK-based peer-to-peer lender Kuflink, Rawinder Binning tells Saloni Sardana why he stopped using private banking – and why his family prefer to manage their wealth internally. Binning also explains the challenges of being an UHNWI, and why he is learning more about family offices

rivate Banker International (PBI): selling, a percentage fee was involved. Kuflink, and I own 21%. When did you use a private bank? PBI: What would encourage you to use PBI: How and when did you become an PRawinder Binning (RB): I used a private banking again? UHNWI? private bank between 2008 and 2010. This RB: The trading cost would have to be lower. RB: I became an UHNW in 2016-2017. was on an execution-only basis as we were I would also like to see the bank having To put that into context, after the property interested in buying certain shares, and the a history of doing trades. Has the bank market shrank in 2008-2009, property values bank would execute those trades for us. experienced a recession and actually come then started to increase again in 2013-2014. through it? We have endured a lot during that time. PBI: What made you close your account? Our asset allocation was mainly made up Would you open another one? PBI: How did you source your wealth? of property. We then decided we needed to RB: With private banking and execution only, RB: We are a strong family network. At the go into other businesses, and that is when the bank was taking a huge percentage of the top, there are three brothers and a nephew. We we started to think of business models. trade. Eventually, after trying a few, we ended up Since you can now pay approximately $16 with bridging finance, fintech and apps. or $20 online on a simple platform to get the That then expanded into a peer-to-peer same trade, why not just do it yourself? platform. We are major shareholders in that This is why we set up the bridging side and group, so the wealth has increased year on year the peer-to-peer side with Kuflink. In the because the business is expanding. We also fintech world, entrepreneurs are now coming entrepreneurs have interests in an app company. up with models that bypass banks. For example, if you are saving £10,000 in are now coming up PBI: Have you used any other forms of your bank account, then you can invest that wealth management advice? money directly in a peer-to-peer platform and with models that RB: We actually manage our wealth internally earn up to 7.2%. within the family. We have increased our skill This is compared to leaving the money in bypass banks set to manage our own wealth. a bank account and letting the bank earn as If we wish to invest in property, we make much as they want on the money. sure there is somebody in the family to make Banks normally take the £10,000 and are the investment, as well as get good advice allowed to borrow 10 times from that money all work together. from professionals in the sector. – I believe. Having bought property in 2000, we have I have a legal background, and I am doing learnt skills regarding planning, development, the Legal Practice Course and a masters PBI: Were the bank fees you paid a factor and management. We have built apartments degree. Hence, my legal skill set is increasing. in you leaving? and industrial units, for example. I understand more about leases, litigation and RB: Yes definitely. When you do a deal online, At the moment only 20% of our wealth lies banking. whether it is £10,000, £100,000 or £1m, [it in property. Most of my wealth is in the actual My brother is very good in the building makes sense] when the fee is as low as $8. But Kuflink business, with some in shares in other trade; he will go out and oversee the with private banks, each trade, be it buying or businesses. Our family owns about 71% of developments. My elder brother is also very

12 | July 2018 | Private Banker International

PBI July 358.indd 12 11/07/2018 14:04:52 feature | hnw profile

savvy on finding property deals. In terms of stock trading, we are not very good at that, we have tried and gotten burnt quite heavily. One of the main criteria for our investments is security. We do invest in non-secure assets, but we keep to our risk-allocation system.

PBI: What is your relationship with family offices? RB: We are exploring the prospects of becoming a family office, and I am beginning to learn about family offices. Are we ready to be a family office now? I would say no, not until we have [substantial] wealth. I am getting family advice just to understand it, as it is something we could do in the future.

PBI: What are the biggest challenges of being an UHNWI? RB: You are constantly looking at cash asset allocations. When cash comes back you have to put that money to work. If a big surplus comes back from property, the question is, do we put it all back into Rawinder Binning, Kuflink property? We never knew that you should actually spread your money, and we now a private bank say: ‘We can put your money family an asset-allocation matrix system. follow our net cash-allocation system. towards a loan basis to this company, and then There are six wallets. Say you have £1,000 a The real question is investing in what we secure it.’ year net cash which does not need to be spent feel strong about. We will look at returns, Looking at Kuflink as a model, we have or saved. You could operate the following security and diversifying into other businesses opened our platform to pretty much anybody. split, which are called wallets. For example: where we feel comfortable in regards their A client can put £100 on our platform and Wallet 1: Cash fixed deposits, so the management and projections. secure it against UK property. money is secure; We never followed the Bitcoin cycle, as we Kuflink is for the average Joe to Wallet 2: Low risk, but delivers a higher feel there is nothing tangible there. Hence millionaires. Clients can all put as much of return, such as peer-to-peer funding; why the price went up and came down very their money on to the platform. Wallet 3: Put money in things like trading, quickly – which is what we predicted. We are going to launch an app very soon running a business yourself; A Bitcoin investment, to us, would have where they can earn 7.2%, and there is Wallet 4: You must enjoy yourself today; been a gambling investment in which we security on property loans. Wallet 5: Money for educational training; would put a small amount in, and we got out Obviously, however, capital is at risk. Wallet 6: Philanthropy. quickly for a profit. We would not have bet the whole bank on it. I have never heard a private bank say: ‘We PBI: Was the private bank you used helpful with spreading your wealth? can put your money towards a loan basis RB: No, the bank was not very engaging. Since we transacted on an execution basis, to this company, and then secure it.’ we are not fans of giving huge fees to people, especially in a new relationship. That is probably why we thought: ‘Let’s just The next product we are coming out with is We have also established the Kuflink do some stock trading with these guys on an for people who want to invest in property and Foundation, which is a charity that provides execution basis.’ ride the capital growth and the rental return. support to communities in Kent and Is there a bit of kudos in having a private Property investment now is more difficult: Gravesham. The Kuflink Foundation has bank? Was there a bit of an ego trip? Possibly. there is heavy taxation through new legislation. worked with The Prince’s Trust to deliver PBI: What does Kuflink do differently from education, sport and health initiatives through private banking? PBI: What financial advice do you give its Achieve programme. RB: A private bank should take your net cash your family? Kuflink is also a primary sponsor of local and actually put it to work. I have never heard RB: I have designed for our children and football team Ebbsfleet United. <

www.privatebankerinternational.com | 13

PBI July 358.indd 13 11/07/2018 14:04:52 country feature | australia

australia: rising demand for tax planning

The majority of wealth managers in Australia are missing out on an opportunity to service strong and rising demand by HNW investors for pension and tax planning, according to a recent report by GlobalData Financial Services. Ronan McCaughey finds out more

espite significant demand, only investors spreading their wealth across tax advisory services should therefore consider around one-third of wealth multiple wealth management firms. partnerships with specialist providers. For Dmanagers target HNW investors Australian HNWIs typically use three example, the GlobalData report notes that offer tax advisory services in Australia. providers for their investments, placing Melbourne-based Estate Planning Equation This lack of tax advisory services in around two-thirds of their business with their assists advisers and their clients with an Australia is a missed opportunity, according main wealth manager. However, the main extensive list of tax planning services. to the GlobalData report Wealth in Australia: reason for seeking professional advice is lack HNW Investors 2017, which is available at of time, suggesting that convenience is also an OVERVIEW the GlobalData report store. Demand for important consideration. pension and tax planning by HNW investors These findings also suggest that HNW Australia’s wealth market is more established is significant and rising in Australia because investors are not inherently inclined to use than that of the wider Asia-Pacific region, of changes to the country’s superannuation multiple providers. They are more likely to where the concept of private banking is still system that became effective in 2017. opt for a one-stop-shop – someone with relatively new, particularly in key emerging On the one hand, GlobalData says offering a relatively sophisticated proposition that markets such as the Philippines, Indonesia and tax advisory services would increase the overall includes auxiliary services, such as tax advice China. appeal of a wealth manager’s offering. On the and planning. Expatriates represent a below-average other hand – and perhaps more importantly Wealth managers that lack the in-house proportion of the Australian resident HNW – it would reduce the likelihood of HNW expertise or resources to offer comprehensive population, and the vast majority can be

14 | July 2018 | Private Banker International

PBI July 358.indd 14 11/07/2018 14:04:53 country feature | australia

HNW asset allocation australia significantly less so than direct and fund style preferences HNW asset allocation equity investments. Average number of wealth managers preferences, September 2017 Over the next year, GlobalData forecasts with which HNW clients work an increase in bonds and alternatives at the Alternatives Commodities 3.00 5% 1% expense of property and equity investments, as a result of an assumed lack of capital- appreciation opportunities. 2.75 Property 13%

OPPORTUNITY 2.50 Cash and Equities near-cash 48% A key message from the GlobalData report 14% is that intergenerational wealth transfer 2.25 Bonds represents a significant opportunity for wealth 19% managers in Australia. 2.00 This is because – compared to relatively Global young wealth markets in Asia-Pacific such as Australia

Source: GlobalData China, Indonesia and Malaysia – Australia is Source: GlobalData home to an above-average number of HNW described as transients rather than migrants, investors aged 61 or above. While a belief that wealth managers abroad having spent five years or less in Australia. This has a number of implications: for can achieve better returns is the main driver Only 12,824 HNW individuals in Australia example, wealth preservation as opposed to for offshoring assets, HNW individuals in are expatriates, but those migrating under accumulation strategies will resonate more Australia invest offshore for a multitude a Significant Investor Visa are a lucrative strongly with this segment. of reasons, with access to a wider range segment thanks to their greater likelihood to Inheritance and estate-planning services of investments and general diversification remain in the country permanently. that include current HNW clients’ children benefits being almost equally important. This Those providers that understand the in the planning process are the most means wealth managers looking to entice distinct needs of migrants from the UK, the straightforward way to connect with the next wealth back home should put greater emphasis US and China will find HNW a lucrative generation of HNW investors. As such, it on these factors, and be sure to highlight their target market in expatriates. However, the comes as no surprise that more than half of wide range of products and good investment more-demanding nature of expatriates wealth managers in the country targeting track record. makes it crucial to offer a wide range of HNW investors offer-estate planning services. One segment that is often overlooked products. In particular, tax advisory should The private banking arms of Australia’s is inheriting spouses, says GlobalData, form an integral part of providers’ service Big Four banks provide customised estate- despite the fact that they are likely to be propositions. Given that the Australian planning and wealth-transfer services designed the main inheritors. Male HNW investors expatriate community is relatively small, client to reduce taxes for heirs. However, more far- are significantly older than their female referrals represent the most effective means of reaching programmes are often the reserve of counterparts in Australia. Only 25.8% of acquisition in this segment. the global private banking giants. female HNW investors are 61 or older, While smaller players will not be able compared to 45.6% of male HNW investors, STYLE PREFERENCES to compete with private banking giants’ suggesting there will be a considerable increase programmes head-on in terms of geographical in inheriting spouses taking over as matriarchs. HNW investors in Australia typically prefer reach, GlobalData says countrywide GlobalData’s research shows that female advisory over discretionary mandates, and networking or educational events have the investors are already more likely to have retaining control remains a key driver for potential to yield comparable benefits. sourced their fortune through their family, or self-directing. The leading factor is a desire to Individuals who are more engaged with to have inherited their wealth. avoid management fees. their investment partner make for a more Unsurprisingly, this segment has different While execution-only services currently loyal customer base, calling for a more active servicing needs than the next generation attract only a small proportion of wealth, approach towards client involvement, even if of HNW investors, and a targeted service providers cannot ignore competition on a smaller scale compared to Citi and other proposition aimed at older female investors from typically low-fee robo-advisors. This operators of that scale. will allow wealth managers to differentiate generation of HNW individuals may show themselves from the crowd. little interest in self-directing, but their heirs OFFSHORE PREFERENCES Westpac’s Ruby Connection represents are likely to be more open to digital services. a good example of this. Run by the bank’s In terms of asset allocation, the average Australian HNW individuals hold a dedicated women’s markets team, it aims to Australian HNWI invests heavily in equities, comparatively small proportion of their total provide women with education, information which constitute almost half of a typical liquid assets offshore. They are predominately and networking opportunities through a HNW portfolio. Local-currency deposit allocated to equity investments, and the major national program. It also offers an interactive products, government and corporate bonds, financial markets of the US and the UK are online community and runs networking and commercial property investments are key booking centres, in addition to select hubs events designed to connect like-minded also popular among local HNWIs, albeit in Asia. Australian women. <

www.privatebankerinternational.com | 15

PBI July 358.indd 15 11/07/2018 14:04:53 wealth management fintracker | northern trust

wealth management Using five common criteria, the GlobalData FinTrack reports give critical at-a-glance information on the latest developments in the fintrackER fast-moving world of financial technology

Northern Trust receives two blockchain patents

Northern Trust received two US patents in June 2018 for its use of distributed ledger technology in conjunction with IBM. The first was for using one-directional cryptographic hashes to log biometric client data, and the second was for recording meeting minutes by generating encrypted keys that are appended to a blockchain. These patents are part of the company’s broader digital strategy, which includes increased use of artificial intelligence and robotic processing.

Northern Trust is the first wealth management provider to patent its use of blockchain technology. While companies Is it original? such as Bank of America have trialled similar blockchain uses and applied for patents, Northern Trust is the first to fully ✓ operationalise them and be granted patents.

Many wealth management providers have been experimenting with similar technology, signalling growing demand for this type of process. Greater emphasis on data security creates demand Is it long-lasting? for innovative technological solutions, and the incontrovertible nature of the record produced by the blockchain, as well as the ✓ encryption complexity, provides solutions to concerns about compromised personal and financial data.

Is it operationally Northern Trust’s internal operations will become more efficient, and data security will be enhanced. However, it will not change game-changing for the fundamental procedures engaged by the company, nor will it ✗ the provider? cause it to offer any new services to clients.

Northern Trust’s blockchain technology will increase biometric Will it significantly data security for users because of the computational impossibility of reverse-engineering a client’s data from the improve the user output stored on the blockchain, due to the complexity of ✓ experience? encryption algorithms. This means the risk of users’ data being compromised decreases.

While useful, the introduction of technology that increases the Is it market-changing? security and efficiency of transactions does not shift the market or change the nature of wealth and asset management services. ✗

Total Score: 3/5

16 | July 2018 | Private Banker International

PBI July 358.indd 16 11/07/2018 14:04:53 wealth management fintracker | hsbc

HSBC launches exclusive concierge service

In June 2018, HSBC launched a concierge service for members of Jade, the bank’s invitation-only non- financial benefits program that provides exclusive access to luxury restaurants, entertainment and travel experiences. For example, it allows clients access to tickets and reservations a few days ahead of use, while the general public must reserve months in advance.

Concierge services are not new – in fact, they are commonly offered by private banks. Additionally, HSBC’s partner company, Is it original? Ten Group, is the same lifestyle management company that ✗ Coutts, RBS, and Citi all collaborate with.

HSBC’s concierge service is responding to growing demand for management beyond financial services. High net worth clients Is it long-lasting? have been using private concierge services for years, and will ✓ continue to do so.

Is it operationally These luxury services are unlikely to be a notable source of game-changing for revenue, and are small compared to the scale of HSBC’s other ✗ the provider? operations for its Jade clients.

This will significantly improve the experience of HSBC’s Jade Will it significantly high net worth clients by offering exclusive services that were previously unavailable. While luxury entertainment access is not improve the user instrumental to the financial goals of clients, and is not a key ✓ experience? part of any private banking offering, it remains sought after and will be appreciated by HSBC’s clients.

HSBC’s personal concierge services are more a symptom of the increase of non-financial services provided by wealth Is it market-changing? management firms than a catalyst for change. This move will not take the wealth industry in a significantly different direction in ✗ terms of operations or services offered.

Total Score: 2/5

£ $ € ¥

www.privatebankerinternational.com | 17

PBI July 358.indd 17 11/07/2018 14:04:55 comment | globaldata

millennials poised to drive boom in philanthropy

With investment back into society growing in importance among the young and wealthy, millennials are poised to drive a philanthropic boom, according to GlobalData Financial Services

his generation is eager to make David Stubbs told the recent PBI London The report, The Generation Game, comprises an impact in the world from the conference. Consequently, wealth managers research into three different cohorts: the over- Tmoment they come into wealth, are going to have to ensure that the needs of 55s with investable assets of £100,000 who rather than once they are established. both inheritors and entrepreneurial millennials are leaving their children’s and grandchildren’s As such, a philanthropic boom may be on are met when it comes to philanthropy, inheritance; people aged between 25 and the horizon. especially with millennials giving a lot earlier – 45 who are expecting to receive at least Data from GlobalData’s HNW Customer and more than their elders. £50,000 in inheritance; and 200 UK-based Demographics shows that the highest Similarly, wealth managers must also ensure independent financial advisers. proportion of younger HNW individuals are that a long-term sustainable strategy is in place The report says that of the 5.1m likely to in the Canadian, Australian and US markets. for philanthropic options that are not to the receive over £50,000, the mean average value However, the level of provision for detriment of the rest of the portfolio. of inheritance expected is £233,000, equating philanthropy in these markets is mixed – and In the words of Melinda Gates, wife of to a total of £1.2trn. However, the report also in some cases is clearly not a priority, as our Microsoft founder Bill Gates: “Philanthropy suggests that 38% of those in line to receive HNW Product and Services Demand tool is not about the money. It’s about using this inheritance have not yet spoken to the shows. In Canada, for example, 17% of whatever resources you have at your fingertips gifting party about their plans. HNWIs are aged 40 and under; however, and applying them to improving the world.” philanthropic provision is only offered by a It seems as though the new generation of ‘OVER-RELIANCE’ quarter of wealth managers. wealth want to apply this early on for the greater good of society. Despite the vast amount of wealth likely to AUSTRALIA be passed down between generations, the UK MILLENNIALS’ WEALTH report nonetheless warns that those in line for On the flipside, the story in Australia is inheritance could end up being over-reliant on more positive, with over two-thirds of wealth In a separate development, UK millennials’ their expected windfall. managers offering philanthropy services. wealth is expected to reach £1.2trn ($1.6trn) Almost a third (31%) of the 25-45-year- Even so, it is evident that some wealth over the next 30 years, according to research olds surveyed for the report admitted they managers are missing a trick. Certainly by financial services group Sanlam. are putting off saving and “living in the now” those wealth managers not already active in Over 11 million people aged between because they know they have the money philanthropy need to seriously consider if and 25-45 in the UK expect to receive some coming later down the line. how they should play in this space – or risk sort of inheritance from their parents or Four out of five (81%) beneficiaries of losing clients to other providers. grandparents. Nearly half (5.1 million) of this inheritance expect to receive money, while just “Millennials are now in a position to group expect to inherit at least £50,000 in over half (51%) assume they will receive fixed influence their inheritance,” JP Morgan’s fixed assets or money, Sanlam added. assets of some kind. <

18 | July 2018 | Private Banker International

PBI July 358.indd 18 11/07/2018 14:04:55 comment | wealthinsight

how multi-family offices are preparing for millennials

Wealthinsight head Oliver Williams reviews how multi- family offices (MFOs) are responding to generational and technological challenges. Like other areas of the sector, MFOs recognise that they must adapt in order to flourish

n Monday 2 July, LJ Partnership, across a broad range of sectors, which is on the process, they’re also positioned to a multi-family office based in in turn reshaping the wealth management make quicker decisions when they see unique OLondon, announced two major sector.” opportunities.” hires and a rebranding. Family offices without such deal-making Coming into the newly named Alvarium SOPHISTICATED INVESTORS aficionados rely on private equity funds to Investments would be Ken Costa, former chair provide such opportunities. However, that of Lazard International, and Ali Bouzarif, Millennials are widely considered to be more figure is falling, according to the Family Office previously head of investment execution at sophisticated investors than their forebears: Exchange, which last year reported that asset Qatar Investment Authority. 72% of millennials “describe themselves as allocation towards direct investments was up This news is just the latest in a string of self-directed with direct control over their 3%, while money allocated to private equity major hires in the family office sector. Last wealth”, according to a Deloitte report. This was down 4%. This trend is likely to continue, month, Bloomberg reported that Chicago- savviness is partly driven by poor rates and given that 81% of family offices have at least based Cresset Wealth Advisors had poached returns since the financial crises. one person working on direct investments. two executives from Ascent Private Capital With roughly a quarter of a million With the private equity space already and Wells Fargo’s Abbot Downing. millennials becoming millionaires in the next crowded, however, many MFOs are turning US banking heavyweights have increasingly five years, this group is not only demanding towards venture capital. Some will invest flocked to family offices. High-profile more from their financial advisers, but through funds, such as China-based investor executives Frank Ghali of Goldman Sachs and becoming wealthier in the process. Sequoia Capital which recently raised $6bn, Margaret Dechant of Morgan Stanley have Some MFOs are taking note. LJ Partnership much of it coming from family offices both created their own family offices in the says it will meet this demand by providing according to the Financial Times. past two years, luring former employees with “bespoke global investment opportunities Others prefer direct positions, like Paul them. In the UK, a pair of senior Credit Suisse in existing sectors such as real estate, and Allen, who recently contributed to a $1bn private bankers started Artorius Wealth a few new areas including M&A, private equity, Series H round for Singaporean ride-hailing years ago and another, Richard Algar, joined technology and advisory”. service Grab. last month. Investment opportunities in these “new Family office patrons with a background This string of high-level hires shows the areas” are rarely available to typical private in one industry might draw upon expertise urgency with which MFOs are responding banking customers, given the competitiveness or contacts to arrange such investments, as to generational and technological challenges. of deal-making in the middle market. This the Paul Allen example shows. His Vulcan Experienced bankers are being brought in explains the rush to hire big names like Capital shows another fashion in the family to broker the big deals that wealthier – and Costa, Bouzarif, Ghali, Dechant et al.; office space: adding an ‘investment’ or ‘capital’ younger – UHNWIs are demanding. experienced brokers with a raft of contacts suffix instead of the more traditional ‘family Announcing the changes, LJ Partnership are better placed to secure direct investment office’. LJ Partnership’s rebrand to Alvarium released a statement in which Costa said opportunities, which often see MFOs go up Investments verifies this trend. he would bring “merchant banking for the against private equity and pension funds. As the war to win millennials intensifies in millennial generation”. Talking to the Knight Frank Wealth Report, the wealth management space, these family The statement read: “This sophisticated Russ d’Argento of Fintrx, a family office offices are making a clear statement through generation of investors expect greater asset-raising platform, commented: “Not hires and rebrands: they provide the muscle transparency, control and the opportunity only are the folks who are pulling the strings and opportunities that fintech and robo- to partner and co-invest with asset managers regarding investment decisions better versed advisers cannot. <

www.privatebankerinternational.com | 19

PBI July 358.indd 19 11/07/2018 14:04:56 news | technology

Users can open an account for a minimum investment of $500, and are charged an let’s talk annual fee of 0.6%. Emperor CIO and co-founder Francis Tapon said: “Our proprietary technology gives investors access to many of the world’s most technology well-known and biggest companies, while investing directly in individual stocks and mitigating the management expense fees that PBI’s monthly summary of the latest developments in typically come with ETFs. wealth management technology and fintech innovation “We’re value investors who focus on top dividend-paying names that we select from some of the world’s greatest companies, which we think is the best way to build and preserve US Bancorp Investments launches robo-adviser and enable them to carry out real-time money long-term wealth.” US Bancorp Investments has collaborated transfers with Zelle. Users can also view bank with BlackRock-owned investment advisory statements and documents up to seven years GBST unveils digital platform for wealth firm FutureAdvisor to launch a new digital in the MyMerrill mobile app. managers investment advisory proposition. Merrill Lynch plans to add more features Fintech business GBST has unveiled a The new offering, Automated Investor, to the app later this year, which will new digital platform, Catalyst, comprises investment portfolios created by enable users to assess their income which is designed to support wealth management professionals and cost- across ten categories and receive the requirements of wealth effective funds. It utilises FutureAdvisor’s annualised views of their management and pension technology platform. income and expenses. clients. Automated Investor has been designed Merrill Lynch wealth The new solution, which to optimise returns while mitigating risk. management head Andy Sieg replaces the current Composer The proposition also rebalances investments said: “Our clients are on the Web platform, features multi- automatically, depending on changes in move, and they take their financial lingual and multi-currency markets. It also offers users an assessment of lives with them. capability. Catalyst supports the current investments to provide insight into “By combining our customised solutions creation of new digital products that can be their performance and opportunities for approach with our leading technology integrated with existing GBST systems. improvement. platform, we’re helping clients connect with The solution is marketed as being US Bank wealth management president their financial advisers, see their full financial highly configurable and providing multi- Mark Jordahl said: “For the emerging affluent picture of banking and investments, and device access. Businesses can also integrate customer or the younger investor who receive clear recommendations with ongoing the platform with existing websites, and may benefit from straightforward portfolio advice as their lives and markets change.” personalise it according to their requirements. strategies, Automated Investor can be a great Clients can collaborate with GBST’s fit.” Robo-adviser Emperor Investments launches new UK-based digital team to maintain the for US investors system, while advisers can serve customers on Merrill Lynch upgrades mobile app with new Emperor Investments, a digital investment the platform through access to applications, features advisory provider aimed at retail investors in document storage and illustrations via a secure Bank of America’s wealth management North America, has launched operations. online interface. division, Merrill Lynch has upgraded its The Toronto-based business will offer End investors, who are provided access mobile app to enable users to manage their tailored equity portfolios, assessed by its to their holdings and all related investment finances more easily. investment professionals. documents, can use any device to onboard The enhancements will allow customers to The robo-adviser’s primary differentiator is and service their accounts. use the Merrill Lynch mobile app to scan and that it ignores exchange-traded funds (ETFs) GBST claims that with a responsive design, send paper documents to financial advisers. in favour of portfolios invested in dividend- the Catalyst solution allows advisers and end The new feature utilises the smartphone’s paying equities. investors to personalise their own dashboards. camera to capture images of each page of a Emperor CEO and co-founder Brenna It also provides access to various retirement document. These images are converted to a Casserly commented: “We strongly believe and savings tools, as well as enabling single PDF file, which can be sent securely to that if you love a company, you need to invest integration with other leading tools currently the customer’s Merrill Lynch adviser. directly in it, not simply in a basket that holds available in the market. Merrill Lynch’s mobile app, which has a that particular company along with many GBST EMEA head David Simpson reported a 20% growth in users in the last others which you may not want exposure to.” commented: “Our clients and prospects are year, will also offer access to a spending and The robo-adviser’s model enables clients to increasingly focused on the digital customer budgeting tool that tracks expenditure. choose multiple custom portfolios, with each experience to drive servicing costs down and In addition, the app will now allow users to having its own investment horizon and risk deliver the overall experience that consumers view transaction activities and FICO scores, appetite. demand today.” <

20 | July 2018 | Private Banker International

PBI July 358.indd 20 11/07/2018 14:04:56 news | regulation

AMPFP financial planners engaged in rewriting conduct, under which clients’ monthly briefing: insurance policies were cancelled and replaced with similar ones through a new application instead of transfer. Overall, ASIC found six AMP employees regulation advising around 40 life insurance customers to purchase new policies with lower levels of cover between 2012 and 2013 in order to earn This month’s key regulatory and compliance-related higher fees. developments in private banking and wealth management The AMP unit had been aware of the matter since 2013, ASIC alleged, but failed to take action against the planners for two years. A hearing for the case is scheduled in Sydney Deutsche Bank’s US division fails FEDeral operations, according to Reuters. The bank on 27 July 2018. reserve annual stress tests is also prevented from making distributions AMP has recently also been under to its parent company in Germany without scrutiny for revelations by the banking royal Federal Reserve approval. commission that it charged fees for no service, and misled regulators. Many of the business’s Morgan Stanley fined $3.6m for alleged senior-level employees, including its CEO, misappropriation of client funds chair and chief risk officer, quit soon after the Morgan Stanley Smith Barney (MSSB) has scandal broke. agreed to pay a fine of $3.6m to the US Securities and Exchange Commission (SEC) us judge dismisses $300m broker compensation to settle allegations of failure to prevent case against Credit Suisse misappropriation of client funds. A US federal judge has dismissed a lawsuit MSSB was accused of lacking effective that accused Credit Suisse of withholding policies to prevent its advisory representatives up to $300m of compensation from brokers from misusing client funds. following the closure of the bank’s 275-broker According to the SEC, even though private banking arm in 2015. MSSB had policies for certain reviews of According to a report by Reuters, the Deutsche Bank USA (DB USA) has failed the disbursement requests, the reviews were proposed class-action suit was filed by former Federal Reserve’s annual stress tests, which not designed to detect or prevent such Credit Suisse employee Christopher Laver evaluate the capital-planning practices of the misconduct. earlier this year in the US District Court in major operating banks in the country. The watchdog said the business’s inadequate San Francisco, and sought compensation The Federal Reserve Board unanimously policies failed to prevent former broker Barry for around 200 brokers. The move followed objected to the bank’s capital plan. It expressed Connell from misappropriating funds worth Credit Suisse’s decision to sign a recruiting concerns over material weaknesses in DB $7m from four client accounts for almost pact with Wells Fargo after the closure of USA’s data capabilities and capital-planning a year. The affected clients have been its private banking unit. controls. The board, however, approved the repaid in full, with interest. Laver said the Swiss bank failed capital plans of another 34 businesses. The broker was arrested to offer deferred compensation The board also found that the bank’s in February 2017, and faces to those brokers who did not approaches and assumptions which are used criminal charges in connection join Wells Fargo under the to predict revenues under stress are weak. DB with the alleged wrongdoings. recruiting agreement, and USA now needs to take appropriate measures The case is currently pending. asserted that those brokers associated with management and analysis of The business agreed to the resigned voluntarily. its counterparty exposures under stress. settlement without admitting or According to Laver, the bank The German bank cleared the Federal denying the charges. deliberately agreed to the recruiting Reserve’s first test, which evaluates every deal rather than selling the unit, as a formal bank’s capital levels against a potential ASIC takes legal action against AMPFP over sale would have led to a change of control recession scenario. alleged failures in insurance advice requiring the payments. He said Credit Suisse The Federal Reserve Board has also issued AMP Financial Planning (AMPFP) has already had knowledge of several brokers a conditional non-objection to the capital been sued by the Australian Securities and unwilling to join Wells Fargo owing to the plans of Goldman Sachs and Morgan Investments Commission (ASIC) over charges latter’s difference in business and client base. Stanley, requiring them to maintain capital of failing to take action against financial Judge William Orrick dismissed the case, distribution levels paid in recent years. planners who offered conflicted insurance saying Laver was bound by an arbitration Failure in this stress test is not expected to advice to clients in order to earn higher agreement and so could not pursue his affect dividend payouts, but will require DB commissions. proposed class action, and that arbitration USA to make appropriate changes in its US The corporate watchdog alleged that details should be worked out in New York. <

www.privatebankerinternational.com | 21

PBI July 358.indd 21 11/07/2018 14:04:58 news | people moves

personNel briefing: people moves

PBI lists the month’s key career developments by the movers and shakers in private banking and wealth management

country name moved from old position moved to new position

Canaccord Genuity Wealth UK Robert Pickford Investment director Julius Baer Relationship manager Management Head – wealth UK Niall Husbands HSBC Intertrust Head – private wealth management Global head – structured Indosuez Wealth France Jacques Prost Crédit Agricole Group CEO finance Management Group Group head – Greater Hong Kong Vicki Lee UBS Wealth Management Country team head Julius Baer China MD and head – Northern Luxembourg Anders Mattson Deutsche Bank Manager – Nordics Desk Credit Suisse and Western Europe Franklin Templeton UK Jennifer Ockwell Janus Henderson Head – UK institutional Head – UK institutional Investments David Hoantee Legal & General Head – Asia-Pacific Hong Kong Standard Life Aberdeen Head – Asia Peng Investment Management excluding Japan MD and head – capital USA Ed Riley Merrill Lynch Citi Private Bank Head – equities markets Head – sports and MD – Australia and New UK Tim Horan Westpac River and Mercantile entertainment business Zealand operation Senior relationship UK Tim Oddy Ballybunion Capital UK MD Maitland Manager Manager – international Norway Tim Warrington Skagen distribution and domestic Skagen CEO wealth management Finance director – wealth UK Mike Morgan RBS Close Brothers Group Group finance director management Marketing business Singapore Hanna Tantoco Aetna International Crossbridge Capital Asia Head – marketing partner

UK Ewen Stevenson RBS CFO HSBC Group finance director

Investec Asset Head – institutional UK Frank Doyle Sales director Liontrust Management business Executive vice-president, Pacific Investment head – Hong Kong and Singapore Scott Steele Janus Henderson Investors Head – distribution Managment Singapore global wealth management Qatar Investment Head – investment USA Ali Bouzarif LI Partnership Executive board member Authority Execution Co-chair; executive board UK Ken Costa Lazard International Chair LI Partnership member

22 | July 2018 | Private Banker International

PBI July 358.indd 22 11/07/2018 14:04:59 HEAR ∤ NETWORK ∤ DISCOVER ∤ CELEBRATE SHAPE THE FUTURE OF LIFE INSURANCE LIFE INSURANCELife INTERNATIONAL Insurance International: Innovation Forum and Awards 2018 Innovation Conference & Awards 20177th November 2018 ∤ Waldorf Hilton, London London The 2018 edition of the Life Insurance International: Innovation Forum and Awards will be taking place in London on 7th November at the iconic Waldorf Hilton. We will once again be bringing together life insurers, insurtechs and solution providers for a day of discussion covering the major issues in the retail banking sector.

Event Highlights :

∤ Two-stream format, with a wider variety of ∤ Oxford-style live debate considering whether Life Insurance International is the only global newsletter talks analyzingand discussions, all of the latest trends case and developments studies in theand global life and health insurance advances markets in robo-advice and D2C insurance keynote presentations will make most financial advisors extinct ∤ Many issues related to innovation, ∤ Industry thought leaders from the transformation, regulation and change to be established insurers to those that are discussed to give a rounded picture of the life up-and-coming along with solution providers insurance market today ∤ Awards ceremony celebrating the ∤ InsurTech innovation lab where five of the excellence in the life insurance industry best insurtech firms can demonstrate their innovative solutions

PROPOSAL FOR SPONSORS

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Bronze Sponsors:Partner: Brand Partner: Supported by

For more details please contact:

Page 2 Vicki Greenwood on [email protected] or call +44 (0) 20 3096 2580

PBI July 358.indd 23 11/07/2018 14:05:00 HEAR ∤ NETWORK ∤ DISCOVER ∤ CELEBRATE LEASING LIFE CONFERENCE & AWARDS 2018 15th November 2018 ∤ Tallinn, Estonia

For its 14th edition Leasing Life Conference and Awards 2018 moves to the Baltic Region to bring together asset finance professionals and industry disruptors in an active discussion of the key issues facing the leasing industry. This year’s Leasing Life conference explores how Europe’s leasing industry is responding to the value chain opportunity - the operational, and strategic, implications of the paradigm shift, and the role that technology must play in transforming the industry so that it thrives in the digital age. . Event highlights:

∤ Re-defining asset ownership for a digital generation · The Baltic Approach: Regulatory arbitrage in the digital era · GDPR and its implications for reporting, asset management and marketing · Funding strategies for a lean world · Re-defining sales and distribution channels for the digital era · Harnessing the power of agile: Assessing the transformative potential of digital · Embracing the circular value chain approach to lease delivery & design · Taking the right risks for the rewards: Strategic implications of the era of asset ownership · Using data and analytics to drive performance, deliver value

Headline Sponsor: Gold Sponsor: Silver Sponsors:

Brand Sponsor: Exhibitor: Badge and Lanyard Sponsor: Table Hosts:

For more details please contact:

Page 1 Vicki Greenwood on [email protected] or call +44 (0) 20 30W96 2580

PBI July 358.indd 24 11/07/2018 14:05:00