www.privatebankerinternational.com Issue 372 / september 2019 PRIVATE BANKER GOLDEN GATEWAY

WHY IT IS NOT JUST THE BEACH THAT ATTRACTS WEALTH TO THE CARIBBEAN FEATURE OPINION FEATURE

Reports of wealth leaving What do the wealthy look Emily Griffiths-Hamilton Hong Kong for Singapore for in a services provider – discusses the fine art of seem to be premature apart from the obvious? dealing with difficult clients

PBI September 372.indd 1 16/08/2019 10:47:59 contents this month

COVER STORY NEWS 14 05 / EDITOR’S LETTER 06 / NEWS ROUND-UP 07 / NEWS ANALYSIS • Falling wealth leaves smaller private banks exposed 20 / PEOPLE MOVES 21 / TECH AND REGULATION

THE CARIBBEAN

Editor: Group Editorial Director: Head of Subscriptions: Oliver Williams Ana Gyorkos Alex Aubrey +44 (0)20 7406 6585 +44 (0)20 7406 6707 +44 (0)20 3096 2603 [email protected] [email protected] [email protected]

Reporter: Sub-editor: Director of Events: Jamie Crawley 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]

Correspondents: Publishing Assistant: David Craik Asena Değirmenci Paul Golden +44 (0)20 7406 6592 [email protected] 07 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 0953-7031 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

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PBI September 372.indd 2 16/08/2019 10:48:05 contents september 2019 10 18

OPINION 18 / BML Most HNWIs have higher expectations than FEATURES other clients. Alpa Bhakta, CEO at Butterfield Mortgages Ltd (BML), outlines what the 08 / HONG KONG 12 / US BANKS IN wealthy expect from a financial services provider – beyond the obvious Media has reported how protests against SWITZERLAND extradition legislation in Hong Kong are Do Switzerland’s biggest banks have a fight causing the wealthy to move money to 19 / GLOBALDATA on their hands in their own backyard? Singapore. Talk to bankers, though, and the With robo-advisors disrupting the investment Jamie Crawley looks at how JPMorgan and story is different, writes Richard Hartung industry, it was only a matter of time before the Goldman Sachs have been expanding their financial advice sector was also affected. IFAs wealth management offerings in Switzerland 10 / PORTFOLIO PLANNING should be careful not to completely ignore this Not all the indicators are negative, but there 17 / CONFLICT RESOLUTION type of development, writes GlobalData are certainly jitters in the air. Jamie Crawley asks leading wealth managers how they Complex conversations are part and parcel are navigating the challenging climate of of private banking, but few relationship 22 economic slowdown and political volatility managers are equipped to deal with them. Oliver Williams speaks to Emily Griffiths- 17 Hamilton about dealing with difficult clients REGION PROFILE 14 / THE CARIBBEAN Could countries circling the Caribbean Sea now be home to more HNWIs than other arguably higher-profile island nations? Oliver Williams takes a closer look at a region where the golden visa reigns supreme BUSINESS PROFILE 12 22 / DOLFIN Dolfin believes it has found the ultimate solution to marrying technology with the individual service of a bespoke wealth manager. Oliver Williams speaks with Nick McCall, head of wealth management

www.privatebankerinternational.com | 3

PBI September 372.indd 3 16/08/2019 10:48:10 HEAR • NETWORK • DISCOVER • CELEBRATE Leasing Life Conference & Awards 2019 Barcelona, Spain • 28 November 2019

For its 15th edition, the Leasing Life Conference and Awards 2019 moves to Barcelona, 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 role of technology in this pinnacle transformation, strategy-driven innovation and much more. Thriving in a digital age has never been more important.

Event highlights • Embracing technological transformation: creating digitised business models • From new technologies to corporate cultures: making innovation a reality • The circular economy: driving change at full speed • CEOs panel discussion and Q&A: the future of asset finance – a strategic outlook • Remaining relevant in an increasingly competitive world • Panel discussion: capitalising on data to drive industry-wide innovation

Headline Partner Gold Partner Silver Partners Bronze Partners

Exhibitors Panel Partner Cocktail Partner Table Host Badge and Lanyard Partner

For more details please contact Ray Giddings on [email protected] or call +44 (0)20 3096 2585

PBI September 372.indd 4 16/08/2019 10:48:11 editor’s letter

HEAR • NETWORK • DISCOVER • CELEBRATE Leasing Life Conference & Awards 2019 Private banks and the Barcelona, Spain • 28 November 2019 problem with politics For its 15th edition, the Leasing Life Conference and Awards 2019 moves to Barcelona, to bring together asset finance professionals and industry disruptors in an active discussion of the key issues facing the leasing industry. Oliver Williams, Editor This year’s Leasing Life Conference explores how Europe’s leasing industry is responding to the value chain opportunity, the role of technology in this pinnacle transformation, strategy-driven innovation and much more. Thriving in a digital age has never been more important. rivate banking is an industry that attempts to It is not hard to join the dots: Brazilians applying to steer well clear of politics. Its famed discretion both Portugal’s Golden Residence Permit Program and the P has shaped a global industry that asks too few UK’s Tier 1 investment visa are currently up in numbers. Event highlights questions. No coincidence, then, that many Brazilian HNWIs are • Embracing technological transformation: And yet private banking is so often created as a result concerned about right-wing President Jair Bolsonaro’s creating digitised business models of political volatility. Every global conflict, or whisper of commitment to democracy. • From new technologies to corporate war, sends wealth flooding over borders, into the hands of European citizenships and the UAE Residence Permit cultures: making innovation a reality some trusted and stable institution. are currently popular among Turkish HNWIs. Their own • The circular economy: driving change at It is one of the main reasons for Switzerland’s success: a currency has halved in two years. Then there are the full speed (landlocked) island of alpine calm that happily looks after Chinese, who make up nearly half of all UK Tier 1 visas • CEOs panel discussion and Q&A: the future the treasures of troubled regions. It helps when those and a very large portion of the US EB-5 visa waiting list. of asset finance – a strategic outlook institutions have stood the test of time – not to mention a There are countless other examples, which will be • Remaining relevant in an increasingly handful of wars. obvious to any private bank or wealth manager based in competitive world According to latest figures from the Swiss National calmer capitals. Bank, some of the highest inflows of foreign funds come However, while they may be happily benefiting from • Panel discussion: capitalising on data to from nations with some form of political volatility. Saudi increased global turmoil, private banks can no longer drive industry-wide innovation Arabia ranks 21st, accounting for 4.3% of the total be discreet about it. Due diligence demands are now individual and enterprise funds deposited at Swiss banks. enforced by most regulators, and the reputational damage Turkey and Thailand fall shortly behind; all have suffered of ignoring them is not worth it: a Sunday Times and from authoritarianism. Channel 4 undercover investigation saw to the reputations Switzerland is not alone. Wealth managers in the UK, of many when they were recorded boasting how easy it (such Dolfin, as featured onpage 22), actively court was to flout DD checks. HNWIs from China, Russia the Middle East. The UK’s Financial firms have to be serious about these checks, Home Office cannot process applications fast enough: even if that means turning away scrupulous wealth. The recipients of the UK’s Tier 1 investor visa were up by a pressure on financial services over illicit wealth is still far third in the first quarter this year compared with 2018. from over. Headline Partner Gold Partner Silver Partners Bronze Partners Then there are citizenship-by-investment programs, In the meantime, bankers will be eyeing up the next currently offered by over 100 countries. As the feature global hot spot: Hong Kong. But it might not prove to be on pages 16 and 17 explains, these emerged out of as lucrative as some are making out, as Richard Hartung the Caribbean over two decades ago, but they are now finds onpages 8 and 9. < more popular than ever, thanks largely to global political Oliver Williams instability in other parts of the world. Editor, Private Banker International Exhibitors Panel Partner Cocktail Partner Table Host Badge and Lanyard Partner

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

For more details please contact www.privatebankerinternational.com | 5 Ray Giddings on [email protected] or call +44 (0)20 3096 2585

PBI September 372.indd 5 16/08/2019 10:48:11 News | Round-up

round-up The biggest stories impacting the private banking and wealth management industry over the past month. Read them in full at privatebankerinternational.com

UBS to reduce threshold for Advisor transactions and six Investment MJ Hudson bolsters ESG passing negative rates Banking Division transactions, according to capabilities with acquisition Fidelity Clearing and Custody Solutions. Swiss wealth manager UBS is set to lower the London-based asset management threshold for charging affluent customers as consultancy MJ Hudson has acquired negative interest rates continue in Europe, CHINA UPDATE Spring Associates Responsible Investment effective from this November. Service, an Amsterdam-based ESG The firm will start charging clients an JPMorgan wins bid for consultant. annual fee of 0.6% for deposits of over controlling stake in China JV €500,000 ($559,000). The previous threshold JPMorgan is set to take a majority stake in ESG investing growing for all was €1m. its Chinese asset management joint venture generations, says Allianz (JV), China International Fund Management Investors from all generations are showing a Volatility drives demand for (CIFM). greater interest in incorporating ESG factors golden visas This was made possible after the bank into their investments, according to a new Residency and citizenship-planning won a bid to buy a further 2% stake survey by Allianz Life Insurance Company of firm Henley & Partners says it has seen in CIFM from its JV partner Shanghai North America. a significant spike in HNWIs applying International Trust at an auction. The trend is also catching up with those for Portugal’s Golden Residence Permit in older generations, with 54% of Gen Xers Programme. Hong Kong asset and wealth and 42% of baby boomers also found to be The firm says the permits are in high AuM falls to $3.06trn expressing interest. demand among Hong Kong and Brazilian AuM in the asset and wealth management investors wanting to insure against political industry in Hong Kong reached HK$23.95trn CFRA strengthens ETF research uncertainty in their home countries. ($3.06trn) at the end of December 2018, with with First Bridge Data purchase HK$783bn in net inflows. Investment research business CFRA has Gold price rises strengthen The figure excludes assets held under trusts, acquired ETF data and analytics firm First status as safe-haven asset and marks a 5% fall from the previous year. Bridge Data. The acquisition is intended to bolster HSBC CEO for Greater China CFRA’s ETF research suite to include a business resigns database of ETF constituent holdings HSBC Greater China CEO Helen Wong data, reference and classification data, Pik-kuen has stepped down, marking the investment analytics, daily pricing, as well Gold continues to be viewed as a safe-haven second senior executive departure in a as flows and statistics. asset in the present economic environment, the month after HSBC group CEO John Flint Royal Mint has said after it recorded a 40% rise stepped down from his role. M&A in interest in the yellow metal in July. ESG Boston Multi Family Office US DESPATCHES unveils management buyout Schroders to buy controlling Boston Multi Family Office, a trust and Wells Fargo hires new private stake in BlueOrchard fiduciary services business based on the Isle of bank head UK fund manager Schroders has agreed to Man, has announced a management buyout. Wells Fargo has appointed Julia Wellborn purchase a majority stake in Swiss impact Former group business development as head of private wealth management, investor BlueOrchard. director Katherine Ellis will assume the role a unit within the bank’s wealth and Set up in 2001, BlueOrchard provides of CEO. investment management business. impact investment solutions in credit, private equity, and sustainable infrastructure. J Safra Sarasin completes US wealth management M&A Schroders has also launched a new fund, Lombard Odier purchase reaches record volume that targets the shift towards a low-carbon J Safra Sarasin Group has concluded the M&A activity in the US wealth management energy system. The new Schroder ISF takeover of the Gibraltar private banking industry reached record volumes in the first Global Energy Transition fund is a long-only operations of Lombard Odier. The deal was half of 2019, with 67 Registered Investment portfolio of 30-50 stocks. announced in April this year. <

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PBI September 372.indd 6 16/08/2019 10:48:12 News | analysis

falling wealth leaves smaller private banks exposed

The relationship manager brings more millions through the door than any other marketing means, but as wealth creation slows, smaller private banks are struggling to keep up, finds Oliver Williams

Things are about to get more difficult for bank took 13 wealth managers from Credit SMALLER BANKS AT RISK private banks and wealth managers. A recent Suisse in Italy. report from Capgemini estimated that the Smaller private banks are already vulnerable. number of HNWIs in the world slid 3% last PAY SET TO INCREASE In July, PwC released a report that analysed year, the first fall in wealth creation for seven the private banking space in Switzerland. The years. UHNWIs were hardest hit – their With supply and demand in their favour, report predicted that consolidation in the number dropped 6%. many wealth managers are counting on pay industry will see the number of Swiss private Other data – from Forbes, Hurun and rises this year. In a survey by financial services banks drop from 130 to 100 in the coming Wealth-X – shows the number of billionaires recruiter Kathy Freeman, 54% of respondents few years. has also fallen. This means private banks – said they would expect an uptick in their pay Martin Schilling, deals director at PwC buoyed by years of growing wealth – will now packages this year. Financial Services, commented in the report: be slicing up a smaller wealth pie. In order UBS, the world’s largest wealth manager, “The framework conditions for private to arm themselves for the forthcoming fight, increased its salaries by nearly half a billion in banking have become much tougher since many are equipping themselves with the best 2018. “Adjusted expenses for salaries increased the financial crisis. Not all banks were able to relationship managers to keep wealth coming by $72m to $6.27bn,” the Swiss bank stated adapt to the new framework conditions and in through the door. in its last annual report. disappeared from the market or were taken After Switzerland, the UK is home to over by a new owner” RECRUITMENT BATTLE Europe’s largest private banks. It also has According to the report 52% of small Swiss its best-paid bankers and fund managers, banks had made losses over the past year. Nearly 50 members of First Republic’s wealth with almost 10 times more financiers on This was calculated by analysing banks that management division walked out of the firm €1m ($1.1m) as Germany, according to the had less than $2bn in assets. There could be in June, following the five top advisors on European Banking Authority. various reasons for this, but one highlighted their team who had already left. Between At the top end, family office pay is also in the report was expenditure among smaller them, these employees were responsible for rising. Between 2017 and 2018, the average wealth managers. Increased spending costs managing most of the $17bn of client assets family office CEO salary went up 11% to paired with low revenues will ultimately lead at the bank. an average $333,000, according to the UBS to a widespread losses among the smaller In losing such teams, as hiring them, hangs Global Family Officereport. In fact all C-level private banks. the balance of retaining extremely wealthy pay at family offices increased in the 2017- No other area of expenditure at a private clients. While First Republic’s team scattered, 2018 period according to the report, with bank is greater than the wage bill, but even taking up positions with a number of most professionals recruited from the wealth with higher salaries on offer at competitors, Registered Investment Advisors, most major management sector. few operators will be able to justify ever- moves – and therefore clients – are between But with pay levels already rising, many increasing bonuses. large private banks. smaller wealth managers without the financial Smaller private banks – not just in In the past month alone, HSBC hired its muscle of a global bank or family office Switzerland but globally – therefore face a new asset management head from Deutsche might struggle to match, let alone beat, such challenge: spend to retain staff and clients but Bank, Credit Suisse raided UBS for its UK packages. Talent will, therefore, leave – and be exposed to falling revenue, or cut wages in wealth management team, and Deutsche potentially clients with them. the hope that clients will stay anyway. <

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PBI September 372.indd 7 16/08/2019 10:48:14 feature | hong kong

media overhypes money flows from hong kong to singap0re

From Asia to Europe, media has reported how protests against extradition legislation in Hong Kong are causing the wealthy to move their money to Singapore. Talk to bankers, though, and the story may well be different, writesRichard Hartung

oon after protests over new And in mid-July, Bloomberg reported NOT MOVING YET extradition legislation started in that “private bankers are being flooded with SHong Kong on 12 June this year, inquiries from investors in Hong Kong who Many Singaporean bankers do acknowledge local and global media began reporting are worried about the long-term effects of the that they received inquiries shortly after the that the wealthy had started moving their political crisis. A new tier of wealthy investors protests started; however, most money is not money to Singapore. The stories have moving to Singapore yet. continued unabated. As evidence, Monetary Authority of In Singapore, for example, Today, an Singapore MD Ravi Menon said in late English-language digital news site, reported June that, despite reports that some people in mid-June that Hong Kong tycoons had in Hong Kong had begun moving money started moving personal wealth offshore, offshore, data, as well as conversations with with one of them shifting more than $100m We’ve received an financial institutions, indicated that there has from a Citibank account in Hong Kong to a been no sign of a significant shift in business Citibank account in Singapore. increased amount or funds. “It’s started,” an unnamed financial adviser Even so, Menon cautioned wealth said. “We’re hearing others are doing it too, of client inquiries managers at local banks in Singapore but no one is going to go on parade that they against aggressively marketing their services are leaving.” about Hong Kong or making other efforts to woo clients by Towards the end of June, Reuters noted capitalising on the ongoing political turmoil that some foreign wealth managers were in Hong Kong. ending plans to open offices in Hong Kong Most bankers are reluctant to talk about and choosing Singapore instead, with the rich are setting up ways to move their money out the trends publicly. The head of wealth beginning to move their funds away from of the former British colony more quickly.” management in Hong Kong for a large Hong Kong. Lawrence Lua, deputy head of private international private bank did say privately in An unnamed mid-sized European private banking at DBS Singapore, told Bloomberg: mid-July that although an unusual number wealth advisory firm reportedly abandoned “We’ve received an increased amount of client of clients had asked about shifting funds plans to set up its Asia arm in Hong Kong, inquiries about the Hong Kong situation in to Singapore, their funds are staying put in choosing Singapore instead. the past weeks.” Hong Kong.

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PBI September 372.indd 8 16/08/2019 10:48:18 feature | hong kong

Similarly, towards the end of July, DBS Bank CEO Piyush Gupta told CNBC that there is no “big movement of money from Hong Kong to Singapore”. Instead, fund flows are only happening at the margin. “In my experience,” Gupta said, “these big shifts don’t happen unless there’s a massive regime change, which we don’t foresee happening in Hong Kong. The focus on Singapore benefiting at Hong Kong’s expense is perhaps overstated.” A banker at a leading global private bank in Singapore likewise remarked in early August that it still had not seen money flowing in from Hong Kong, and observed that many wealthy clients already had money diversified into multiple jurisdictions. Another private The Hong Kong protests have received extensive media coverage banker at a separate global bank said it also had not seen any significant movement of Pacific region. The fund flows in the Greater transparency agreements which require banks client funds from Hong Kong to Singapore. China region continue to increase every year, to report account holders’ information to and we want to position ourselves to capture Hong Kong officials, which in turn makes BANKERS STAY PUT TOO that flow.” the information available to 75 jurisdictions, Recent announcements have also seen VP including China. While Singapore has similar Private banking jobs are not being relocated Bank Group, a Liechtenstein-based private agreements with 61 jurisdictions, it does not from Hong Kong and, if anything, bank, sign a memorandum of understanding include either China or Hong Kong. recruitment is increasing in the Special with Hywin Wealth Management (China) Additionally, the Hong Kong Securities and Administrative Region. to develop a Hong Kong-based collaboration Futures Commission released new regulations Although efinancialcareers writer Simon platform for the affluent in China. in July 2019 to classify all investment Morlock wrote in July that executive Since the protests began, Pictet Asset products as either complex or non-complex. recruiters have noticed a rise in Hong Management has hired a new CEO and While the distinction may seem minor, Kong-based private bankers contacting them Jefferies a new Asia chair. observers said it may cause intermediaries about Singapore jobs in recent weeks, citing who support investors to exit Hong Kong, concerns about the extradition bill, large OTHER FACTORS AT PLAY and may lead to investors seeking products private banks do not appear to be moving that can generate superior returns to turn to jobs from Hong Kong to Singapore. Individuals who have moved funds to intermediaries outside Hong Kong. Hong Kong private bankers cover mainland Singapore in recent years may well have based Both regulatory changes may indeed have Chinese clients, which account for a far their decision on broader trends that result concerned investors in Hong Kong, as well higher percentage of global wealth than Hong from longer-term catalysts. Indeed, the shift as investors from China or Taiwan, who keep Kong itself. With these clients still favouring of funds to Singapore has been occurring for their funds there and led to their shifting global private banks in Hong Kong, bankers some time. funds offshore. MORE HYPE THAN REALITY Our office has been diversifying outside While wealthy individuals in Hong Kong Hong Kong for years since the Umbrella may have greater concerns about living there amid protests and potential legislation, media Movement protests in 2014 reports so far seem to be more hype than reality. It is clearly worth watching the data: the are unlikely to be relocated anytime soon. “Our office has been diversifying outside latest shows that total AuM in the asset and Bank of Singapore (BoS) actually increased Hong Kong for years since the Umbrella wealth management industry in Hong Kong its commitment to Hong Kong in July when Movement protests in 2014,” Marc Geary, was down 5% in December 2018. If, and by it hired three industry veterans for its Hong MD at multi-family office Major Domus, told how much, this momentum continues will be Kong office, noting that the Greater China the Financial Times. “We have seen a trend to indicative of the effects the protests have had region holds close to one-fifth of the world’s offshoring assets in the last few years, and the on Hong Kong’s financial services sector. UHNW wealth. Derrick Tan, BoS branch recent protests on extradition legislation are Peripheral indicators such as regulators’ CEO for Greater China and North Asia, said: another catalyst underpinning this.” statements, property purchases and staff “Hong Kong is one of the most important Another reason for shifting funds abroad movements will be closely watched as protests international financial centres in the Asia- is that Hong Kong recently signed tax continue. <

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PBI September 372.indd 9 16/08/2019 10:48:19 feature | portfolio planning

taking stock: portfolio planning amid fears of recession

Not all the indicators are negative – at least not yet – but there are certainly jitters in the air. Jamie Crawley asks leading wealth managers how they are navigating the challenging climate of economic slowdown and political volatility

ith indicators showing the there always will be, but there are lots of and have learned from past mistakes. And present economic expansion things supporting this bull market.” we’ve had globalisation, whereby if companies W is set to end, private banks were finding that their local market was and wealth managers are challenged with RECESSIONARY FEARS? depressed, they could send goods abroad. That cushioning their clients’ portfolios against has really helped expanding this cycle.” a slowing economy and geopolitical risk at The present period of economic expansion Fundamentals of economic cycles point every turn. to which Choukeir refers is now one of the towards this present expansion being in its How worried should they be? Not overly, longest on record. later stages, owing to multiples expanding and according to Mo Choukeir, chief investment The US economy completed its 121st valuations increasing. officer at Kleinwort Hambros. month of expansion at the start of July, Fahad Kamal, chief market strategist at “If you look at the indicators on the making it the longest such run since 1854. On Kleinwort Hambros, says: “We are in a pretty economic dashboard - growth, unemployment the one hand, this will raise concerns that a late stage here in terms of the bull market, and inflation - what do you see?” Choukeir recession must surely be coming sooner rather but nobody in the world can tell you if this is asks. “Growth is not that great. The EU could than later, but on the other it is symptomatic going to last another month or another five be facing a recession, as could the UK and of the increasing rarity with which economic years. maybe even the US. downturns occur. “However, according to our best “However, inflation is around the 2% mark According to the National Bureau of assessments, we don’t think that we are give or take. Even in the EU it’s not that far Economic Research, there have been 33 heading towards an imminent collapse because off. So if you look at that in isolation, you recessions since 1854, or an average of one multiples, while stretched, are certainly not have to say it’s a benign environment. every five years. There have, however, been in dangerous territory yet – though, they are “Unemployment, however, is going only three in the last 30. heading there.” gangbusters. The unemployment figures Frédérique Carrier, head of investment So, nothing to worry about just yet then. continue to impress on the global stage, with strategy for RBC UK, tells PBI: “Recessions However, given the global uncertainty in the employment at a multi-year high.” are less frequent than they used to be. We now political sphere, there are fears that the world Choukeir continues: “This is not an have safety nets, we have central banks that are is altogether less well equipped to handle a environment to be fearful. Yes, there are risks, perhaps a bit more professional than they were downturn as and when it arrives.

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PBI September 372.indd 10 16/08/2019 10:48:20 feature | portfolio planning

But a new asset class is now being deemed a safe haven. Bitcoin’s price is up over 200% in 2019, as some institutional investors watch on with interest. One commentator went as far as to say it is becoming irresponsible to have no exposure to Bitcoin in the current climate. LOVE THE LATE CYCLE

Viewing the market in a very dispassionate way can help investors embrace the late-cycle environment, reducing a great deal of risk, while remaining engaged to the possibility of healthy return. “The factors that we look at are valuation, Mo Choukeir, Kleinwort Hambros Frédérique Carrier, RBC UK momentum and sentiment,” says Kamal. At the start of 2019, there was a general “Valuation is increasing, but it isn’t worrying “If you go against the herd, you stand a consensus that the trade dispute between us terribly yet. While we’re late stage, we’re not good chance of generating good returns,” the US and China would have eased by glaringly expensive. The UK, for example, has Choukeir explains. “When everybody’s fearful, now, and there would also be greater clarity very fair valuation levels.” that’s the time to look at the asset and see if on the Brexit dilemma. Not only do these Of momentum, Choukeir explains: “Trends there’s a chance that it’s actually undervalued, matters rumble on, they have been added feed on themselves. When something is and therefore there’s a chance of making to by tensions involving Iran for its nuclear gaining in popularity, people pay attention, returns. And clearly, when something is overly programme, and India for controversially and there is fear of missing out. So they start euphoric, overly optimistic, there’s too much stripping the Kashmir region of its special to buy, and that takes its price higher, and hype about it, there’s a chance that you will constitutional status. then other people start to pay attention. lose money.” The ramifications of geopolitical risk were brought home powerfully on the first Monday in August when US stocks plunged following When everybody’s fearful, that’s the time the Chinese yuan dipping to below seven to the dollar. With this, Bloomberg reported to look at the asset and see if there’s that the richest 500 people on Earth lost a combined $117bn, equating to some 2.1% of a chance that it’s actually undervalued their collective wealth.

THE NEW SAFE HAVENS “If you have negative trends, where This will be seen as a difficult approach to everybody’s rushing for the exits at the same reconcile. Fearing poor momentum while also To navigate these turbulent seas, defensively time, those tend to show the risk of losing embracing negative sentiment would appear positioned portfolios have been increasingly value.” to be contradictory, as one so closely feeds off adopted in private banks and wealth managers’ This may seem like common sense, however the other. In the current climate, for example, investment outlooks. Kleinwort Hambros’s approach becomes the largely negative sentiment could be seen to “We would advise clients to be very mindful intriguing when it comes to sentiment. adversely affect momentum. of what they have in their portfolio,” Carrier “They don’t all point to the same direction tells PBI. “Stocks with low levels of debt and at the same time,” Choukeir acknowledges. strong cash-flow generation tend to be better “What we do is combine those risk factors, performers over the long run, particularly in and we see that actually they give you a more times of turbulence. Underlying all of that, balanced assessment of the market. companies that can do this tend to have a very “When they all point in the same direction, strong business model. that’s the time to have high conviction. An “We prefer sectors which are more example of this would be the crisis in the defensive to those that are more cyclical. We’re eurozone of 2012, where European equities overweight in staples, for example, which we were cheap and sentiment was negative, but see as being relatively defensive. And in terms momentum was positive thanks to the ECB’s of fixed income, with central banks becoming whatever-it-takes approach. dovish, we’ve increased duration.” “You had a tick against all three of those Along with bonds, traditional safe havens characteristics,” Choukeir concludes. are back in fashion. Gold has hit six-year highs “European assets performed exceptionally well in recent months and, at the time of writing, in 2013 and 2014 on the back of those ripe is sitting just above $1,500 per ounce. Fahad Kamal, Kleinwort Hambros conditions.” <

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PBI September 372.indd 11 16/08/2019 10:48:22 feature | us banks in switzerland

Switzerland: the yanks are coming

Do Switzerland’s biggest banks have a fight on their hands in their own backyard? Jamie Crawley looks at how JPMorgan and Goldman Sachs have been expanding their wealth management offerings in Switzerland

nvestment banking is an industry New York Department of Labor. Globally, financial services consultancy, TORI Global, dominated by Wall Street, with there have been more than 30,000 lay-offs says: “The realisation dawned on UBS some IJPMorgan and Goldman Sachs the first since April in investment banking, the time ago that it was destroying a great wealth and second largest by almost any metric. Financial Times reported in August. Wealth management franchise (and its balance sheet) Citi, Morgan Stanley and Bank of America management has therefore become more through its pursuit of investment banking and complete the top five. appealing to many of the world’s financial has subsequently re-orientated the business However, the huge statures of UBS and, with a high degree of success.” to a slightly lesser extent, Credit Suisse mean Credit Suisse did something similar in Switzerland still holds the ascendancy in 2015, and has since become something wealth management. Both JPMorgan and of a success story in bank restructuring. A Goldman Sachs have upped their headcount further example is Deutsche Bank, where in their Swiss offices this year, while also the corporate restructuring and recently nabbing executives from UBS and Lombard Switzerland continues announced job cuts appear to be largely Odier to lead their operations there. affecting trading operations. The German “Given the significant rise of millionaires to be the largest bank’s wealth management unit meanwhile is in the US, it is logical for the banks to invest set to receive around 300 reinforcements in in Switzerland just like the Swiss banks are market for wealth the next couple of years. investing more in the US,” Sankar Krishnan, What does this have to do with JPMorgan executive vice-president of banking and management and Goldman Sachs? The two US banks capital markets at Capgemini, tells PBI. emerged from the financial crisis in better shape than most. In fact, JPMorgan has gone WANING INVESTMENT behemoths in recent years. from strength to strength, its share price UBS announced thousands of job cuts in increasing by 75.7% between the start of In a post-2008 world, investment banking has its investment bank in late 2012, as CEO 2016 and the end of July this year. become an increasingly difficult environment, Sergio Ermotti embarked on his plan to make Goldman Sachs, however, were concerned owing to more stringent regulations and wealth management front and centre of the enough by a decline in fixed-income trading capital requirements eating into profits. bank’s business, with investment banking to launch an ambitious plan aimed at Jobs in commodity and securities trading relegated to a supporting role. increasing revenue by $5bn in the next three fell 2% in June alone, according to the Christ Renardson, managing director of years. An increased focus on private wealth

12 | September 2019 | Private Banker International

PBI September 372.indd 12 16/08/2019 10:48:24 feature | us banks in switzerland

management was to play an important part collaboration with the bank. This invited in this. comparisons with rumours from March of last So, given the recent efforts of the two year that JPMorgan and Amazon were in talks banks to expand their wealth management to start offering banking services. operations in Switzerland, does this point “The banks are obviously building products towards a scaling back of their traditional to engage with more users,” Freddy Kelly, specialism of investment banking? CEO of API-powered credit bureau Credit Krishnan thinks not. “Investment banking Kudos, said at London Fintech Week in July. continues to be a key area of focus for “The question you often hear is: is it both Goldman and JPMC, and they have easier for an Amazon to become a bank, or a strengthened their number one and two Barclays to become an online marketplace? positions versus the rest of the industry,” he “You can see that it’s easier for Amazon to notes. “That said, they are diversifying into become a bank – not that it isn’t hard. I think new areas through digital banking initiatives perhaps the banks have more to lose in that across retail and commercial banking.” trade-off, so they would do anything to get on board with companies who have such a huge ALPINE EXPANSION user base.” Goldman Sachs has already been successful JPMorgan and Goldman clearly see a Sankar Krishnan, Capgemini in building a stake in the mass market substantial presence in Switzerland as integral through its Marcus brand. JPMorgan to tapping into any growth in the European However, he notes that those who are meanwhile closed down its own digital bank, market. Research by GlobalData has found keen to gain some international exposure Finn, only a year after rolling it out in the US. that 71% of the Swiss population is affluent, increasingly look to a third provider, usually JPMorgan has, however, recently launched with a 12% increase in the emerging affluent in the UK or US. Therefore, while the Swiss a robo-advisory platform, christened You segment projected up to 2022. giants dominate wealth management in their Invest, which offers investment in the bank’s Krishnan adds: “Switzerland continues to home country, it seems the pie is big enough ETFs. There has also been much talk of be the largest market for wealth management, to be shared around. Goldman Sachs doing the same, possibly although there has been a slight decline in “JPMorgan and Goldman bring a lot of integrating it into its existing digital brand. market volumes as Singapore and Hong Kong versatility to wealth management banking in “Goldman launched Marcus as an entrée pick up volumes as a response to the growth Switzerland, given that the Swiss economy into the retail and mass affluent market and in millionaires in Asia.” is doing well and there is a significant rise in so likewise is wanting a piece of the vanilla JPMorgan and Goldman currently manage millionaires around the world especially in de-risked action,” Renardson says. $522bn and $391.8bn, respectively, according Asian and African regions,” Krishnan says. “JPM remains firmly in the investment banking camp and is doing just fine, but you can be sure there will be an aggressive strategy demand for Swiss banking has never been in wealth management to buy market share.” so strong, and Goldman and JPMC are MORE US MUSCLE? looking to increase their client coverage It will not just be the Swiss banks keeping a close eye on the US wealth managers in Switzerland. Other major US banks – Citi, to GlobalData and PBI’s latest Global Private “As such, the demand for Swiss banking Morgan Stanley and Bank of America – Wealth Managers AuM ranking.These sums has never been so strong, and Goldman and already have a presence in the country, and trail Credit Suisse’s $770bn figure, and are JPMC are investing in Switzerland, looking to the question will be asked: will they too boost dwarfed by UBS’s jovian $1.046trn. Added to increase their client coverage.” their alpine operations? this, the latter claims to bank at least some of These other US behemoths will be looking the wealth of 80% of Asian billionaires, and GOING MASS MARKET? closely at JPMorgan and Goldman’s Swiss roughly half of Europe’s. bet. Other US banks will also be keeping tabs A key client base for UBS and Credit Where Goldman and JPMorgan may look on the performance of smaller Swiss wealth Suisse is in Germany, where HNWs often to steal a march over the likes of UBS and managers, which are increasingly proving to look to Swiss banks to manage part of their Credit Suisse is by targeting the mass affluent, be unprofitable (see page 7). wealth, for obvious reasons of proximity and who they may perceive are being overlooked For those that do not already have a Swiss language. by the Swiss giants. Both banks have also presence, these smaller firms present an Hakan Straengh, JPMorgan’s head of demonstrated their desire to broaden their opportunity to enter the market through private banking in Germany, recently told client base through partnerships with the acquisition. Bloomberg that German HNWIs generally world’s biggest tech companies. But for now, all eyes, both Swiss and US, maintain relationships with one local bank Goldman Sachs hit the headlines in April will be focused on JPMorgan and Goldman and one Swiss. when Apple unveiled its new credit card in Sachs. <

www.privatebankerinternational.com | 13

PBI September 372.indd 13 16/08/2019 10:48:24 region profile | the caribbean

region profile: A golden gateway

Could countries circling the Caribbean Sea now be home to more HNWIs than other arguably higher-profile island nations?Oliver Williams takes a closer look at a region where the Golden Visa reigns supreme

here are approximately 120,000 citizenship-by-investment (CBI) schemes, ST KITTS AND NEVIS HNWIs in the Caribbean, whereby countries provide passports in Taccording to analysis of the latest return for investment. This is a no-nonsense On paper, St Kitts and Nevis started what data by PBI. That is roughly the same transaction: passports that allow easy access is now seen as one of the world’s first CBI as Austria, and more than Ireland, New to countries, such as those within the EU, are programs. “But they didn’t actually do Zealand and Taiwan. valued assets for some HNWIs who might be anything,” explains Chris Kaelin, chair of How could a group of small islands, whose restricted by their own nationalities. Henley & Partners, one of the world’s largest economy is reliant on declining agricultural As the CBI idea grows and expands citizenship advisory businesses. exports and seasonal tourism, have more across the Caribbean Sea, more and more “They were doing this, but not very millionaires than some parts of Western millionaires are calling these islands home. efficiently. I was interested in this, a country Europe you might ask. For most, the answer PBI looks at the region’s various models of where you can invest and they give you lies with Golden Visas, or more correctly, development. citizenship right away.”

14 | September 2019 | Private Banker International

PBI September 372.indd 14 16/08/2019 10:48:25 region profile | the caribbean

caribbean country profiles

British Virgin Islands St Kitts and Nevis Antigua and Barbuda HNIS: 500 HNIS: 15,000 HNIS: na Passport rank: na Passport rank: 26 Passport rank: 29 CI Program: No CI Program: Yes CI Program: Yes

Barbados HNIS: 1,500 Passport rank: 23 Belize CI Program: No HNIS: 5,000 Passport rank: 55 CI Program: No Dominica HNIS: 4,000 Passport rank: 37 CI Program: Yes

St Lucia HNIS: na Passport rank: 32 CI Program: Yes Grenada HNIS: 2,000 Passport rank: 34 CI Program: Yes

No. of HNIs: Including most recent CBI data (where available andor applicable), rounded to the nearest 100

Passport ranking: Based on the 2019 The Henley Passport Index ranking of global passports

Source: PBI, CBI, Henley Passport Index

Kaelin therefore travelled to St Kitts and In return, St Kitts and Nevis was able to warning that “illicit actors” were buying Nevis, two islands under one government, to manage the transition from a sugar-dependent passports “for the purpose of evading US or find out more. economy. “In 2006 when we started, CBI international sanctions or engaging in other What he discovered was a system mired in contributed under 1% of GDP. In 2014, financial crime”. bureaucracy where “you had three different when our contract ended, it was 24% of Until May last year, St Kitts and Nevis also ministries which had to give the right stamps GDP,” says Kaelin. featured on the EU’s blacklist of jurisdictions and it took anywhere from five months to two In July, the St Kitts and Nevis government with low tax-transparency standards. The years to get this through.” claimed that it had earned more than $22m benefits and controversies of St Kitts and In 2006, Henley & Partners started over the past four years from the program. Nevis’s citizenship program would soon working with the then-government of St Kitts However, St Kitts and Nevis quickly reverberate around the Caribbean Sea. and Nevis to formalise its CBI process. In discovered there was a catch to such schemes. so doing, it also helped to create the Sugar While the CBI program provided much- ANTIGUA AND BARBUDA Industry Diversification Foundation, “a kind needed investment into these islands, few of sovereign wealth fund to help the transition investors could actually call the islands home: “The success in St Kitts attracted the of the sugar industry into tourism and light in the 10 years between 2005 and 2015, interest of neighbouring countries in the manufacturing, among other things”, as the population of St Kitts and Nevis rose by Caribbean that wanted to do the same. We Kaelin explains. approximately 6,000, according to World then got a mandate in Antigua to design a The result was the world’s first scalable Bank figures; over the same period, however, new citizenship program from scratch. We citizenship-by-investment program where a total of 10,777 passports were issued under designed all the laws and regulations and an investor could, provided they pass due- the CBI program. everything,” Kaelin continues. diligence checks, be granted a St Kitts and As locals worried about their sovereignty While a St Kitts and Nevis citizenship Nevis passport in return for a lump-sum being sold out, foreign governments started would now set you back a $150,000 investment. Such as passport would provide to fret about whom they were being sold to. contribution to its Sustainable Growth Fund, visa-free access to the EU, in addition to over In May 2014, the US government’s Financial or a $400,000 property, Antigua comes in 100 other countries. Crimes Enforcement Network issued a cheaper at $100,000. 

www.privatebankerinternational.com | 15

PBI September 372.indd 15 16/08/2019 10:48:26 region profile | the caribbean

There is a catch, however: investors have to who may have made their wealth from the spend five days in the country over five years. tourism industry – one of the region’s largest. Though a tiny amount of time, many passport Many also hope to benefit from the island’s purchasers are finding that they are becoming large number of semi-resident HNWIs; these fond of these islands and are spending more currently include UK billionaire Sir Anthony than their allotted time there. Bamford, owner of JCB, and Irish racehorse Property developers are racing to keep owner John Magnier. up with demand. Half Moon Bay is a resort But while Barbados does not currently currently being built in the East of the island, offer CBI, the government might well which will offer 10 “Rosewood Branded consider such a scheme. The sheer number of Residences” for purchase. Developers would billionaires owning properties on the island not disclose the price, but if they are anything would mean it could charge a premium over like Jumby Bay – another hotel and residential the $100,000 currently charged in Antigua development in the north of the island – their and Barbuda. Its passport is also ranked by price would more than qualify their buyers for Henley & Partners as the most powerful in the Antigen citizenship. Chris Kaelin, Henley & Partners Caribbean, providing visa-free access to 161 existence, and although it is no longer quite destinations. BRITISH VIRGIN ISLANDS the case that every Hong Kong 18-year-old Internationally, Barbados is making steps receives a briefcase and ‘a BVI’, in many parts to improve its image. In May this year, the The last few years have not been kind to the of the world they remain ubiquitous.” country was dropped from the EU’s blacklist BVIs. First, the Panama Papers exposé revealed This and other structures have seen an of tax havens after it agreed to remedy massive failures in the country’s anti-money increasing interest by private banks in the concerns regarding the replacement of its laundering checks; this resulted in a $440,000 BVI market. Recently, Liechtenstein-based harmful preferential regimes. administrative penalty levied against Mossack VP Bank opened an office to target offshore Fonseca by BVI authorities. companies, trusts and HNWIs. GOLDEN ISLANDS’ FUTURE A year later revealed exposures of a different kind: in September 2017, Hurricane Irma BARBADOS Many expect it is only a matter of time before ripped through the BVIs causing four deaths richer Caribbean nations such as Barbados and an estimated £3.6bn ($4.34) worth of Barbados does not have a citizenship and BVIs start offering CBI schemes. damage to property and infrastructure. investment program, nor does it have the Traditionally these schemes have been Having seen how citizenship schemes offshore financial reach of the BVIs. Instead, adopted by less-developed countries – can boost damaged economies, the BVI Barbados resembles something like a more Grenada, Dominica and St Lucia also have them – in order to supplement declining agriculture or fickle tourism revenues. Not everybody is interested in the country, However, their adoption by wealthier islands will happen soon, say some. But if every 10th person does something “There are probably about 15 countries around the world that are about to introduce else, it is an enormous investment or expand citizenship or residency programs,” says Kaelin. “I think in 10 years time [investment citizenships] will be the norm government said last year that it would traditional private banking market, with a in most countries. Demand is very high, and consider offering citizenship or residency large number of local and resident HNWIs. on the supply side you have more and more to wealthy investors. It is also planning to This native wealth is evident in the island’s countries offering it.” regularise the large number of expatriates racecourses, polo grounds and vast west coast The next problem for Caribbean countries, who live on the islands, either as employees of mansions. It is also evident in the number of though, is attracting HNWIs – and their financial firms – which make up around 60% private banks that have decided to set up shop complex financial service demands – to of local GDP – or long-time inhabitants such on the island. the islands, rather than just banking their as UK billionaire Richard Branson. RBC first entered Barbados in 2010 with a investment. Kaelin thinks this might change This could be a popular move, given the advisory and securities brokerage office. That over time. “Not everybody is interested in the number of structures available to wealthy office has since been ramped up to offer a full country,” he notes. “But if every 10th or 50th investors. Among these is the British Virgin suite of services, including private banking. person does something else, it is an enormous Islands International Business Company This was followed in 2015 with an outpost of investment. (BVI Co), which “is still the world’s favourite London & Capital. “And because they are a citizen, their wealth-management vehicle”, according to These foreign outposts of global groups investment is more secure, so maybe they buy Matthew Howson, senior associate at global supplement the local private banking some more property, maybe they even develop offshore legal practice Harneys. economy, which include First Caribbean, J&T a hotel, maybe they buy some businesses, Writing in PBI in May, Howson said: Bank and Trust and Cidel Bank and Trust. maybe they say: ‘Hey, this is a nice place, I’ll “There are around 600,000 BVI Cos in Collectively, these firms cater to HNWIs, move here!’” <

16 | September 2019 | Private Banker International

PBI September 372.indd 16 16/08/2019 10:48:26 feature | conflict resolution

conflict resolution: a guide to handling difficult clients Complex conversations are part and parcel of private banking, but few relationship managers are equipped to deal with them. Oliver Williams speaks to Emily Griffiths-Hamilton, author and conflict resolution coach, about how to deal with difficult clients Emily Griffiths-Hamilton very advisor dreads the late-night It is only through face-to-face This is one of the most complex issues of phone call from a client. A panicked communication where you are able to see the conflict resolution, says Griffiths-Hamilton, Eclient equals a panicked advisor. subtle clues. and rarely is it a straightforward process. Emily Griffiths-Hamilton, family enterprise “I am watching for not only what’s being Firstly, the elephant is often not quite what it advisor, conflict resolution coach and author, said but what’s actually happening at the may first seem. recommends advisors to think twice before table, the way people react – whether they get “We all have elephants, but often it’s one of answering such phone calls, however. defensive or they shut down. There are subtle those multi-coloured elephants. You have to “Firstly, I will probably not answer a call clues,” Griffiths-Hamilton explains. figure out what you’re dealing with.” at 10 at night,” she says in conversation with If someone is fearful of speaking face That’s the first step: understand the nature PBI. “But if somebody were to call me at 10 to face, then maybe seek a facilitator or of the beast, and this takes time. o’clock at night to say something that I’m not resolution coach, she recommends. “I don’t believe it does anyone any good qualified or comfortable in doing, I would jumping right off and addressing those issues; say ‘talk to this person’, or give them an You do not need to be a psychologist. In you don’t have the tools,” Griffiths-Hamilton alternative.” fact, it is better not to be one explains. “When you have an elephant in the But this is just one of many scenarios when Despite the subtle psychologies displayed room, it is like having a boiling pot of sauce relationship managers are forced into positions through face-to-face meetings, it is better not with the lid on. If you go ahead and rip that where they have little training. Advisors to know too much about the complex inner lid off, the sauce is everywhere. qualified to handle investments often find they workings of the human mind. “The first thing I always do is throw the are drawn into difficult conversations over “I’ve seen a lot of research on birth order lid back on the pot. The idea is to have a ownership rights or succession plans. When – where the oldest child will be like this and facilitator in this area to let a little bit out at these become fraught – as they frequently do the youngest child will be like that – and I a time so people feel safe. You have to keep – advisors suddenly find themselves in the role did enough to make me stop reading into this building trust within the group.” of a mediator. because I’m conscious of the concepts of bias,” Here, Griffiths-Hamilton dispenses advise Griffiths-Hamilton says. Look for at the subtleties and details for on how to handle difficult clients. There is a huge danger of unconscious bias signs of a breakthrough through this kind of knowledge, she adds. It can be over family constitutions, ownership Always speak face to face This is where the role of a mediator becomes structures or other issues more trivial, but With private banks and wealth managers more art than science. client conversations seem like they can go on ramping up their digital offerings, clients now “What I see in families doesn’t require for an age; however, look at the details and have the option of speaking with chatbots or psychology,” Griffiths-Hamilton notes. “It just you will start to see minor breakthroughs, advisors via various messaging platforms. requires sensibility and time.” advises Griffiths-Hamilton. But there are some occasions when this is “I’m listening to that subtle shift from the never going to work, says Griffiths-Hamilton. Always deal with the elephant in the ‘I’ and ‘me’ to the ‘we’ and ‘us’. There’s that “Fifty five percent of our communication is room, but do not rush in magic moment. When a family can do that, it face to face, so the best way to communicate is Every advisor has been there, confronted by a can do anything. in person. In communicating, 35% is through particularly large elephant in the room. What “Once we move from the ‘I’ to the ‘we’, our tone of voice and only 7% comes through should you do? Ignore it until somebody then the processes they’re working through – text, where there’s so much room for things addresses it? Or just wade straight in and how to manage as a team, work out succession going sideways.” bring the subject up? plans, etc. – are easier to develop together.” <

www.privatebankerinternational.com | 17

PBI September 372.indd 17 16/08/2019 10:48:27 opinion | bml

what do hnwis look for in a financial services provider? Most HNWIs naturally have higher expectations than other clients. Alpa Bhakta, CEO at Butterfield Mortgages Ltd (BML), outlines what the wealthy expect

from a financial services provider – beyond the obvious Alpa Bhakta, BML he UK financial services industry is BE ATTENTIVE ETHICAL INVESTING anything but static, and since the Tglobal financial crisis, the industry According to BML’s research, 64% of HNWIs Today, the changing ethical landscape means has been in a constant state of flux. are willing to pay more, or achieve lower investors are not just concerned about returns, The rise of financial technology, or fintech, returns, when making a financial decision if capital growth and profit when making a has transformed the way organisations engage they receive a high quality of customer care. financial decision. with their clients and deliver their products. One crucial factor is attention; HNWIs For instance, and scoring on par with At the same time, new lenders and challenger naturally have higher service expectations confidentiality, 74% of respondents to banks are springing up across the market, than others, particularly as they are paying BML’s survey revealed that they are actively increasing competition. premiums for personalised services. Nearly conscious of the impact of their investments These trends offer opportunities, and two-thirds (63%) of HNWIs have changed on wider society. indeed challenges, for financial and providers in the past 24 months because of What this means to each individual professional service providers. Moreover, the lack of attention they received. investor will naturally differ; some will want it emphasises the need for providers to be From the outset, financial service providers to follow investment avenues that support flexible, and adapt to changing market must ensure that they maintain a clear environmental projects, while others will be conditions to ensure they can meet the communication strategy with their clients to more driven towards initiatives that would evolving needs of their clients. This is enable them to effectively address any arising have a positive societal or governmental particularly true of HNWIs, who typically concerns and also offer tailored advice. impact. present a nuanced set of demands not every Consistent communication is particularly Many also consider the corporate social provider can satisfy. important when an HNWI is searching for responsibility policy in place by different But just what are the wealthy and ultra- their ideal service provider; many will expect organisations, and I am pleased to say that wealthy on the lookout for when it comes to several face-to-face meetings before settling on BML has been a leader in this field. The finding the right financial services provider who to work with. Butterfield Group, of which we are a part, to meet their needs? As a prime property proudly serves as a global pilot partner of the mortgage provider dealing exclusively CONFIDENTIALITY IS KEY Seabin Project – an initiative to reduce the with the needs of HNWIs, BML recently amount of waste in the world’s waters. conducted research to answer this pertinent The nature of having an extensive financial The most important lesson to take away question. What we discovered may come portfolio means many HNWIs are seeking from BML’s research is that the quality of as no surprise to many, but it does indicate complete confidentiality when dealing with customer care cannot be overlooked by service where businesses need to direct their focus to their financial matters. providers, particularly when it comes to remain competitive. In fact, three out of four (74%) HNWIs HNWIs. Reigning supreme is the quality of stated that discretion and confidentiality are Indeed, anyone who works closely with customer care received – 77% of the 550 ‘important’ or ‘very important’ factors when it this demographic – or the intermediaries who UK-based HNWIs we surveyed said this comes to choosing a service provider. represent them – will know they typically factor stands as a ‘key consideration’ when Providers cannot, therefore, overlook the expect a very personal, bespoke and attentive considering different providers. importance of guaranteeing discretion. They service from businesses. Quality customer care can mean different must not only take all the necessary steps to This is why I encourage providers to things to different people, which is why ensure that their clients’ data does not fall think carefully about how they can deliver a BML also gauged attitudes towards different into the wrong hands, but they must also valuable service to keep up with the specific, aspects of a service. Below are a few essential assure all current and prospective clients that and changing, needs of their HNWI clientele, considerations that providers should keep in their confidentiality will be a main priority forging long-term relationships built on trust mind in their dealings with HNW clientele. over the course of the relationship. and transparency. <

18 | September 2019 | Private Banker International

PBI September 372.indd 18 16/08/2019 10:48:27 opinion | globaldata

However, as robo-advice can no longer be avoided by the largest wealth managers, IFAs hybrid advice platforms: should not be so oblivious to such innovation. Both GlobalData’s Mass Affluent and Global Wealth Manager surveys show strong appetite for digital services with access to a human adding churn to a advisor, especially among the younger generations. Digital IFAs are only in early stages of market adoption and so are unlikely to fade crowded market away anytime soon. In fact, within 24 hours of MyEva’s launch, Multiply announced a With robo-advisors disrupting the investment industry, it summer release for its own digital IFA. MyEva is already being offered to employers in the was only a matter of time before the financial advice sector retail and public sectors, proving the need for was also affected. IFAs should be careful not to completely such a product. ignore this type of development, writes GlobalData Technology in the wealth industry has once again opened doors for the masses to he launch of, an independent comprises a web app with chatbot capabilities. receive advice and investment management. advice platform MyEva will add an The product is designed to guide people Innovations such as digital IFAs are inevitable, Tadditional layer of competition to through a financial health check, before and although they are unlikely to completely the UK’s already crowded advice market. offering personalised recommendations on take over the industry, they will appeal to With a new kid on the block, automated longer-term savings and investments, among cost-conscious customers. investment services will have to up their other services. Pricing differs for each level of For now, an aversion to high advice fees has game and pay greater attention to the advice service, but there is also a free option. benefited robo-advisors that have been able component, while bricks-and-mortar wealth With robo-advisors disrupting the to attract those willing to forego personalised firms will be pressed to prove their worth. investment industry, it was a matter of advice for automated investment options. Introduced by UK fintech Wealth Wizards time before the financial advice sector was However, offers such as MyEva, which give in July 2019, MyEva is a fully regulated, disturbed. According to GlobalData’s UK customers the knowledge and tools to manage hybrid digital independent financial advisory Independent Financial Advisor (IFA) Survey, their finances and investments independently, platform available through employers and only 6.3% of IFAs are concerned about client- stand to gain market share from both robo- open to the public. The solution currently facing tech or apps entering the IFA space. advisors and traditional IFAs. < Betterment takes on the banking industry While demand for robo-advice has increased, many players continue to struggle to build a client base. Betterment’s launch of a savings account is a step in the right direction, aiding the provider in establishing the valuable main financial institution relationship, saysGlobalData Betterment, one of the largest robo- importance of cross-selling, this comes account offers an annual percentage advisors globally by AuM, is now as little surprise. For example, 43% yield that can reach 2.69% – outdoing introducing a high-yielding savings of US consumers selected their main some traditional players – as well as account, Betterment Everyday savings account as they already had no ATM, account or overdraft fees. Savings. But the US robo-advisor another product with that bank. Yet these are necessary benefits; is not the first to enter the banking Clearly, those with a wide product consumers are loyal to their savings space. Wealthfront has already offering have an advantage, as they are providers, and a startup such as succeeded in this area; its banking able to leverage existing relationships. Betterment needs to go above and services accumulated over $1bn from Betterment’s entry into the banking beyond to tempt people to switch. consumers within a few months of sector, therefore, makes strategic Long-term sustainability is launch earlier this year. sense. Introducing Betterment paramount for robo-advisors. GlobalData’s 2018 Mass Affluent Everyday Savings is an important way Betterment is not the first to introduce Investors Survey shows that only 3% to attract clients and gain a larger share banking services, but it is the largest of US mass affluent investors see a of the consumer wallet. The holistic player to do so. If the move proves robo-advisor as their main investment approach provides the convenience successful – and Wealthfront has provider, while 17% have used one at and simplicity that consumers want. proven it can be – it may prompt more some stage. The product’s benefits are appealing, robo-advisors to follow suit. This could Consumers’ main banks remain despite Betterment earning 0.25% of turn the heads of both robo-advice and the preferred channel, and given the the earned interest on the account. The non-robo-advice users. <

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PBI September 372.indd 19 16/08/2019 10:48:28 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

area name moved from old position moved to new position

Head – wealth management, Europe Roberto Coletta Credit Suisse Head – UHNWI market, Italy Deutsche Bank Italy Sandaire Investment JO Hambro Capital UK Alexandra Altinger CEO CEO - UK, Europe and Asia Office Management Head – private wealth USA Julia Wellborn Comerica Bank Head – wealth management Wells Fargo management Head – corporate finance, Australia Richard Gibb Deutsche Bank Credit Suisse CEO - Australia Asia-Pacific Head – financial services Switzerland Peter Sanderson BlackRock GAM CEO consulting, EMEA Head – private wealth USA Jim Hays Wells Fargo Advisors Wells Fargo Advisors President financial advisors Saudi Arabia Khalid Al Ghamdi GIB Capital Head – investment banking Credit Suisse CEO - Saudi Arabia Christopher Skandinaviska Head – sustainable finance Head – sustainable investment Switzerland Lombard Odier Kaminker Enskilda Banken research research Vice-president – M&A and Head – corporate Switzerland Ebba Lepage Stora Enso Lombard Odier corporate finance sustainability HSBC Global Asseset UK Nicolas Moreau Deutsche Bank Head – DWS CEO Management Shanghai Dasheng China Raphael Qian Financial controller Yintech CFO Agricultural Finance MPMF Fund Ireland Larry Morrissey Management Senior vice-president AMX Ireland Chief compliance officer (Ireland)

20 | September 2019 | Private Banker International

PBI September 372.indd 20 16/08/2019 10:48:30 news | tech and regulation

Malaysia charges 17 Goldman Sachs executives over 1MDB news round-up: The Malaysian government has filed criminal charges against 17 bankers of three Goldman Sachs subsidiaries over their involvement in tech and regulation the 1MDB Malaysian state fund scandal. ABN Amro warns of money- laundering fines The latest technology and regulation news to impact Dutch banking group ABN Amro has hinted private banking and wealth management. Read the at possible fines over money laundering, stories in full at privatebankerinternational.com and made an additional provision of €114m ($127m) for a customer due diligence remediation programme. Northern Trust launches price Morgan Stanley unveils HSBC hit with €300m fine for engine for securities lending sustainable analytics app tax evasion in Belgium US asset manager Northern Trust has Morgan Stanley has introduced The Swiss private banking arm of HSBC has developed a new pricing engine, a new app, which will enable been handed a fine in the region of €300m which is designed to predict clients to incorporate social ($335m) to resolve a number of charges of tax rate-to-loan securities in the and environmental factors evasion in Belgium. securities lending space. into their investment Prosecutors accused the bank of helping Lloyds to roll portfolios. affluent clients in Belgium to evade hundreds The Morgan Stanley of millions of euros in taxes. out robo-advisory Impact Quotient tool enables proposition in 2020 clients to prioritise more than LLB Verwaltung (Switzerland) UK banking group Lloyds is set to 100 social and environmental fined $10.6m on tax evasion introduce a mass market robo-advisory impact factors. Private bank LLB Verwaltung (Switzerland) service for clients next year. has agreed to pay a fine of $10.6m to the US Clients with assets below £100,000 will Digital wealth platform Department of Justice to settle tax evasion have access to the robo-advisory service. secures $12m investment charges. StashAway, a digital wealth management The bank, previously known as Box powers transformation of platform based in Singapore, has raised Liechtensteinische Landesbank (Schweiz), was Assante Wealth Management $12m in a Series B round led by Fidelity accused of helping US clients dodge taxes by Assante Wealth Management (Canada) has International’s investment unit Eight Roads conspiring with a Swiss asset manager. hired cloud content management provider Ventures. NZ enables funds passport to Box to support its digital transformation. Refinitiv and Appway join strengthen Asia presence Through the partnership, the wealth New Zealand has completed preparations manager’s advisers and assistants will gain forces to support onboarding to enable the Asia Region Funds Passport a complete view of their CRM data and Fintech businesses Refinitiv and Appway arrangements, which aims to combine the documents. have agreed a strategic alliance to facilitate the client onboarding process for wealth funds markets of the participating economies. Bitcoin back above $11,000 as managers. Lloyds to pay £140m to end renminbi falls to crisis levels Appway’s client onboarding capabilities feud with SLA will be integrated on the Refinitiv BETA Lloyds Banking Group has agreed to pay Platform, a suite of brokerage £140m ($169m) to Standard Life capabilities. Aberdeen (SLA) to resolve the Morgan Stanley taps issue of terminating a £109bn Box for encrypted funds management contract. document portal China to remove Morgan Stanley has teamed foreign ownership China has seen renminbi fall below CNY7 up with cloud content limits by 2020 to the US dollar, with Bitcoin supposedly management business Box to China is opening up its financial profiting, moving above $11,000 after launch a document-sharing portal services sector to more outside weeks of bearish movement. for clients. competition by scrapping restrictions on “It’s no coincidence that Bitcoin’s surge The new Digital Vault offering enables foreign ownership limits. over the weekend has coincided with clients to share documents including wills, The foreign ownership caps will be Donald Trump’s announcement,” said Simon deeds, estate plans, financial statements removed by next year, a year before the Peters, analyst at trading platform eToro. and tax filings with financial advisers. scheduled date. <

www.privatebankerinternational.com | 21

PBI September 372.indd 21 16/08/2019 10:48:30 business profile | dolfin

business profile: dolfin

Dolfin believes it has found the ultimate solution to marrying technology with the individual service of a bespoke wealth manager. Oliver Williams speaks with Nick McCall, head of wealth management at Dolfin, about bionics and AI Nick McCall, Dolfin

Oliver Williams: Dolfin recently acquired platform that allows clients to manage OW: Will the technology be cost-effective? Falcon Private Wealth, the UK unit of their portfolio. Given that some of these NM: It is already is. Switzerland’s Falcon Private Bank. What ‘robo’ platforms have recently proven was the rationale behind the acquisition? unprofitable or unpopular, how do you OW: What is the future of Dolfin’s Nick McCall: I used to run the Falcon expect Dolfin’s to perform? business model, beyond the technological Private Wealth business in London, and had NM: Some of these platforms have focus? been informally advising Dolfin on building traditionally been retail or mass affluent NM: We’re looking to grow our up their wealth business. ones. I think those markets have struggled international business base, primarily as an I knew that Falcon was looking to divest to make money. emerging markets franchise. its London business for strategic reasons, What Dolfin has been doing is different. We are strong currently in Russia and and that the franchise would be a good Yes, we’re using technology, but we’re Eastern Europe. We have a very strong match with Dolfin’s business model. using it to digitise otherwise very onerous China franchise, which we definitely want Dolfin bought the business through an processes – like onboarding, AML and to expand on. asset purchase, not a legal entity purchase. We’d like to grow the Middle East more, That was finalised in early May this year but it has its challenges with geopolitics. and we’ve had extremely high retention We would like to break new ground in Latin rate with clients since then. America as well. The first touch point we have with many OW: Given the huge number of wealth clients in emerging markets is the UK managers now in London, let alone private very few wealth investor visa. If a client needs to set up a banks, how does Dolfin differentiate itself UK investor visa, whether they are from in a crowded market? managers have their China or another part of the world, we’ll set NM: There is a huge number of wealth the whole thing up for them. managers in London, but very few have own custody and their own custody and execution platform. OW: UK investor visas are incredibly Dolfin does, however, and that means we execution platform popular among Chinese investors right can manage the client’s assets for them and now. What is it about the UK that they also the execution. like so much? It’s unusual for a wealth manager to have NM: When you’re in the private banking that custody and execution capacity, and KYC checks, and client reporting – not to business, you have to follow the it’s a huge benefit because, obviously, you automate the investment advice process, geopolitical waves. then control the whole client experience all which is done by our investment team, If you go back in history, it all started in the way from onboarding to what kind of which offers both discretionary and the 1990s with Saudi Arabian money, and execution you get, as well as the traditional advisory services. then Russia started to be the place money wealth management product. That’s what has made a relationship came out of. The experience is much better. You get manager’s life miserable. If you can make Now China is definitely the next wave. better price discovery and low costs. If that more efficient, you have a happier There are huge amounts of wealth being you can shave away cost from a client’s relationship manager who has more time to created and they will want to diversify portfolio, you’re already ahead of the speak with their clients. outside their own country and the UK is an competition. What this allows you to do from a obvious destination for them. business perspective is manage volume. But I wouldn’t be surprised if we start OW: Speaking of client experience, Dolfin The technology will be used internally, and seeing a lot of inquiries from Hong Kong in is developing an end-to-end technology eventually by institutional clients as well. the near future. <

22 | September 2019 | Private Banker International

PBI September 372.indd 22 16/08/2019 10:48:36 PBI September 372.indd 23 16/08/2019 10:48:38 29th Annual Private Banker International Global Wealth Summit and Awards 2019

11 October 2019 The Westin, Singapore

Share experiences, challenges and opportunities with an unrivalled selection of peers from the private banking and wealth management global community

AMONG THE 2019 SPEAKING FACULTY ARE:

Arjan De Boer Rahul Malhotra Rohit Bhuta Head of Markets, Investments & Managing Director CEO Structuring, Asia J.P. Morgan Private Bank Crossinvest (Asia) Indosuez Wealth Management Pte Ltd,

Rohit Jaisingh Woon Shui Lee Head – Equity Investment Products Managing Director DBS Bank DBS Bank

Visit pbigws.verdict.co.uk now to purchase your pass! #PBIGlobalWealthSummitandAwards

PBI September 372.indd 24 16/08/2019 10:48:39 20x26 PBI2019.indd 1 7/10/19 9:45 AM