www.privatebankerinternational.com Issue 364 / january 2019 PRIVATE BANKER NEXT DESTINATION
PRIVATE BANKERS AND WEALTH MANAGERS PLOT COURSES FOR 2019 FEATURE COUNTRY FOCUS OPINION
Asia: is the party really over How Switzerland is looking Prenups: how they can be for the region’s fastest- to retain its wealth appeal challenged, and how to growing economies? in a turbulent Europe avoid this from happening
PBI January 364.indd 1 08/01/2019 11:19:59 contents this month
COVER STORY NEWS 08 05 / EDITOR’S LETTER 06 / NEWS ROUND-UP 07 / THE BRIEFING • A look back at 2018 in numbers 20 / LIQUIDITY MOMENTS 21 / TECH AND REGULATION 21 / PEOPLE MOVES 22 / AWARD WINNERS 06
2019 FORECASTS
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]
Correspondents: Sub-editor: Director of Events: Mishelle Thurai Nick Midgley Ray Giddings Paul Golden +44 (0)161 359 5829 +44 (0)20 3096 2585 [email protected] [email protected]
Publishing Assistant: 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 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
2 | January 2019 | Private Banker International
PBI January 364.indd 2 08/01/2019 11:20:03 contents january 2018
OPINION 18 / COLLYER BRISTOW Toby Yerburgh, partner and head of family law at London practice Collyer Bristow, looks at whether prenuptial agreements can be challenged in court, and the grounds upon which such an action could be successful 19 / GLOBALDATA The string of scandals that are currently rocking the Australian wealth market are causing some local consumers to renew their interest in robo-advisory platforms, according to GlobalData Financial Services 19 / VICTORIA MOFFETT A distortion in fund fees is leaving HNWIs worse off. With some investors now putting as much money with fund managers as institutions, it is time for a rebalancing of their 12 fees, says Victoria Moffett FEATURES CONFERENCE 08 / 2019 OUTLOOK 16 / PBI SWITZERLAND PBI looks at the year ahead and asks: what A record number of people attended PBI’s will be the biggest changes to private banks Switzerland conference and awards in and their clients? This year we have included December; that meant a diverse debate those managing the philanthropy, domicile, that ranged from Brexit to Bitcoin. Oliver tax and – of course – wealth of HNWIs Williams chaired the proceedings in Zurich 12 / EMERGING ASIA India is facing a contentious election, and China trade tariffs from the US. Is the party over for Asia’s fastest-growing economies? Oliver Williams talks to emerging-market specialists about their prospects for 2019 COUNTRY PROFILE 14 / SWITZERLAND Switzerland remains a popular destination for offshore investments, although fraught relations with the EU and Brexit threaten an industry known for its international appeal. Mishelle Thurai finds out more 08 16
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PBI January 364.indd 3 08/01/2019 11:20:09 HEAR l NETWORK l DISCOVER l CELEBRATE Private Banking and Wealth Management Germany 2019 30th April 2019 l Frankfurt, Germany SHAPE THE FUTURE OF PRIVATE BANKING
Private Banking & Wealth Management: Germany 2019 Conference & Awards brings together private banks, family offices, independent wealth managers and intermediaries in an active discussion of the key issues facing the industry. The informative and inspiring keynote sessions and informal conversations provide setting for you to join other high-profile guests in engaging discussions.
Key Issues l How is the regulation change set to challenge industry practices? l What is the future of Europe without Britain? l How can the private banking industry in Germany rival its neighbours? l Is Germany the traditional wealth hub we all know or will it become the new FinTech centre? l How can robo-advisors present opportunity to traditional wealth managers? l How are FinTech start-ups rivalling the market? l How can firms remain cyber safe and raise their security profile? l Can collaboration between incumbents and FinTechs be the next big thing? l Discovering Germany’s best kept investment secrets l How can banks leverage technology to strengthen the human relationship? l An insight into the next generation and how they are shaping the industry
Gold Partner Lunch Partner Silver Partners Exhibitor
For more details please contact Hannah Leigh on [email protected] or call +44 (0) 20 7936 6689
PBI January 364.indd 4 08/01/2019 11:20:10 0219Timetric_PBI_Ad.indd 1 07/12/2018 09:37 editor’s letter
HEAR l NETWORK l DISCOVER l CELEBRATE Private Banking and Wealth Management Germany 2019 30th April 2019 l Frankfurt, Germany Whatever happened SHAPE THE FUTURE to the tech utopia? OF PRIVATE BANKING Oliver Williams, Editor Private Banking & Wealth Management: Germany 2019 Conference & Awards brings together private banks, family offices, independent wealth managers and intermediaries in an active discussion of the key issues facing the industry. The informative and inspiring keynote sessions and informal conversations provide he streets of Zurich are empty. Not a single Switzerland conferences, about which you can read more setting for you to join other high-profile guests in engaging discussions. private banker is to be seen. The big-name on pages 16 and 17. T brands removed from the rooftops and the Previous speakers at these events have talked about trading floors turned into tech HQs. the demise of Swiss private banking, as its raison d’être – Instead, HNWIs in Switzerland and beyond are logging secrecy – is no longer. Relationship managers, they said, onto their online wealth managers. These robots – driven would all be replaced by robots as fintech disrupts the by algorithms and artificial intelligence – are able to offer industry. better returns than the banks. And lastly, cryptocurrencies would underpin all our Key Issues Even the support of a relationship manager is no longer transactions. HNWIs would be buying crytocurrencies, required by the wealthy. The new wave of fintechs is able argued various speakers, at the very moment the price of l How is the regulation change set to challenge to satisfy the human demands of wealth: intergenerational Bitcoin soared. But Bitcoin has subsequently collapsed, industry practices? transfer, tax advisory, retirement planning and the like. and relationship managers have never been more popular l What is the future of Europe without Britain? Through monitoring the digital footprint of their clients as Swiss private banks continue to expand their assets l How can the private banking industry in Germany – billions of datapoints from social media and browsing under management. rival its neighbours? histories – these ‘robo-advisors’ can pre-empt issues and Just because these previous predictions have been l Is Germany the traditional wealth hub we all know mitigate their effects. reversed does not mean we can ignore them, however. or will it become the new FinTech centre? Concerns of cybersecurity are laid to rest by the Private banking is at the crossroads of complex forces, integration of blockchain technology into every aspect of from trade wars to tech. Only by envisioning extremes can l How can robo-advisors present opportunity to traditional wealth managers? our financial lives. The ledger system is able to prevent we enforce sufficient mitigations. attempts to rob the wealthy, and provides transparency to And so this issue of PBI looks at these and other l How are FinTech start-ups rivalling the market? regulators. issues that will affect our industry over the next 12 l How can firms remain cyber safe and raise their The wide adoption of cryptocurrency has also meant months. Pages 8 through to 11 list different predictions security profile? that cross-border transactions are seamless. HNW from industry experts in everything from markets to l Can collaboration between incumbents and portfolios are now balanced across borders and assets like managing philanthropy. These are not utopias so much as FinTechs be the next big thing? never before, ensuring risk management of a complexity possibilities. Rarely do the two collide. < l Discovering Germany’s best kept investment beyond human comprehension. secrets Except none of that happened. And yet these were the Oliver Williams l How can banks leverage technology to strengthen predictions made at previous Private Banker International Editor, Private Banker International the human relationship? l An insight into the next generation and how they are shaping the industry
Gold Partner Lunch Partner Silver Partners Exhibitor Get in touch with the editor at: [email protected]
For more details please contact www.privatebankerinternational.com | 5 Hannah Leigh on [email protected] or call +44 (0) 20 7936 6689
PBI January 364.indd 5 08/01/2019 11:20:10 0219Timetric_PBI_Ad.indd 1 07/12/2018 09:37 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
Financial advisers brace for The report The State of Digital Investment Aspiriant launches family market downturn next year Management: Adoption and Usage in 2018 office in San Francisco area The majority (77%) of financial advisers by InvestCloud.Inc has found that 68% of predict a market downturn over the next two wealth managers are aware that they need years, with big market correction, geopolitical to improve their digital technology in order uncertainty, and trade war among their key to survive. concerns, according to a report by SEI. Just under half of the investors Of those polled, 33% expect a market interviewed currently use mobile apps to downturn next year, while 44% forecast this manage their investments. This number for 2020. Only 13% of the advisers surveyed is set to increase, even though a large believe the markets are clear of a downturn in proportion of wealth managers are behind the near future. Asked about their main goal on their mobile offerings. for 2019, 25% of advisers said they would focus on retention of HNW clients. Credit Suisse unveils share buyback programme Julius Baer in negotiations with Credit Suisse has secured consent from its Wealth manager Aspiriant has introduced its Santander over Venezuela board to buy back up to CHF1.5bn of its multi-family office services for HNW families Julius Baer Venezuela is in negotiations shares next year. A Credit Suisse buyback is also in the San Francisco Bay area. with Spanish lender Banco Santander planned for 2020, subject to board approval. The family services offering covers asset to transfer its book of clients. The deal The bank is nearing completion of a three- management and reporting, income tax would reportedly be a referral agreement, year restructuring under CEO Tidjane Thiam. compliance and planning, bill pay and enabling Santander to gain access to clients Söderberg & Partners to buy 51% accounting, and retirement. It also includes of the Swiss bank. estate planning, philanthropy and risk, The agreement would enable Santander of Catella’s Swedish business alongside cash and debt management. to relaunch in Venezuela; the bank ended Söderberg & Partners has agreed to acquire operations in the country nine years ago a 51% stake in Catella Bank Swedish Natixis creates new $6.7bn private after offloading its Banco de Venezuela wealth management operations in a deal equity manager holding to the government for €1.05bn. worth around SEK36m ($3.9m). Natixis Investment Managers has combined The move follows a strategic review of three private equity affiliates to launch a Brewin Dolphin to take over the Swedish wealth business. According new firm with $6.7bn in assets. IFA Aylwin to Catella, Söderberg offers “optimal The new Flexstone Partners business UK wealth manager Brewin Dolphin has conditions” for its customers and staff. merges Euro-PE, Caspian Private Equity agreed to purchase Basingstoke-based advisory and Eagle Asia. < business Aylwin for an undisclosed amount. Legg Mason launches Dublin office in Brexit contingency ICG buys Standard Chartered 68% of wealth managers think US-based asset manager Legg Mason has private equity spin-off their firm’s technology is poor launched an office in Dublin as part of its Funds managed by ICG Strategic Equity, a Brexit contingency planning. unit of Intermediate Capital Group (ICG), The new office will house six employees, led have agreed to acquire a majority of Standard by Penny Kyle, from January 2019. The team Chartered’s private equity assets in a deal will focus on investments, finance and risk. worth around £790m. Mirabaud acquires Brazilian asset Canaccord Genuity invests in manager Galloway Family Office Networks Mirabaud Asset Management, the Canadian wealth manager Canaccord investment unit of Swiss asset manager Genuity Group has made a strategic Mirabaud Group, has acquired Brazilian investment in Family Office Networks, asset manager Galloway Gestora de a community of family offices offering Recursos and investment adviser Galloway investment opportunities to wealthy Capital Management. families. <
6 | January 2019 | Private Banker International
PBI January 364.indd 6 08/01/2019 11:20:12 News | the Briefing
the briefing In this issue, The Briefing looks back at 2018 in numbers
The amount lost by billionaires in Asia in 2018 as markets in the region fell. According to Bloomberg, which compiled the data, it is the first time wealth $137bn in the region has dropped since the ranking started in 2012.
The number of fines given to private banks, wealth managers and their parent groups in 2018, as covered by PBI. The largest fine we covered in 2018 was RBS’s $4.9bn payout to the US Department of Justice over misleading investors on residential mortgage-backed securities in the run-up to the financial crisis. 44
The pace of global growth in 2018. UBS says this will slow 0.2% in 2019, which it expects 3.8% to have a negative impact on company earnings.
The number of money managers launching cryptocurrency products in 2018, as covered by PBI. The year started with regular launches of funds and online investment platforms. However, these slowed as the price of Bitcoin fell from its year-beginning highs. 9
The percentage European UHNWIs who are optimistic about stock market valuations, according to JP Morgan Private Bank. Its Private Client Survey has shown that wealthy individuals believe 59% the current market conditions show room for growth.
Awards given out to organisations in the wealth management industry in 2018 by PBI. Our five events around the world – London, Germany, Greater China, Singapore and Switzerland – set a record this year, with more delegates than ever before. 68
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PBI January 364.indd 7 08/01/2019 11:20:15 feature | 2019 outlook
private banking: predictions for 2019 and beyond
PBI looks at the year ahead and asks: what will be the biggest changes to private banks and their clients? This year we have cast the net wider than usual and included views from those managing the philanthropy, domicile, tax and – of course – wealth of HNWIs
PHILANTHROPY Dave Hillyard, philanthropy and In 2019, we expect to see a growing partnerships director, Oxfam demand for forums that allow people to Joanna Walker, head – private discuss their experiences of giving, and help clients, CAF Philanthropy them to think more strategically about where Philanthropists are looking at driving impact and how to donate to generate the biggest from their investments, so there is a growing impact. Donors are increasingly keen to be trend of increasing the impact from traditional involved with Oxfam’s work from design to investments and philanthropy and blending delivery. those two things. Oxfam is committed to listening to and The millennial generation think about learning from our donors, as well as sharing their money in a very different way. Their our findings with the charity sector. In values need to be imbedded in every part of response to feedback, we now offer workshops their lives, and they want to be more actively and training around key issues such as engaged. monitoring, evaluation and learning, which People who make their own wealth think are proving popular with philanthropists. about it very differently; they think about it in an entrepreneurial way. People spend their Udit Garg, head – wealth money in the same way they make it. They’ll management, Sun Global want to see that return in their lifetime using Evidence shows that people’s attitudes are Investments their time and knowledge to make a difference changing: the days of ‘chequebook giving’ There is a growing interest among conscious happen. They’ll leverage their networks are over. We work closely with engaged and investors to seek green investments and HNWIs now are looking at different ways committed individuals, trusts and foundations sustainable finance, and the sector continues to doing things, and one of the ways is to give who generously donate to Oxfam, and it’s to be a large field of ideas that are worth through donor-advised vehicles, an alternative clear that donors want to give more than exploring. to setting up your own foundation. It is a just their money. They are also keen to invest Philanthropy is also picking up among simple and much more cost-effective way [of time and provide their own expertise to help UHNW families, and they are enlisting wealth giving].” Oxfam’s causes. mangers to handle their philanthropic plans.
8 | January 2019 | Private Banker International
PBI January 364.indd 8 08/01/2019 11:20:17 feature | 2019 outlook
Coutts in multiple jurisdictions and consideration MARKETS & INVESTMENTS Philanthropists are increasingly debating the should be given to when best to convert relative merits of charitable foundations that money and/or take tax credits. James Fleming, CEO, Sandaire exist in perpetuity and those that exist for a Finally, the deluge of information limited lifespan – often referred to as ‘spend exchanged under CRS will lead to more down’ foundations. enquiries being opened by HMRC as they Social investing is nothing new, but there seek to understand historic non-UK activity as is no question that social investing has grown well as a continuing focus on those claiming significantly in scale and prominence over non-domicile status in the UK. the past 10 years, with organisations such as Big Society Capital playing a key role in Matthew Hudson, CEO, MJ connecting charities and social enterprises in Hudson the UK with social investment. Exodus from the City is a threat, not a reality. A number of Coutts clients have, in their In or out [of the EU], London is a leading own right, been driving the development centre for asset management – and with good of this market. Investment from HNWIs in reason. social businesses or social investment funds is Personally, I do not foresee any European also becoming more commonplace. country having the ability or infrastructure The outcome of the EU referendum has to ensure a damaging asset-management exposed potential challenges for UK funders migration from the UK. It will take 2019 will bring higher volatility across asset and charities alike. It raises many questions a generation to shift the unparalleled prices, presenting opportunities for capital about how EU funding for the charitable not bound by redemptions or benchmarks. sector will be replaced. The prior 10 years saw significant global Some foundations are also collectively monetary stimulus of unprecedented size and reviewing the potential impact of possible synchronicity. changes in policies or laws, which to date have Over the course of 2018, global monetary underpinned the work of the organisations stimulus is retracting – and not in a co- they support – relating to issues such as ordinated fashion. Moreover, geopolitical climate change, conservation, human rights, events are causing less synchronised growth employment rights or welfare. across economies and raising greater The full impact on philanthropy and idiosyncratic risks. Finally, the dampening of charitable organisations in the UK is yet to be volatility provided by central banks has been seen. removed. Structurally, the depth of market liquidity is DOMICILE & BREXIT a fraction of what it was pre-2008. This means that it takes longer and moves prices further to Lisa Cornwell, director, PwC buy or sell an asset than in the past. This fact Conversation in 2019 will continue to be infrastructure of systems, people and laws that is more relevant today in some asset classes, dominated by the spectre (and reality) of have made the City the global leader. We do like high yield bonds or leveraged loans, which Brexit and the associated risk of a change in not anticipate a meaningful exodus from the have doubled in size. government in the UK. London asset management industry. Additionally, the significant growth in For HNWIs, this means serious discussion Fund managers that pause for a Brexit passive index products and systematic trading about where to base themselves and their break will find themselves playing catch-up. strategies may prove pro-cyclical to market moves – meaning their reaction function may accentuate market trends. I do not foresee any European country We would expect more frequent and more violent ‘air pockets’ in asset prices, as markets having the ability or infrastructure to adjust to flows in an environment of tighter monetary policy. We believe that the rise in ensure a damaging migration from london volatility and desynchronised economies will result in greater re-allocation of assets by large investors – resulting in a larger inventory of businesses in the future, as well as whether We anticipate that passporting will remain in trades going through a now very small door it makes sense to diversify assets to different place during a transition, but not if there is no of broker dealers. This should be viewed as an jurisdictions. transition, when it will fall away. opportunity by UHNW families. A knock-on effect of the political Using a hybrid Luxembourg-London Liquidity is important to address uncertainty is the ongoing volatility of platform can remove the issue entirely, of unexpected spending. However, liquidity currency markets – this will have a real course, meaning that fund managers can should also be viewed as the option to buy impact on individuals managing tax liabilities proceed as planned. assets at distressed prices. We believe the value
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PBI January 364.indd 9 08/01/2019 11:20:19 feature | 2019 outlook
of this option will prove very attractive over Sterling’s recovery in 2017 coincided with This does not bode well for fixed-income 2019. the dollars biggest annual loss since 2003. A assets, where we prefer inflation-linked bonds Capital without constraints will be able recovery back up towards 1.50 and higher for to conventional Treasuries and hard-currency to step in to a true buyers’ market to buy sterling against the dollar, mooted by some Emerging Market Debt over US High Yield, temporarily unwanted – but not broken – well-respected commentators to be seen before where there is an increasing concern coming assets at steep discounts from sellers driven by then end of 2019, perhaps ignores the fact from companies with low interest cover. rule-based constraints on liquidity or portfolio that it is heavily reliant on the prospect of a With the traditional negative correlation composition. It is also important to maintain weakening dollar as well. between equity markets and government a shopping list of desired assets – or work With the pace of rate hikes in the US likely bonds breaking down of late, we have also with an advisor who manages such a list and to slow in the year ahead, it has become the increased our exposure to liquid alternative mindset. fashionable view that the dollar will weaken investments as a source of uncorrelated returns dramatically in that period. Even when there and an important diversifier within portfolios. John Goldie, FX strategist, appears to be an overwhelming consensus – Argentex and often because of this – the FX markets Jeffrey Sacks, EMEA head – Budgeting for 2019, a period punctuated have a surprisingly regular habit of bucking investment strategy, Citi Private so early by the Article 50 deadline is clearly that expectation and doing the opposite. Bank incredibly difficult. Therefore, assuming that the move in the We expect 2019 to be a more challenging year Many banks are forecasting sterling to coming 12 months will adhere to a linear, for global markets. appreciate in the next 6-12 months. Clearly, upward, direction of travel will be a dangerous That said, there are likely to be decent the banks’ base-case outcome is for a workable presumption to take. opportunities on a selective basis, so we are deal to be achieved, and some of the biggest advising our clients to safeguard assets with institutions have suggested that there is only Ed Raymond, head – portfolio more defensive portfolios, while still staying a 30% chance for a ‘no deal’ outcome, but management, Julius Baer exposed to risk assets. concede that if that did happen, sterling As we enter 2019, the world seems a very We estimate around 7% total return in would likely depreciate by approximately different place from a year ago when we had the US dollar for global equities, and 1% for 10%. synchronised global growth and extreme levels global fixed-income. Global growth is likely to The Bank of England took it a step further of market optimism. moderate in 2019 but stay above 3%, and this recently, in suggesting that the damage could Now US-China trade wars, political is likely to be reflected in global EPS growth be as much as 25% for the pound – setting uncertainty in Europe, quantitative slowing from 16% to 8%. We expect the US parity in its sights for sterling and the US tightening, slowing global growth momentum dollar to remain range-bound below its 2017 dollar, a level never seen before for the pair. and heightened volatility have dampened the peak, with likely downside pressure growing Clearly, by the time this publication goes to spirit of investors. later in the year. print, we will be two months from the March- Ironically, and following the recent bout Within equities the stronger relative end deadline for negotiations. Therefore, of price-earnings compression, I believe performance is expected outside the US. Asian investors and companies should be careful of this provides a better base for global equity equities are preferred while Europe ex-UK being overly swayed by a bank’s market view markets to continue their ascent as we enter equities should offer selective opportunities on a tactical basis. Fixed-income offers potential for making with the pace of rate hikes likely to slow, our cash work much harder, especially at the short end of the US yield curve. In addition, it has become the fashionable view that floating rate notes benefit from rising rates, and emerging-market debt – especially in the dollar will weaken dramatically Latin America – offers decent yields relative to reasonable macro backdrops. In addition, we are recommending or opinion, which could easily be obsolete the latter stages of the decade-long bull ideas within three ‘unstoppable trends’: before the end of the first quarter of 2019. market. Markets climb walls of worry, and firstly, getting exposure to Asia’s long- Indeed, up until recently especially, it with a plethora of risk factors raising the term development, increasingly driven feels as if there was an inherent assumption equity-risk premium of global markets, we by consumption, and not yet reflected in in the market that the outcome is rather believe equities will offer better value than benchmark indices. binary – yet clearly, in politics, this is rarely fixed-income in 2019 as these risks abate – Secondly, increasing human longevity is the case. The legal wrangling, and the albeit with higher levels of volatility than we raising spending on healthcare. Along with parliamentary debates, will likely verify this have seen in recent years. the impact of technology in this sector, we in the coming days and weeks, but even We expect the Federal Reserve to continue are finding equity opportunities that should working to the assumption that the deal – in to normalise monetary policy throughout the perform well even as rates rise and as credit its current format, or amended – is agreed and course of 2019 against the backdrop of robust risks increase. ratified, we should be wary of assuming that US economic growth and rising inflationary Finally, we are focused on disruptive digital sterling and the dollar will necessarily trend pressures, although the pace may slow from technologies in areas like robotics and artificial significantly higher in the coming year. what is currently being indicated. intelligence.
10 | January 2019 | Private Banker International
PBI January 364.indd 10 08/01/2019 11:20:20 feature | 2019 outlook
Odi Lahav, CEO, MJ Hudson bond markets, QE slowing or stopping, and the risk of an imminent downturn, and 2019 Allenbridge the sheer size of the passives market – means global economic growth should still surpass that it is unlikely to remain a one-directional that of the post-financial crisis average. We bet, and we are entering market conditions think this suggests earnings and share values which now favour active management and have room to advance. disciplined risk management. Moreover, these But 2019 equity returns could be modest conditions, should they persist, favour many and delivered unevenly. We believe it is alternative investment strategies. appropriate to trim overall equity exposure to The popularity of passives will slowly fade a market weight or benchmark level in global in 2019 as investors find the market volatility portfolios, from a slight overweight level. uncomfortable and look to manage their risk The late cycle is also the time to address exposures. the de-risking of fixed-income portfolios. Reducing exposure to credit risk is a good RBC Wealth Management place to start, because compensation for In our judgment, this very long economic taking those risks is currently minimal and expansion in the major economies has further credit quality has weakened. to run. But evidence mounts that we are in the Infrastructure investment offers the greatest later stages of the cycle. A moderate slowing in near-term opportunity, in our opinion. We believe the market has reached crunch time for passive investing – one of our investment themes for 2018 and the next few We believe it is appropriate to trim years. As the markets look poised to shift into overall equity exposure to a market the next part of the cycle, having seen strong gains in their equity exposures over the greater weight or benchmark level part of a decade, investors will become wary of the risks of being overly passive in their investment approach. economic momentum, rising trade tensions, The global demand for new, refurbished, Market conditions have been extremely and a more complex political backdrop in and replacement infrastructure assets is advantageous for passive investing, but these many countries have made the investment immense, particularly in the world’s two are now changing. A combination of factors skies cloudier. largest economies – the US and China – and – the Fed’s interest rate rises, the return of While we are clearly in the late cycle, the private sector appears destined to play a volatility, the rotations now happening in the reliable leading indicators do not yet point to greater role than ever before. <
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PBI January 364.indd 11 08/01/2019 11:20:25 feature | emerging asia
EMERGING asia: IS THE STAR STILL RISING?
India is facing a contentious election, and China trade tariffs from the US. Is the party over for Asia’s fastest-growing economies? Oliver Williams talks to emerging-market specialists about their prospects for the year ahead
“ his year has been a challenging year in 10, 15, 20 years’ time,” says Norman There is evidence that investors are for my portfolios,” Daryl Liew, Villamin, chief investment officer (private adjusting to this new normal. “The interesting Thead of portfolio management at banking) for Union Bancaire Privée (UBP). thing is, over the last few months, the Reyl Singapore tells PBI. “Asian markets “Its about technology and who’s going to Shenzhen and Shanghai stock exchanges have been hammered one after another.” dominate that landscape.” have been net positive. Which means to say, While there are some macro forces that have This is a view also held by Liew: “My thesis international investors are buying into that; collectively “hammered” Asian markets in on this is it’s not about trade. It’s about tech they’re buying into China right now,” says the last year – notably a strong US dollar and leadership. It’s about intellectual property.” Liew. falling oil prices – the biggest economies have While theories and theses may seem a bit But investors will want to be selective of responded individually. grand to the mere HNW investor, they at least their stocks. The recent arrest of Chinese Growth rates in both India and China have give some indication on the timeline of tariffs. telecoms executive Meng Wanzhou in Canada slowed for different reasons, but outside these But opinion differs as to how this will affect has sent the shares of her company, Huawei, markets there is growth to be found. And even markets. “I don’t see how this can be resolved spiralling. This front line in a tech – not within in the behemoth economies of India any time soon. These tensions are going to trade – war is highly unpredictable. “Nobody and China there are opportunities, if you look remain for quite a while,” says Liew. could’ve predicted this,” says Villamin. hard enough. PBI talks to several emerging “We believe China is going to stabilise. market specialists who have done just that. Maybe it picks up a little bit,” is Villamin’s INDIA: DEMOCRATIC DOOM? assessment for 2019. CHINA: TARIFF-TAINTED Others believe that markets will adjust to Asia’s other major economy, India, is not a new normal. Ewan Thompson, co-head faring much better economically. It may be Trade between the US and China stole the of emerging market equities at Neptune immune to trade tensions, but it is prone to headlines in 2018 as tit-for-tat tariffs were Investment Management, calls this “tariff democracy. labelled a ‘trade war’. fatigue”. He explains: “The China currency India’s 2019 election could be the largest This is overdoing it, say some. “It’s not deprecation has offset the cost of tariffs. Trade democratic undertaking the world has ever about trade, its about who’s going to be the values have been stable. There is an element of seen, as a high turnout is anticipated in the economic and political leader of the world tariff fatigue.” world’s most populous democracy. At the
12 | January 2019 | Private Banker International
PBI January 364.indd 12 08/01/2019 11:20:27 feature | emerging asia
Indian Prime Minister Narendra Modi seeks re-election in April Increased car sales in Thailand are signs of better economic times time of writing, most polls are almost even. “I markets to function unperturbed,” says Udit Orbium. “These trade wars have particular don’t think its certain that [Prime Minister] Garg, head of wealth management at Sun consequences,” he says. “One is, if you look at Modi will get through. One of the things that Global Investments. manufacturing, what you have is outsourcing he’s done is he’s pushed opposition together. out of China into Vietnam.” Whereas in the past they’ve been very THAILAND: A DARK HORSE Vietnam also has a huge consumer potential fractured, they’ve now come together because that has not yet been realised, says Zboinski. of him,” says Liew. Thailand is “Asia’s dark horse” and “one to “There’s this large chunk of the population Added to this uncertainty is a disagreement watch in 2019”, according to Lloyds Private that has entered the job market and are between Modi and the Reserve Bank of India, Bank. earning money and spending that money,” which has seen two of its governors quit in the “Private consumption in Thailand is he says. “It is driving everything – demand past year. So what does 2019 have in store for improving, led by passenger car sales. The for apartments and so on. In five years’ time Asia’s third-largest economy? Thai baht is resilient, and the annual bank we will see a boom in the medical centre. All “What’s changed is that income levels are loan growth rate is on the verge of rising above those 24- and 25-year-olds will settle down rising,” says Gaurav Narain, head of equities 10%, while non-performing loans are less and start families.” at Ocean Dial. “That means a consumer than 3% of the total,” Lloyds Private Bank economy whose growth is not yet realised.” said in its annual Investment Outlook. AND THE REST GDP matters here, says David Cornell, “I think Thailand is a very interesting CIO and MD at Ocean Dial. “The point market,” Alvin Lee Han Eng, head of group While China, India, Vietnam and Thailand about that is it is consumption coming off a wealth management at Maybank Bhd, all have risks and opportunities of their own, very low base,” he explains. “GDP per capita recently told PBI. “Thailand is one of the they are often in sync with the other Asian is $2,000; Mexico’s is about $8,000. India is only markets in the region that is not part of emerging markets absent from this article. All today where Mexico was 36 years ago, but its CRS [Common Reporting Standards] so a lot are watching the US dollar as it sets the scene population is tenfold.” of discerning, tax-savvy investors do want to for local currencies, but for how much longer? And while “India’s large-cap stocks have a move some money there. Two experts provide their “de’s”: lot of obstructions”, according to Liew, small “The one caveat is Thailand has quite a lot Liew speaks about “de-dollarisation”, and mid-caps are holding up. of coups. But it’s a way of life.” explaining: “The fact that the US is slapping “Mid-cap stocks over time tend to sanctions on Iran and on Russia is actually perform better than large cap stocks,” agrees VIETNAM: TRADE WINNER? pushing them away from the dollar and Cornell. “Since 2003, India mid-caps have forcing them to look for alternative currencies, compounded at 17.7% in dollar terms every While trade tariffs between the US and China which is one positive on the renminbi.” year for the last 15 years. That compares with have met with scorn in much of Asia, that is The outcome of this, Liew believes, will China at about 7.7%, Brazil at about 11%, not the case in Vietnam, says Liew. be that more Asian currencies start to take Mexico at about 12% and South Africa at “It is a potential beneficiary of the reference from the renminbi rather than the about 9%.” trade war,” he notes. “There are a number dollar. But will the double-digit growth continue? of companies that are shipping the Patrice Gautry, chief economist at UBP, Much of this depends on the outcomes of manufacturing out from China to elsewhere believes in a “de-synchronisation” of global April’s election. in Southeast Asia, and Vietnam is one of the markets. “We have different views of “It is imperative that any of the governing few beneficiaries.” monetary policy and different views of the blocks achieve parliamentary majority or a This view is also held by Piotr Zboinski, fiscal situation,” he notes. “So it means a lot of strong working coalition for businesses and senior manager at management consultancy opportunities and a lot of volatilities.” <
www.privatebankerinternational.com | 13
PBI January 364.indd 13 08/01/2019 11:20:30 country profile | switzerland
switzerland: remaining bright during europe’s new Turbulence
Switzerland remains a popular destination for offshore investments, although fraught relations with the EU and Brexit threaten an industry known for its international appeal. Mishelle Thurai finds out how Swiss wealth management could thrive in a challenging new reality
witzerland continues to be one of the $1m in onshore liquid assets – account for an 30% OF ASSETS OFFSHORE world’s most prosperous economies. astonishing 69%. SWhile its GDP grew by 1% in 2017, However, this wealth division is set to There is a growing desire among Swiss figures show that the final quarter of 2017 shift in the next five years, according to HNWIs to invest beyond their alpine resulted in a 0.65% growth, the highest GlobalData. The proportion of mass affluent homeland. According to GlobalData, quarter-on-quarter increase since 2014. individuals will decrease by 2% in the five 29.5% of HNW assets are now held outside Strong financial and manufacturing sectors years between 2017 and 2022. Switzerland. have contributed to this economic boost. A However, GlobalData also anticipates a While general geographic diversification is weakening Swiss franc and an international 12% increase in emerging affluent individuals the primary motivation for Swiss HNWIs to demand for Swiss products – including luxury – those with between $25,000 and $50,000 in take their money abroad, there are a number watches and pharmaceuticals – have helped onshore liquid assets – over the same period. of other factors driving this capital flight. increase exports, but there are concerns This is largely due to a combination of a stock Following the decision of the Swiss National that strained relations with its neighbours market slowdown and rising salaries among Bank (SNB) to de-peg the franc from the – particularly the EU – and declining the country’s middle class. euro in 2015, the value of the currency soared international appeal might have negative as overseas investors rushed to buy what was consequences for the wealth management LIQUID VS ILLIQUID ASSETS widely considered to be a safe denomination. sector in 2019. The SNB has since taken steps to encourage According to GlobalData’s report, most Swiss investors to place their money abroad, in an SWISS HNWIS HNWIs hold the majority of their assets in attempt to weaken the franc and encourage traditional liquid classes such as deposits and export growth. With a population of just 8.5 million adults equities. However, wealth managers also need Germany is the preferred booking centre and GDP figures comparable to neighbouring to be aware that approximately 21% of HNW for offshore wealth. The two countries have a European countries, Switzerland ranks as assets are in illiquid assets. close relationship aided by proximity, language having one of the largest GDP-per-capita The data suggests that demand for illiquid – at least for the German speaking side of figures in the world. Swiss private banks, assets is falling, however. Property is one the country – and Frankfurt’s well-developed therefore, have a ready market of HNW and area that is seeing a decline in HNWI assets. stock exchange. affluent individuals at home. Even though low property prices present an The UK and the US are also attractive hubs GlobalData’s latest Wealth in Switzerland: attractive investment opportunity, it seems for offshore investments. Brexit remains a Sizing the Market report found that Swiss that perception of safety is a major driver concern, however, as current relations between HNWIs accounted for 2% of the total for Swiss HNWIs. Their caution is likely to the UK and Switzerland lie with the bilateral population in 2017, while mass affluent outweigh any potential capital-appreciation agreements currently in place between individuals – those with between $50,000 and opportunities in Swiss property. Switzerland and the EU.
14 | January 2019 | Private Banker International
PBI January 364.indd 14 08/01/2019 11:20:32 country profile | switzerland
A SWISS BREXIT SWISS WEALTH BANDS Number of individuals by asset band (2017) During the two-year transition period after 23.7% the UK leaves the EU – which is currently set to run from 29 March 2019 to 31 December 19.8% 2020 – the Switzerland-EU bilateral agreements will continue to apply to the UK. 14.5% 13.8% 12.9% Yet after this period, new agreements will have to be created which could affect Swiss investments in the UK. 5.01% 5.5% Switzerland has outlined how it might 1.03% 1.78% maintain a close relationship with the UK in 0.08% 0.38% 0.71% 0.78% its Mind the Gap policy, drawn up in 2016.
In this strategy, “the Federal Council pursues $10m+ $25k $3m-10m $50k-75k $25k-50k $1.5m-3m$1m-1.5m$750k-1m $75k-100k the Mind the Gap strategy independently of $500k-750k$300k-500k$150k-300k$100k-150k the framework of the Swiss-EU relationships Source: GlobalData which are for Switzerland of fundamental importance,” the document reads. following the consultation, then private banks Under the data-swap agreement, financial The Swiss Federal Department of Foreign will need to rethink how they offshore their institutions registered with the FTA collected Affairs recently released a Brexit factsheet clients’ portfolios. Trading in EU equities will data on millions of accounts and sent them stating that there have been agreements made suddenly need to be brokered through local to the tax agency. In turn, FTA sent data on regarding Switzerland and the UK. These banks in the EU. Shares in Swiss stocks such around 2 million accounts to partner states will apply after the end of the transition as Nestlé, Novartis and Roche could also be including EU countries, Australia, Canada, period, when bilateral agreements between affected if EU citizens withdraw their funds Guernsey, Iceland, the Isle of Man, Japan, Switzerland and EU are no longer valid for from Swiss exchanges. Jersey, Norway and South Korea. the UK. However, an unintended outcome could In spite of this, and in another gripe with This should provide some optimism for be more alignment between the UK and Brussels, Switzerland was placed on the EU’s HNWIs with offshore investments in the UK, Switzerland if both countries succeed in ‘grey list’ of ‘non-co-operative jurisdictions as Switzerland will be sure to maintain a close distancing themselves from Brussels. Around for tax purposes’ in 2017. The effect this will relationship with the UK regardless of the type a third of Swiss blue-chip stocks are traded on have on investors is uncertain, since there are of deal agreed – or not agreed – with between London-based venues. no penalties associated with the colour coding. the UK and the EU. “Most of the foreign business with Swiss However, it will make global wealth managers equities is taking place via London, and aware of any further tax-transparency pressures EQUIVALENCE DEADLINE from there a lot of business could come back that could jeopardize clients’ investment or to Switzerland, despite Brexit,” daily Swiss exposure. Swiss investors are keeping a close eye newspaper Luzernerzeitung reported. If Swiss stocks suffer due to this or the on Brexit for another – and potentially Swiss HNWIs will be closely watching the ending of equivalence, it will only add another more critical – reason. The ‘equivalence’ Brexit process over the next year as it affects reason for foreign HNWIs to withdraw funds arrangement that allows EU investors to trade their own alignment with Brussels. Private from the country. A Swiss private banking on Swiss exchanges and vice-versa might come banks and wealth managers will have to be sector that is absent of secrecy and tax to an end if Switzerland does not agree to prepared to react accordingly. efficiency, and is unable to offer the types of new ‘institutional agreements’ put forward by returns clients expect, will need to reinvent the EU. This would mean that Swiss HNWIs OFFSHORE WEALTH itself to continue attracting foreign wealth. might only be able to access EU stocks – Differentiation of Swiss private banks and including their favoured Frankfurt Börse – Though Swiss HNWIs are concerned about wealth managers is clearly required. Heritage through local brokers. the continued ability to offshore their wealth, cannot be the only thing to draw HNWIs to The decision on the institutional it is foreign HNWIs placing their money in Geneva or Zurich. Innovation is also needed agreements – which the EU originally asked Switzerland that have earned Swiss private as forward-thinking wealth managers will Basel to ratify in December – has now been banks profit, as well as worldwide recognition. appeal to HNWIs, wherever they are. postponed for six months as authorities hold But the secrecy and tax advantages of However, in Switzerland there is often a public consultation. At the centre of this offshoring wealth in Switzerland came to an innovation in heritage if not a heritage of contentious debate is the protection of local end in 2018, further questioning the future of innovation. As Ian Woodhouse, head of high wages in Switzerland: the EU wants the industry. strategy and change at Orbium told the the end of ‘flanking measures’ which require The long-lasting Swiss banking secrecy audience of PBI Switzerland in December: EU companies to register eight days before ended in October last year as the Federal Tax “The Toblerone is a great example of Swiss sending workers to Switzerland, as well as Administration (FTA), the Swiss tax agency, private banking. If you can differentiate other freedom-of-movement measures. started exchanging bank account data with tax chocolate, you can differentiate anything.” If Switzerland rejects the institutional authorities in other countries for the first time, Swiss private banks need to look back to look agreements and equivalence is withdrawn in an effort to curb tax evasion. forward – and now more than ever. <
www.privatebankerinternational.com | 15
PBI January 364.indd 15 08/01/2019 11:20:32 conference | pbi switzerland
pbi switzerland: the dangers of bold predictions
A record number of people attended PBI’s Switzerland conference and awards in December. That meant a diverse debate that ranged from Brexit to Bitcoin. Oliver Williams chaired the day’s proceedings in Zurich
ow in its third year, PBI latter of these that is most crucial. Banks that example there is a clear return on investment. Switzerland, the annual conference fail to mitigate against a market downturn “Every time a client leaves, it takes roughly Nheld in Zurich every December, will see as much as a 12% decrease in their four months to recover from the asset loss. was forced to address predictions from revenue. It takes eight months to recover from the previous years. revenue loss. Eight months is an eternity,” Technology has not replaced private ACTUAL AI Vidal explained. bankers and nor has Swiss private banking as Using machines to sift through the data an industry collapsed, said Tobias Wagner, Predictions were paramount in Salvador of clients that had previously left the bank, head of the Zurich branch and member of Vidal’s presentation. However, Vidal, who BNP was able identify trends. Vidal explained: the executive committee at Société Générale. is head of marketing and client experience “Somewhere between 13 and 14 months Both were predications from previous PBI at BNP Paribas Wealth Management, made before the client leaves, something happens Switzerlands. predictions of a different nature. with the assets. First there’s a gradual drop, On the contrary, Wagner noted: then all the client’s assets go. It’s the same with “Switzerland still retains the same proportion inflows. Between three and four months they of offshore assets as it always had.” The drop off.” number of assets under management is By employing machine learning, Vidal growing and private banks are even struggling noted, bankers can be notified way in advance to attract talent given the overwhelming Am I able to predict of a client leaving the bank. Whether they can demand for bright bankers. then identify the underlying reasons for client loss is another thing, however. ALL THINGS TO ALL PEOPLE the next product or service that my DIRECTION OF DIGITAL That does not mean that the industry is immune from other pressures, said Wagner. client will want? Subsequent speakers explained how Chief among them is the desire of private integrating better technologies can help banks to offer “all things to all people private banks in other tangible ways. everywhere”; something Wagner calls “broad Only 18% of wealth managers “believe they waterfront strategies”. Private banks with are really successful in digital transformation,” broad waterfront strategies struggle to “Am I able to predict the next product or argued Michael Rogenmoser, chief market differentiate themselves; rather, banks should service that my client will want?” asked Vidal officer in Switzerland and Liechtenstein for focus on their key competencies. before explaining how artificial intelligence Avaloq. This is one of the “strategic levers” that (AI) can do exactly this. Axigo’s Mario Alves provided the audience Wagner advises banks to address to save More interesting, though, was Vidal’s with a real example of a Swiss private bank their bottom lines. Other levers include data example of how AI can foresee when clients that has adopted a wealth tech platform. A analytics, transforming the workforce, and might leave the bank. Unlike some areas of growing adoption of smartphones and virtual preparing for a market downturn. It is the spending on technology, in this particular assistants has increased demand not only
16 | January 2019 | Private Banker International
PBI January 364.indd 16 08/01/2019 11:20:34 conference | pbi switzerland
for accuracy in automation, but for speedy conference opinions responses as well, Alves noted. Two more examples of digital adoption What is the biggest threat that followed in the day’s second session. technology poses to private banking? Millennium Bank’s head of IT, José Uribarri Soares, showed how technology could have a Cyberhacking 38% direct effect on client longevity. System failures shutdown 10% A joint presentation from Kartik Over-digitising/replacing staff 17% Chillakantin from Moxtra and Andrew Losing share to fintechs 19% Trythall from Prospery turned into a live demonstration, as the duo showed how their Being overly intrusive 15% technology could link client to advisor in seconds. What will be the most important strategies Another joint presentation, this time from for gaining and retaining clients? Patrick Odoni and Christophe Brisson from Capital Banking Solutions, showed how Offering innovative products/services 8% private banks could easily and efficiently adopt Providing hybrid digitally enabled RMs 12% technology through building blocks. This is cheaper than other methods, they argued. Using technology to work in a partner ecosystem 12% “The banker has to help the client walk the Using data to offer personalisation and choice 60% walk,” said Mahesh Bulchandani, CEO and director of FinIQ Europe. Only automation Source: PBI can help the banker in that task, Bulchandani said, providing an example of automation at a SWISS PRIVATE BANKING and Liechtenstein and member of the group large multinational private bank. executive board at Avaloq. There was little Having set a benchmark for prediction, no actual innovation in Switzerland, said Unger, AN ETHICAL CHOICE PBI Switzerland event could end without because “there are not enough risk takers”, a some remarks from speakers and panellists on direct affect of having “too many well-paid “How do you ensure a consistent definition the future of private banking in the country. jobs. of sustainability? Nuclear power is cleaner That was the question Ian Woodhouse, head “We’re all living too well in order to provide energy than oil and gas... so helps to build a of strategy and change at Orbium, asked the those push factors to force someone to get out sustainable world,” asked one member of the final panel of the day. and build a startup.” audience. Wagner, back on stage after his morning’s Switzerland, therefore, has to “be active in Their question was directed at Joseph presentation, was quick to list why there was marketing its capabilities”, added Wagner. The Oumarou, assistant vice-president at Banque reason for optimism. “The country is still a Alpine nation needs to show-off its credentials Cantonale de Genève, whose presentation stable hub,” he pointed out. “We haven’t been in order to attract talent from overseas. These focused on impact and environmental, social in a war since 1812. Its very traditional and future and foreign innovators will keep Switzerland and private banking relevant. We’re all living too well in order to PBI’S PREDICTIONS provide those push factors to force While most were upbeat about Swiss private banking, the day’s speakers were noticeably someone to get out and build a startup tight-lipped about cryptocurrency. This is interesting, because last year’s PBI Switzerland conference was dominated by and governance (ESG) investing. safe. The [Cryptocurrency] Etherium was crypto-conversations. The price of Bitcoin The choice of investment was down to the founded in Zug. The sustainable investment soared as speakers debated its merits; just one investor, said Oumarou. Distinctions between community in Switzerland is the most year on, and Bitcoin finds itself almost back sustainable and impact investing and ESG developed.” where it started. remain blurred, however. Vidal was also optimistic, noting that the This time, PBI Switzerland was hosted Asked what would be needed to make country’s future as a hub for fintech was against a backdrop of Brexit. Later that day, sustainable investments mainstream, positive. BNP has set up incubators all over all Brits in the room were glued to the news Oumarou said clarity over definition and the world, he noted, and Switzerland is its as the Conservative Party voted a motion universal ratings would help. While UN most expensive. “But we’re not closing it,” of confidence in its leader, Prime Minister Sustainable Development Goals were adopted he said. The incubator is the bank’s most Theresa May. in the monitoring of ESG and impact successful to date. If anything, Brexit and Bitcoin have shown investments, a more transparent auditing of That was not a view shared by Tobias that the dangers of making bold predictions these investments was needed. Unger, regional manager for Switzerland are not to be taken lightly. <
www.privatebankerinternational.com | 17
PBI January 364.indd 17 08/01/2019 11:20:35 opinion | collyer bristow
signing it, and it will be given little weight. To be on the safe side, plenty of time – two challenging prenups: months minimum – should be allowed to negotiate an agreement. Any attempt to impose harsh terms on a weaker party could seven common backfire. 4. Not meeting reasonable needs of spouse or children If the children’s needs, particularly for objections housing, are not met the agreement is likely to be ignored in that regard – though any provision for housing could be on trust. If Toby Yerburgh, partner and head of family law the agreement leaves a spouse of a wealthy individual penniless then, again, it will be at Collyer Bristow, looks at whether prenuptial vulnerable to challenge. agreements can be challenged, and the grounds For that reason, agreements that simply say upon which this could be successful that each party should keep what they bring into the marriage, with everything else created during the marriage to be divided equally, may ou are lying on your sun lounger significant. Some of the most common well be open to challenge where the marital reaching for your first cocktail of grounds are as follows: assets turn out to be minimal and one party is Ythe day, when your beloved fiancée left with very little while the other’s significant casually mentions that before you take your 1. Lack of proper disclosure wealth is purportedly protected. first sip it would be a good idea if you both Generally, both parties need to disclose their It is for this reason that a bespoke prenup signed that tiresome prenup that he had income, assets, liabilities and other actual is more likely to carry weight than an ‘off the mentioned some time ago. or prospective financial means. If the fact peg’ one. Rather than spoil the moment, you squiggle that you are the beneficiary of a trust is not your signature and then forget all about it. disclosed, or the fact you are likely to inherit 5. Failure to review Fifteen years and two children later when the significant assets is overlooked, you can expect Prenups often contain review clauses that marriage ends in some acrimony you find that, a challenge. both parties forget to implement; that can as a result of that squiggle, far from sharing be fatal to their effectiveness. Even if there is the fruits of the marriage, you are potentially 2. Lack of proper and independent legal no review clause, then arguably the prenup left in something akin to penury compared to advice should be reviewed periodically, and at the the lavish lifestyle you have enjoyed during the If you get your spouse to sign an agreement time of materially life-changing events such as marriage. without the benefit of legal advice, or the legal the birth of children, receipt of an unexpected Can you challenge the terms of the prenup? adviser is your mate, then the validity will be windfall or when the parties move country. And if so, on what basis? This is similar to undermined. Similarly, if your spouse takes the position that Kelly Brack, whose case is advice on the agreement from a conveyancing 6. Contribution currently with the Court of Appeal, claims lawyer rather than a specialist family lawyer, If one party enhances the value of assets in a to have found herself in when her marriage you may well find that this is used to challenge way that is not recognised by the agreement, to racing driver Kenny Brack ended and Mr the agreement. then this could undermine it. For example, if Justice Francis left her with only £500,000 out A party to a prenup needs to be fully one spouse improved the value of the other of her husband’s £10m-plus fortune. informed of what they are giving up. spouse’s property by hard work or, say, a So, what are the grounds on which a Accordingly, they should have proper advice financial contribution, and the other spouse prenup can be challenged? And what should regarding what their position would have been sought to retain the benefit, this might well be someone wanting to rely on one do to try to on a future divorce if there was no prenup. seen as unfair. ensure the challenge is not successful? The prenup should record that such advice has Prenups in England and Wales – the rules been given. 7. Compensation in Scotland are different – have no statutory Similarly, if a spouse gives up something for recognition. However, since the 2010 case 3. Duress the relationship – such as a career to bring up of Radmacher v Granatino they have had If your spouse-to-be is pregnant and penniless, the children – non-recognition of this under an imprimatur of approval by the Supreme and you try to impose a prenup on them that the agreement will undermine its weight. Court, which found that the terms of a gives them very little, it may be claimed that Generally, to give an English prenup the prenup should be given compelling weight by the agreement should be set aside as a result best chance of success, both parties should the court unless it is unfair to do so. of duress. take independent specialist advice well ahead Fairness is often thought to be in the eye Similarly, a spouse who is presented with of the wedding, and be prepared to negotiate of the beholder, meaning opportunities a prenup just before the wedding is likely to its terms to ensure that they are not found to for challenges to an English prenup are be able to show that they were railroaded into be unfair if challenged subsequently. <
18 | January 2019 | Private Banker International
PBI January 364.indd 18 08/01/2019 11:20:35 opinion | globaldata
is suffering from a conflict of interest and corruption. australia: Similar brand damage from the scandals of the global financial crisis caused lasting harm in other markets such as the UK and the US. The rise of robo-advisors such as A reputation Betterment, Wealthfront and Acorns in the US, and a host of neo-banks such as Atom, Monzo and Starling in the UK was facilitated by a collapse of faith in established banking in meltdown? brands. The exact same thing is under way in Australia and, by association, New Zealand, as A string of scandals in the Australian wealth many of the same brands are in operation on either side of the Tasman Sea. market are causing some consumers to renew an The clutch of neo-banks waiting in the interest in robo-advisory platforms, according wings in Australia will have no better time to GlobalData Financial Services to launch recruitment drives, while a range of robo-advisors – none of which have yet broken out into the mainstream – will have t the time of writing, IOOF is the its share price down over a third – and wealth the best conditions yet to draw in AuM. latest wealth manager in Australia managers more generally. Incumbents need to act fast to shore up A to be struck by scandal, with both tarnished brand images. As of yet there is its MD and chair stepping aside to fight PRIZED PLACE no indication that consumers are keen to Australian Prudential Regulation Authority switch, but all it will take is a sudden change (APRA)’s move to have them disqualified Superannuation has a prized place in the in interest rates, putting attractive APRs for from managing superannuation. hearts of many Aussies, so allegations of savings out into the market – unlikely in the Regardless of the outcome of the misuse of client money in this area are short term, to be sure – or a big downturn in proceedings, the damage to IOOF and to particularly damaging. the share market causing portfolio values to public trust in the financial services industry APRA’s accusations – coming as they do tumble – already underway by some measures will have significant long-term implications after a long string of banking and wealth- – to galvanize the market. for how Australians invest. related scandals unearthed by the Royal With these consumer trends already in IOOF is strenuously disputing the Commission into Misconduct in Banking, play, disillusioned consumers will bite the allegations of conflicts of interest, but the Superannuation and Financial Services – bullet and switch to these new, untested, but damage has been done both to IOOF – with give the impression that the entire industry unsullied providers. < Are you paying to be privileged? With some investors now putting as much money with fund managers as institutions, it is time for a rebalancing of their fees, says Victoria Moffett FIA, CERA HNWIs pay higher fund management fees than institutional benefit of bulk capital. However, this is under the premise clients. And when I write “higher”, I don’t mean just a few that a manager is receiving greater assets to manage from basis points here and there: I mean $500,000 if you are an institutional clients. individual on the cusp of being considered UHNW and are In the UK alone there are at least 1,000 pension schemes paying 0.5% more on a very similarly invested fund for 10 with fewer than £25m of assets. If these schemes are years. This is significant. receiving institutional rates, then surely so should successful So what do HNWIs get for their extra fund fees? Well, for individuals? starters there might be tickets to the occasional sporting I feel that the rise of the HNWI into institutional levels of event here and there – who does not love a day out at wealth is something that the investment industry has been Ascot? – but materially, they seem to be getting very little relatively slow to pick up on. Or perhaps I should say, has extra bang for this extra buck. not had sufficient competition to be forced to engage with. Fund managers might claim that $30m is not much when Why would a fund manager offer lower rates than their compared to some of their institutional clients. And to the competitors unless meaningfully asked? The question is, will extent that this is true I can hear an argument that putting the industry decide to innovate from within or leave itself more money with a manager means they can give you the open to external disruption? <
www.privatebankerinternational.com | 19
PBI January 364.indd 19 08/01/2019 11:20:35 news | liquidity moments
wealthinsight liquidity moments
PBI has partnered with leading HNWI consultancy WealthInsight to highlight some of the month’s largest and notable liquidity events – deals that have resulted in net new wealth – and those who have benefited from them
JOHN CONNAUGHTON SELLS STAKE IN IQVIA HOLDINGS STANHOPE ENTREPRENEURS INVESTS IN S4 CAPITAL Deal type Share sale Deal type Private equity Country US Country UK Value ($m) 94.96 Value ($m) 290.87 Beneficiary John Connaughton Beneficiary Sir Martin Sorrell
The Stanhope Entrepreneurs Fund, a growth capital fund managed by John Connaughton, director of pharmaceutical firm IQVIA holdings, Stanhope Capital, has completed its first investment as lead investor has sold a 0.4% stake in the company for proceeds of $94.96m. in a $90m equity raise for S4 Capital (S4). US citizen Connaughton is also MD at money management business S4 is a new digital advertising business set up by Sir Martin Sorrell, Bain Capital, and a trustee at the University of Virginia McIntire who was famously head of WPP, the world’s largest advertising and Foundation and the Young Men’s Christian Association. public relations company.
ULTIMOVACS TO RAISE $81.3M IN IPO KKR & CO. TO INVEST $365.61M IN V3 GROUP Deal type IPO Deal type Private equity Country Norway Country Singapore Value ($m) 81.34 Value ($m) 365.61 Beneficiary Øyvind Kongstun Arnesen Beneficiary Ron Sim Chye Hock
V3 Group, a speciality retailer of luxury lifestyle and wellness Ultimovacs plans to raise around NOK700m ($81.3m) in an initial products in Asia, has announced an investment by private equity public offering (IPO). The company intends to use the proceeds to firm KKR. The S$500m ($365.61m) investment values V3 at fund the development of its immunotherapy cancer drug. approximately S$1.7bn. Øyvind Kongstun Arnesen is CEO of Ultimovacs and chair of the Ron Slim, a Singaporean billionaire who made his first wealth with Oslo Cancer Cluster. OSIM International, founded the group.
LONG-TERM ASSET PARTNERS ACQUIRES GRAINCORP PK RETAIL HOLDINGS ACQUIRES GOOD FOOD HOLDINGS Deal type Private equity Deal type Acquisition Country Australia Country US Value ($m) 2,331.73 Value ($m) 275 Beneficiary Graham J Bradley Beneficiary Matt Turnbull
South Korean retail giant Shinsegae’s discount store chain, E-mart, Private equity firm Long-Term Asset Partners has acquired 100% of has announced that subsidiary PK Retail Holdings is acquiring US Graincorp, an Australian agribusiness company. food retailer Good Food Holdings for $275m. Graham Bradley is chair of GrainCorp. He was appointed to the Order The US-based business owns three food retailing brands – Bristol of Australia in 2009 in recognition of his contribution to business, Farms, Lazy Acres and Metropolitan Market – with 24 stores medical research and the arts. in locations including Los Angeles and Seattle. Matt Turnbull is executive vice-president of Good Food Holdings.
WealthInsight monitors thousands of deals every week, tracking newly created wealth. Its liquidity events tracker details deals of any kind where the beneficiaries are or have become HNW – defined as somebody having a net worth of over $1m excluding primary residence. The liquidity events and beneficiaries are a selection of the most prominent and interesting events picked up by WealthInsight globally.
20 | January 2019 | Private Banker International
PBI January 364.indd 20 08/01/2019 11:20:36 news | tech and regulation/people moves
Pension trustees will be required to run a competitive tender if they intend to delegate investment decisions for more than 20% of news round-up: their scheme assets to a fiduciary manager. The tender should include at least three firms. tech and regulation Goldman Sachs faces criminal charges in 1MDB case Malaysian authorities have filed criminal The latest technology and regulation news to impact charges against US investment bank private banking and wealth management. Read the Goldman Sachs and two former bankers over involvement in the 1MDB Malaysian state stories in full at privatebankerinternational.com fund scandal. The pair facing criminal charges are former Morgan Stanley taps Yext to platform WealthBar Financial Services. MD Tim Leissner, and former Southeast Asia enhance’ digital presence On completion of the deal in January chair Roger Ng Chong Hwa. 2019, WealthBar will continue to run as a US investment bank Morgan Stanley has SFM HK Management fined standalone entity. teamed up with technology firm Yext to for short-selling failures modernise its financial advisers’ digital UBS hit with $15 fine for The Hong Kong office of Soros Fund presence and enhance prospecting work. lapses in AML Management (SFM) has been reprimanded The bank will leverage Yext’s artificial UBS Financial Services has been fined $15m and fined HK$1.5m ($192,000) by Hong intelligence-ready data structure to manage by three US regulators for failures in its anti- Kong’s securities watchdog for failures in the 15,000-plus adviser websites. money laundering (AML) controls. short-selling of Great Wall Motor Company Northern Trust adds private Each regulator – the Financial Crimes shares on behalf of a fund it managed. Enforcement Network (FinCEN), Securities The move follows a probe by the Securities market capability to platform and Exchange Commission and the Financial and Futures Commission, which found that US asset manager Northern Trust has Industry Regulatory Authority – will receive SFM was notified of being entitled to 1.6 added a private market investment offering $5m from UBS as part of the settlement. million bonus shares due to its pre-existing to its new ArcLine Alternatives platform for FinCEN accused UBS of failing to deploy holding of 808,000 Great Wall Motor shares. wealth management customers. an effective AML programme to flag risks for Launched in December 2018, the Credit Suisse faces probe for accounts including traditional brokerage and money-laundering liability alternatives platform enables Northern banking-like services. Trust’s wealth management clients Credit Suisse is being investigated in a access hedge fund opportunities through Poor competition triggers case linked to money laundering by TG dedicated managed accounts. reforms in UK consultancy Investments, an asset manager that handled The UK competition regulator has unveiled money for the bank’s wealthy Turkish clients. CI Financial to buy majority stake reforms to the £1.6trn UK investment Geneva prosecutor Johan Drohas has in Canada’s WealthBar consultancy and fiduciary management already indicted four current and ex-Credit Canadian asset manager CI Financial market, citing competition concerns. The Suisse staff, although no names were revealed. has agreed to purchase a majority stake reforms follow a probe into the sector by the The employees were charged with complicity in local online wealth management Competition and Markets Authority. in fraud and money laundering. < people moves region name moved from old position moved to new position
Head – Sadara Wealth Oman Aziz Al Jahdhami National Bank of Oman Bank Sohar Head – wealth management Management and Private Banking Head – China wealth Co-head – wealth Asia-Pacific Amy Lo UBS UBS management management, Asia-Pacific Head – Southeast Asia wealth Co-head – wealth Asia-Pacific August Hatecke UBS UBS management management Asia-Pacific Autorité des Marchés MD – asset management Switzerland Xavier Parain FundRock CEO Financiers directorate Head – capital introductions, Head – business US Dan Rizzuto Société Générale Lyxor Americas Americas development - Juerg Steffen Henley & Partners COO Henley & Partners Group CEO Region president – Southern US Michele Havens Northern Trust Northern Trust President – West region California EU William Nott M&G Securities CEO; chair Syz Asset Management CEO
www.privatebankerinternational.com | 21
PBI January 364.indd 21 08/01/2019 11:20:36 news | award winners
HEAR l NETWORK l DISCOVER l CELEBRATE Digital Accountancy Forum & Awards London 2019 award winners 3rd October 2019 l London the winners of the 2018 pbi switzerland awards are: Outstanding Customer Relationship Service and Outstanding Wealth Management Technology Engagement Platform in Switzerland (Bank) Shape the Future of Winner: Société Générale Private Banking Winner: BNP Paribas
Excellence in Customer Experience (Technology Outstanding Front-End Digital Solutions Digital Accountancy Provider) Provider (Vendor) The Digital Accountancy Forum & Awards has grown from strength to strength in recent years. Winner: Wealth Dynamix Winner: Wealth Dynamix Starting as an awards reception in 2012, we will be returning to London in 2019 with our industry forum followed by a gala awards ceremony aimed at UK, European and global accounting firm leaders. Outstanding UHNW Offering in Switzerland Outstanding Boutique Private Bank in Switzerland Winner: Reyl & Cie On the 3rd October at the iconic Waldorf Hilton we will once again bring together c-level professionals Winner: Banque Paris Bertrand from accounting firms, regulators and industry bodies, consultancies and advisors, law firms and tech Outstanding Family Office Proposition in vendors to discuss some of the most pressing issues the industry faces today. Switzerland Outstanding Private Bank – Switzerland – International Players Winner: Stonehage Fleming Winner: Citibank Switzerland Outstanding Wealth Management Technology Provider in Switzerland – Middle and Back Outstanding Private Bank – Switzerland – Office (Vendor) Domestic Players Winner: Avaloq Winner: Julius Baer
Event highlights l Deploying and using artificial intelligence for better services in accounting and auditing l Getting on Blockchain – hype or reality for auditing and reporting l Automation of services in accounting and the effect on the businesses l Uncovering the potential of machine learning for your business l Developing future leaders with new technology l Implication of digital transformation on accountancy and their firms’ business model l Cloud adoption by accounting firms: Latest trends and developments l Post GDPR review and key takeaways from small, medium and large firms l Creating real business value through your data strategy
Badge and Knowledge Partner Silver Partner Lanyard Partner Lunch Partner
22 | January 2019 | Private Banker International For more details please contact Hannah Leigh on [email protected] or call +44 (0) 20 7936 6689
PBI January 364.indd 22 08/01/2019 11:20:44 1019Timetric_DAF_Ad.indd 1 12/12/2018 10:23 HEAR l NETWORK l DISCOVER l CELEBRATE Digital Accountancy Forum & Awards London 2019 3rd October 2019 l London Shape the Future of Digital Accountancy The Digital Accountancy Forum & Awards has grown from strength to strength in recent years. Starting as an awards reception in 2012, we will be returning to London in 2019 with our industry forum followed by a gala awards ceremony aimed at UK, European and global accounting firm leaders. On the 3rd October at the iconic Waldorf Hilton we will once again bring together c-level professionals from accounting firms, regulators and industry bodies, consultancies and advisors, law firms and tech vendors to discuss some of the most pressing issues the industry faces today.
Event highlights l Deploying and using artificial intelligence for better services in accounting and auditing l Getting on Blockchain – hype or reality for auditing and reporting l Automation of services in accounting and the effect on the businesses l Uncovering the potential of machine learning for your business l Developing future leaders with new technology l Implication of digital transformation on accountancy and their firms’ business model l Cloud adoption by accounting firms: Latest trends and developments l Post GDPR review and key takeaways from small, medium and large firms l Creating real business value through your data strategy
Badge and Knowledge Partner Silver Partner Lanyard Partner Lunch Partner
For more details please contact Hannah Leigh on [email protected] or call +44 (0) 20 7936 6689
PBI1019Timetric_DAF_Ad.indd January 364.indd 23 1 08/01/2019 12/12/2018 11:20:44 10:23 Retail Banking London 2019 24th April 2019 l London SHAPE THE FUTURE OF RETAIL BANKING
Retail Banking London 2019 brings together high-street banks, new market entrants, financial professionals and industry disruptors in an active discussion of the key issues facing the industry: new regulation, digitalisation and tech innovations that are shaping the future of retail banking.
Key Issues l Open Banking and the main results of the first stage implementation l How Millennials are shaping the future of payments l Artificial intelligence and machine learning, Innovation in branch transformation l Digital security and cyber crime l RegTech - Leveraging technology innovation to comply with regulation l Optimising customer experience in today’s competitive environment l Technophiles v Technophobes - meeting the needs of different customers
Headline Sponsor Silver Sponsors
For more details please contact Hannah Leigh on [email protected] or call +44 (0) 20 7936 6689
1118Timetric_RBI_Ad.inddPBI January 364.indd 24 1 08/01/201926/11/2018 11:20:44 10:17