www.privatebankerinternational.com Issue 369 / june 2019 PRIVATE BANKER HOLDING TOGETHER?

HOW EUROPE IS SHAPING UP IN THE FACE OF REGULATION, DISRUPTION AND BREXIT

FEATURE OPINION REGION PROFILE

Why HNWIs are looking to Tokenisation will transform Tech and sustainable invest in a drug that is still the capital markets for both investing are challenging illegal in most countries investors and companies traditional Nordic players

PBI June 369.indd 1 12/06/2019 10:50:07 contents this month

COVER STORY NEWS 08-16 05 / EDITOR’S LETTER 06 / NEWS ROUND-UP 07 / THE BRIEFING • This month, the Briefing looks at investor sentiment across the UK, Europe and elsewhere as uncertainty continues to grip the world economy 20 / PEOPLE MOVES 21 / TECH AND REGULATION 07

EUROPE

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]

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Correspondent: Publishing Assistant: Melanie Sneddon Asena Değirmenci +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]. 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 | June 2019 | Private Banker International

PBI June 369.indd 2 12/06/2019 10:50:11 contents june 2018 10

14 OPINION 18 / MALTA STOCK EXCHANGE Tokenisation, the creation of digital shares in companies for onward sale, will transform capital markets in Europe for investors and FEATURES companies alike, writes Joseph Portelli 08 / EUROPEAN M&A 14 / CANNABIS executive chair of the Malta Stock Exchange The Deutsche-Commerzbank deal is dead, As more countries legalise cannabis, the 19 / GLOBALDATA but this has not dented private ’ sector is seeing a windfall of investments from As competition rises and revenue growth slows, appetite for M&A activity in Europe. David HNWIs. Mishelle Thurai finds out why so traditional wealth managers aim to find new Craik asks whether we are likely to see more many are placing capital into a drug that is avenues. Goldman Sachs has announced it will consolidation in the market still outlawed in most countries be expanding its service to 12 / INVESTOR VISAS 16 / PBI GERMANY attract the mass affluent through technology A combination of political concerns twinned PBI’s second Germany conference took with the availability of foreign citizenships place in at the end of April. Event means that wealth is crossing European chair Oliver Williams reports back on the borders like never before. But that could all be discussions over the future of about to end, Oliver Williams finds and wealth management in Germany 16 16 REGION PROFILE BUSINESS PROFILE 10 / NORDICS 22 / NYKREDIT Jamie Crawley looks at private banking and Many look to the Nordics as the bellwether wealth management in the Nordic countries, of changing consumer tastes in Europe. where a growing mass-affluent client base, Does this work with private banking? Oliver 10, 22 sustainable investing and a promising tech Williams talks to Lotte Månsson, managing scene are challenging traditional players director at Nykredit Private Banking Elite

www.privatebankerinternational.com | 3

PBI June 369.indd 3 12/06/2019 10:50:17 HEAR l NETWORK l DISCOVER l CELEBRATE Motor Finance: Europe 2019 29th May 2019 • Munich, Germany Motor Finance: Europe Conference and Awards The 5th annual Motor Finance: Europe Conference and Awards leverages insight and expertise from across the industry to deliver a programme that offers you the latest innovations, strategies and technologies driving the industry forward. We will bring together the industry’s thought leaders, experts and challengers to discuss the key factors leading market growth and how to adapt to the ever changing marketplace.

Key Issues

l The impact of digitalisation on the automotive industry l Complying with regulatory requirements l Understanding your customer and adapting in real time l Preparing to meet the requirements of GDPR l Disruptive innovations in car financing l Captives of the future: Old world vs new world l A car retailer’s perspective on the challenges the dealer world faces l Embracing the digital world

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PBI June 369.indd 4 12/06/2019 10:50:18 0519_Timetric_MF_Ad.inddMF January 170.indd 4 1 11/12/201807/12/2018 16:37:33 10:10 editor’s letter

HEAR l NETWORK l DISCOVER l CELEBRATE Motor Finance: Europe 2019 29th May 2019 • Munich, Germany How much is a private Motor Finance: Europe Conference and Awards banker really worth?

The 5th annual Motor Finance: Europe Conference and Awards leverages insight and Oliver Williams, Editor expertise from across the industry to deliver a programme that offers you the latest innovations, strategies and technologies driving the industry forward. We will bring together the industry’s thought leaders, experts and challengers to discuss the key factors leading market growth and how to adapt to the ever changing marketplace. t is a fortunate irony of private banking that while At UBS, the shareholders’ gripe was more than just looking after other HNWIs’ money, it is possible to what the management were paying themselves, it was I become one in the process. also their competence. Just 42% gave their support to But how do your clients feel about that, as escalating senior management in a largely symbolic rejection which fees are often pitted against marginal gains? has no legal ramifications. However, given that 89.7% of For clients who feel as though they are paying over the shareholders voted in favour of their performance at last odds, the danger is they will show their displeasure when year’s annual investor meeting, the vote shows a clear it is too late, by simply walking out and taking their money dissatisfaction of the Swiss ’s leadership by its biggest with them; after all, there is no shortage of other private shareholders. banks courting your wealth if you are high-net-worth. In the UK at least, pay levels might be soon to come How can bankers pre-empt this behaviour? BNP down. An analysis of the Sunday Times Rich List by PBI Key Issues Paribas Wealth Management thinks it might have found found that the 10 wealthiest bank or investment platform a solution in data. Using machine learning algorithms, the owners lost £1.1bn over the last year. The biggest hole in l The impact of digitalisation on the automotive French bank aims to collect the type of data that will send the wallets of the UK’s largest banking owners was the industry warning signals to relationship managers when a client Schroders’ family loss of £1.2bn. These shareholders, at might be about to leave. least, will look to trim the pay of their senior staff. l Complying with regulatory requirements “Somewhere between 13 and 14 months before Will this make clients happier? Ideally, in a win-win the client leaves, something happens with the assets,” scenario, the wealth of both client and banker would rise. l Understanding your customer and adapting in Salvador Vidal, head of marketing and client experience, But as fears abound of another recession – or at least the real time told a PBI conference last year. “First, there’s a gradual end of this economic cycle – private banks must look at how they reward their senior staff. l drop, then all the client’s assets go. It’s the same with Preparing to meet the requirements of GDPR inflows: between three and four months they drop-off.” There are many ways to do this: look at the highest l Disruptive innovations in car financing While BNP tweaks its algos, others might seek to salary verses the lowest, as listed companies in the UK emulate. But there is another, more affordable way to are now required to do. Or look at remuneration as a l Captives of the future: Old world vs new world gauge client sentiment: talk to shareholders – many of correlation to share performance, or profits. Perhaps a better way is to measure it against what clients are getting l A car retailer’s perspective on the challenges whom are often clients as well. There were many grumbles among them as AGM season back from the bank. the dealer world faces came and went last month. Activist shareholders rallied Otherwise, there risks a repeat of the scorn felt towards l Embracing the digital world against executive pay at Schroders, GAM, UBS and others. banks following the 2008 recession. Many HNWIs still Why should senior management be paid so much – UBS’s hold a chip on their shoulder over a decade on. < Sergio Ermotti is one of the highest-earning CEOs in Oliver Williams Europe – when performance or the share price is down? Editor, Private Banker International

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Panel Partners Lunch Partner Exhibitor Table Host Get in touch with the editor at: [email protected]

For more details please contact | Hannah Leigh on [email protected] or call +44 (0) 20 7936 6689 www.privatebankerinternational.com 5

PBI June 369.indd 5 12/06/2019 10:50:18 0519_Timetric_MF_Ad.inddMF January 170.indd 4 1 11/12/201807/12/2018 16:37:33 10:10 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

UK private banking and CFA UK to launch new ESG EFG acquires majority stake wealth families lose £1.1 bn investment qualification in Shaw and Partners Some of the UK’s richest bank owners have CFA UK has launched a new qualification Swiss EFG International has lost a collective £1.1bn ($1.4bn) of their net in ESG investing, which will be available for concluded the acquisition of a 51% stake in worth, according to estimates calculated by investment professionals later this year. Australian business Shaw and The Sunday Times. The Certificate in ESG Investing is Partners, after securing regulatory approval. The £1.1bn is shared between 10 recognised and supported by the Principles individuals and families who made it into The for Responsible Investment, an international Brewin Dolphin to acquire Sunday Times list of the 1,000 richest people network of investors working to put principles Investec Irish wealth arm in the UK. of responsible investment into practice. UK wealth manager Brewin Dolphin has agreed to buy Investec Group’s Irish wealth UBS shareholders vote against Citi Private Bank partners art management business for €44m ($49.1m). top management dealer Sotheby’s UBS shareholders have voted against Perspective opens London the performance of the business’s board office with purchase directors and senior management. Consolidator Perspective Financial Group Just 42% of the shareholders gave has set up its first office in London, with the their support to senior management, in acquisition of Thornton Springer Financial a largely symbolic rejection that has no Services. legal ramifications. However, given that 89.7% of shareholders voted in favour of GLOBAL MOVES their performance at last year’s annual investor meeting, the vote shows a clear Scotiabank to launch global dissatisfaction with the Swiss bank’s Citi Private Bank has joined forces with wealth management line Sotheby’s, a broker of fine art, real estate, leadership by its main shareholders. Canadian lender Scotiabank is set to form a and collectibles, to offer a new programme global wealth management business, which called Art: Beyond Borders. Wealth clients now less loyal will serve as its fourth business line. and demand more flexibility Multi-family office Sandaire Loyalty among wealth management clients Morgan Stanley plans closure is waning as new players enter the market, launches Sandaire Real Estate of Russia business Family office Sandaire is set to continue with clients now having relationships with an US-based investment bank Morgan Stanley to diversify its offering with the launch of average of five different types of provider. is planning to cease banking operations in Sandaire Real Estate. The findings come from a report by EY, Russia in the first quarter of next year. The new business will provide strategic which surveyed 50 industry executives and The bank’s Russian arm said in its annual portfolio, transaction and asset management 2,000 wealth management clients in 26 report that it was becoming tough for of individual property assets and portfolios to countries. businesses in the country to gain access to both new and existing clients. international capital markets as a result of US The international multi-family office had Investec closes online and EU sanctions. platform as costs increase previously expanded its offering with the Investec Group has closed its online launch of and private equity Julius Baer receives licence for investment platform, Click & Invest, as businesses. Joint Venture in Thailand operating costs at the UK and South SCB Julius Baer, a wealth management joint African bank and asset manager rise. M&A ACTIVITY venture of Swiss private banking group The online platform’s operating loss was Julius Baer and Thailand’s Siam Commercial £12.8m ($16.3m) in 2018, slightly less Dolfin seals Falcon Private Bank (SCB), has secured a licence to begin than the £13.5m loss from the previous Wealth purchase operations in Thailand. year. Investec said it had written off Dolfin has completed the acquisition of The business will provide international approximately £6m for the software in its Falcon Private Wealth, the UK unit of wealth management capabilities to Thai 2018 results. ’s Falcon Private Bank. HNWIs and UHNWIs and their families. <

6 | June 2019 | Private Banker International

PBI June 369.indd 6 12/06/2019 10:50:20 News | the Briefing

the briefing This month, the Briefing looks at investor sentiment across the UK, Europe and elsewhere as uncertainty continues to grip the world economy

The share of EMEA UHNW investors who believe equities will be the best-performing asset class over the next 12 months. JP Morgan’s Spring Private Client Survey polled the responses of 800 European participants on financial markets and the global economic and political environment. 39% London is the city with the second-highest investment potential, according to Schroders’ Global Cities 30 index. From third place in 2018, London has overtaken Hong Kong but remains behind top-placed Los Angeles. “The ranking reinforces London’s position as a significant contributor of the UK economy and highlights the UK’s 2 capital attraction as a location for real asset investing,” Schroders said. Half of EMEA investors are optimistic about the European economy, compared to 34% of UK investors, according to a recent UBS survey. Some 44% of UK investors are optimistic about the UK economy. UBS’s James Mulford said: “It is encouraging to see investors more optimistic about their investments than last year, and it is not unusual to see a preference for their home region versus the global economy.” 1 in 2

Support for the EU is at a level only before equalled in 1983, according to Eurobarometer. However, CIO at Lombard Odier, Stéphane Monier said : “A majority of EU citizens now say the bloc is ‘very likely’ or ‘fairly likely’ to fall 1983 apart within two decades” Year-on-year GDP growth in the Eurozone for the first quarter. Unemployment hit 7.7%, its lowest level since the global financial crises. In its May Monthly Investment Outlook, Swiss private bank Reyl said the market remains sceptical and needs confirmation that the economy is about to improve. “We remain tactically neutral €/$ but acknowledge down-side risk, mainly on a technical basis,” it added. 1.2%

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PBI June 369.indd 7 12/06/2019 10:50:21 feature | european M&A

europe: are we about to see a boom in wealth management M&As?

The Deutsche-Commerzbank deal is dead, but this has not dented private banks’ appetite for M&As in Europe. David Craik asks if we will see more consolidation in the market

he last few years have seen a surge Julius Baer continues to have a “very The third option on the list is acquiring a in M&A activity across both North structured list of acquisition targets and particular expertise, capability or team. “Over TAmerica and Europe. potential partners, which are kept constantly the last six years we’ve seen, in particular, According to PitchBook, 2018 marked the on our radar”. US and UK banks like Merrill and, for fifth consecutive year, with a total M&A value example, exiting cross-border wealth exceeding $3trn. WHAT IS DRIVING M&AS? management businesses. That is happening The technology, media and pharmaceutical less currently than it did following the sectors led the way, but desire among private The driving forces behind private banking financial crisis, but it is still going on,” – and mainly Swiss – banks to acquire, M&As fall into three distinct “buckets”, he says. Moreover, there are plenty of merge or partner has also been striking. according to Alexander. opportunities for expanding private banks to Recent examples have included the mergers The first is a classic consolidation or ‘bolt- buy up the foreign operations of another. of Banque Heritage and Sallfort Privatbank, on’ acquisition. “This is a market we already “International wealth management is more Gonet and Mourgue d’Algue, and Vontobel’s exist in and want to scale up. Being bigger expensive to operate now vis-à-vis regulation, acquisition of Notenstein La Roche is increasingly important from a margin and so sub-scale businesses are being sold,” Privatbank. perspective,” Alexander explains. notes Alexander. “Gross margins are under Julius Baer also has a strong M&A “The operating cost base is under pressure, pressure, so to offset that effect you need to be track record. Back in 2013 it bought the and with increasing complexity, scaling up bigger or less complex and more automated. international wealth management arm of to extract operational leverage is key. You There are opportunities in Europe and also Merrill Lynch outside the US excluding also need size to extract more benefit from in Asia as banks look to ‘trim’ their wealth Japan, and in 2016 it acquired Commerzbank automating or robotising your middle- management activities.” International Luxembourg. and back-office processes to make your Another acquisitive European bank is Matthew Alexander, head of corporate organisation more efficient.” Banca Generali which recently snapped development at Julius Baer, explains that both Another strategy is new market entry, up Swiss wealth management firm Valeur transactions had quite different motivations. and usually takes the form of a strategic Fiduciaria. “Bank of America Merrill Lynch was a partnership or joint venture. “We’ve done this “We are trying to create a new long-term fantastic opportunity to build significant scale most recently in Brazil, Mexico and Thailand growth engine by selectively expanding our in several strategic markets by securing a high- onshore. We often take an initial minority geographical footprint,” explains Banca quality franchise that had very good overlap stake and then step up to majority or a Generali CEO Gian Maria Mossa. with our existing locations,” he says. permanent joint venture,” Alexander explains. “The increasing demand from Italian clients “Commerzbank secured us a new European “You seek to partner with the best, most to diversify custody of financial wealth across booking platform. It brought with it the latest experienced player in a new location to give booking centres is the main reason why we are Temenos booking platform and significant you immediate market access, credibility, looking at the Swiss market. We chose Valeur professional expertise, which we adapted to brand recognition and familiarity together. because it is a financial boutique with a strong suit Julius Baer’s requirements.” This de-risks your entry into a new market.” expertise in the private banking industry,

8 | June 2019 | Private Banker International

PBI June 369.indd 8 12/06/2019 10:50:21 feature | european M&A

TOP EUROPEAN M&A ACTIVITY OVER THE LAST 12 MONTHS Announced Status Headline Country Financial Advisor(s) Legal Advisor(s) Value ($m) Emirates NBD to acquire 99.85% stake in Binder Groesswang 22 May 2018 Announced DenizBank from Sberbank Turkey Sberbank Rossii Rechtsanwaelte GmbH 2,783 26 October 2018 Announced VP Bank to acquire assets of Catella Bank Luxembourg 901 Vontobel Holding acquires 100% stake in 24 May 2018 Completed Notenstein La Roche from Raiffeisen Bank Switzerland 705 SaintMichelCo to acquire 100% stake in IFG 25 March 2019 Announced Group UK Goodbody Stockbrokers Mathesons 272 25 February 2019 Announced Caceis to acquire 100% stake in KAS Bank Credit Agricole CIB Stibbe NV 213 Butterfield Bank (Guernsey) to acquire ABN 25 April 2019 Announced Amro (Channel Islands) from ABN Amro Bank UK Rothschild & Co. Allen & Overy 208 Spar Nord acquires 27.05% stake in Danske Carnegie Investment Accura 26 September 2018 Completed Andelskassers Denmark Bank Advokatpartnerselskab 92 Intrinsic Financial Services to acquire 100% 3 April 2019 Announced stake in Lighthouse Group UK Investec Bank DLA Piper UK 60 Alm. Brand Bank acquires activities of Saxo 5 February 2018 Completed Privatbank Denmark Bruun & Hjejle 60 Brewin Dolphin to Acquire Wealth 10 May 2019 Announced Management Business of Investec Group Ireland Rothschild & Co. 49 Source: GlobalData

that allows us to maximise synergies with our as a result of new regulations and more “There are heightened regulatory and current business model. demanding clients. reporting requirements that are increasing “We see benefits in Switzerland from the “We are seeing some banks cleaning up the cost of doing business. However, markets changed market and regulatory context. their portfolios and exiting some markets – with the exception of the end of last year Through Valeur, we also intend to start where they had an onshore presence, as it – have been doing well, which has largely expanding our presence in the country, is expensive to run their subsidiaries, or masked some of these margin and operating developing a real banking hub,” he adds. others who are increasing the size of their challenges. Now there has been an early subsidiaries in markets they consider key, but warning of markets possibly turning, quite a ANALYST VIEWS there has been nothing really sizeable over few management teams in the smaller players €50bn [$55.8bn] – nothing that makes you are starting to think about aligning themselves Analysts are able to take a step back from the go: ‘Wow!’” to some of the larger players. Conversely, workings of an individual institution and look That, he believes, is down to a lack of the mid-large tier of firms are realising that at the wider M&A landscape. So what do targets and shareholder pressure. “Despite meeting their growth targets organically is they see as the main drivers behind this M&A poor financial performance, the shareholders quite a difficult challenge.” move, and will there be more? are patiently sitting and waiting. They are still Upadek believes there are concerns around They are surprisingly phlegmatic about the scared of transactions,” he states. how the wider economy will perform over the current pace of activity, but believe it is ready Kai Upadek, partner and head of wealth next year; no private bank wants to buy at the to accelerate. management at Oliver Wyman, also sees more peak of the market. “[Consolidation] is a model which has worked well over the last 10 years’ bull Gross margins are under pressure, so to market, but if markets go sideways or down, then you begin to quickly enter loss- offset that effect you need to be bigger making territory,” he explains. “There will be correlation of M&A activity to market or less complex and more auromated movement, and we believe firms need to get prepared for an impending downturn over the next 12 to 18 months.” According to KPMG, the number of talk than action among European private There will be no “merger of equals” across private banks in Switzerland fell from 163 in banks. “There is a heightened level of interest the larger banks, Upadek believes. “We’ve seen 2010 to 107 in 2017, and to 105 by the end in M&A, but at present it is being discussed in the past that this hasn’t worked because of of 2018. To Christian Hintermann, partner around boardroom tables rather than being the complexities of merging and integrating and head of financial services transformation translated into activity,” he states. “It is a pre- cultures. Private banking is a very high-touch at KPMG Switzerland, those figures show cursor to what could be an increased M&A business, and having clarity over which sales consolidation in the sector has slowed down activity level going forward.” model will prevail means it is more likely to over the last two years. “Where we are He sees “pockets” of M&A, primarily in the see larger banks picking up smaller firms,” he seeing M&A deals, they tend to be smaller UK, Switzerland and Luxembourg. “The UK explains. independent banks,” he states. and Switzerland have the most fragmented “Indeed, it is another push towards “The rationale for consolidation is clear, markets across European wealth management. consolidation as smaller firms realise that with a still highly fragmented industry, cost There is a long tail of potentially scale- a high-touch client model comes with pressures, shrinking fees, more complexity challenged players there,” he explains. significant cost.” <

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PBI June 369.indd 9 12/06/2019 10:50:21 region profile | nordics

north of $1m: the state of wealth management in the nordics

Jamie Crawley looks at private banking and wealth management in the Nordic countries, where a growing mass-affluent client base, the prevalence of sustainable investing and a promising tech scene are challenging traditional players

he Nordic countries have long distinctive – of which more later. more family-oriented in our approach than possessed a reputation for having Nordic HNW clients are among the most other countries. What we do is really try to Tamong the mostly sternly liberal loyal in Europe. Swedish HNWIs work with engage with the younger generations, and we economic environments in Europe, with an average of 3.4 wealth managers, against the try to educate them on business and estate high tax rates and a strong welfare state continent’s average of 4.1. This is also visible management and so on.” helping to redistribute wealth. to a slightly lesser extent in Norway, where the The current economic outlook in figure stands at 3.7, according to a GlobalData ESG FORERUNNERS Scandinavia looks largely positive, with a survey of the region’s wealth managers. thriving environment for innovation and an This could be attributed to the homely type The Nordic countries are well known for enthusiastic approach to sustainable investing. of service that banks and wealth managers their high top levels of income tax, at 57% in adopt, as Månsson explains: “We are a lot Sweden and 55% in Denmark, with Norway REGIONAL SNAPSHOT

“The Nordic countries are in very good shape,” Lotte Månsson, MD at Danish bank Nykredit’s private banking unit, tells PBI. “Their economies are run very well and very efficiently.” The Nordic countries would certainly appear to be conducive to investment, with We are a lot more Sweden, Norway and Denmark ranking 12th, seventh and third respectively in terms of ease family-oriented in of doing business, according to the World Bank’s 2019 report. our approach than Furthermore, in technology and innovation, Sweden and Denmark came first and second other countries in the European Commission (EC)’s 2018 Innovation Union Scoreboard. According to the EC, Denmark performs notably well in linkages, entrepreneurship and intellectual assets. Sweden’s technology scene is also Lotte Månsson, Nykredit

10 | June 2019 | Private Banker International

PBI June 369.indd 10 12/06/2019 10:50:24 region profile | nordics

the outlier at 39%. making a concerted effort to demonstrate its management offerings, and some 60% of This could suggest that areas such as stern approach to tax evasion. The Danish wealth managers believe they will lose market philanthropy and impact investing are less of tax authority used data in both the Panama share to automated investment services in the a concern for Swedish and Danish HNWIs, and Paradise Papers leaks to crack down on short term. who will believe their social obligation is tax evaders, and was an early adopter of the “Nordic banking is not at the forefront of comfortably taken care of already. Common Reporting Standard. digital transformation, but we do highlight According to the OECD, for example, its importance and are dedicated to creating Denmark is one of the world’s biggest DIGITAL EXPECTATIONS a digital experience for our clients,” Månsson spenders on healthcare and social welfare, says. “ accounting for 28.7% of GDP in 2016. Sweden has established itself as technological The numbers on this front are certainly Despite this, sustainable investing and ESG hub, with the likes of Skype and Spotify being eye-opening. As of November 2018, only appears to be particularly prominent in the fine examples of local companies that have 33.4% of Swedish wealth managers offered an wealthy’s mindset in these countries. Sweden’s become global leaders in their respective fields. automated investment service, despite it being main state pension fund, for example, has cut Sweden is also recognised as one of the most almost universally demanded by Swedish tobacco, coal and oil sands from its portfolios conducive ecosystems for startups, tied with HNWIs. in the past year. Norway’s sovereign wealth fund, one of the world’s largest thanks to the country’s oil reserves, is now completely Nordic banking is not at the forefront divesting its oil and gas shares. “I think sustainable investing is more of digital transformation, but we do prominent in the Nordic countries than elsewhere,” says Månsson. highlight its importance “There’s a strong social aspect to the privilege of being wealthy. Everyone wants to do something with a positive social impact, and our clients are interested in knowing Los Angeles in fourth place in SparkLabs’ This situation is replicated to a certain how they can make a difference in the world, 2017 ranking, behind Silicon Valley, Tel Aviv extent in Norway, where 76.3% of HNW helping to clean up plastic in the ocean and and Beijing. investors seek an automated investment so on. That might not be something HNWIs Sweden owes this position to its service, as compared to just 33.4% of wealth necessarily talk about with their private bank outstanding technical infrastructure, while managers who currently offer one. in the UK or other countries, but it’s very its small size and population make it an ideal Wealth managers report that many HNW common here.” testing ground for new products. investors’ knowledge of financial markets is According to GlobalData, 15.8% of growing, and so the threat of robo-advisors OFFSHORING PREVALENCE HNWIs in Sweden owe their wealth to and the like could be set to grow. technology and telecommunications, one of Månsson adds, “There is certainly demand According to GlobalData, offshoring of the highest proportions in the world. for digital wealth solutions – not necessarily wealth is a prominent factor on the Nordic The prevalence of technology and robo-advisors, but more hybrid solutions wealth landscape. Sweden’s HNWIs are more innovation in Sweden points towards a between automated investment and traditional likely than most to invest outside their home heightened demand for digitally centric wealth relationship management.” < country – around 40% of portfolios are held offshore. nordics and technology However, this has little to do with the country’s high tax on personal income, Proportion of HNW wealth sourced says GlobalData; more common factors are from technology and communications concerns over wider economic stability and Taiwan the weak krona. US In short, Sweden’s HNWIs invest in markets such as the US, the UK and Germany Sweden because of the promise of strong returns China that are unlikely to matched at home. Better Denmark returns, local economic instability and India currency volatility are all far more prevalent Global drivers for offshoring in Sweden than the Canada European average. UK Danish HNWIs, on the other hand, who New Zealand offshore 12.1% of their wealth, are not 0% 5% 10% 15% 20% 25% ashamed to admit that tax concerns are prime motivations for taking money abroad. It is worth pointing out that Denmark has been Source: Globaldata

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PBI June 369.indd 11 12/06/2019 10:50:24 feature | investor visas

why european private banks could become less international

A combination of political concerns twinned with the availability of foreign citizenships means that wealth is crossing European borders like never before. But that could all be about to end, Oliver Williams finds

rivate bankers frequently talk about tensions and a lack of business opportunities. for example, are now looking to get an Irish wealth being more mobile than ever Turkey ranked sixth by number of passport,” says Patricia Casaburi, director at Pbefore. applicants to the UK’s Tier 1 Investor Visa Global Citizenship Solutions. The availability of ‘golden visas’ – in 2018 (see table), though Amoils says citizenship or residency bought through other EU countries and the UAE are popular THE BANKS investment – has allowed those with the destinations for Turkish HNWIs. means to hold multiple passports, while “Some years we see a sudden flow of Ever since the sale of Coutts’ international the globalisation of the finance industry migrants from countries we normally do not arm – which had a presence in Switzerland, means that money can cross international see investor visa applications from, such as Monaco, UAE, Qatar, Singapore and borders with ease. As wealth flowed Iran, Turkey or Brazil,” says Farzin Yazdi, head Hong Kong – to UBP in 2015, there has between countries, so private banks and of Investor Visa at Shard Capital. been a small flow of private banks’ overseas wealth managers have opened international “A few years later we hear and see those operations changing hands. operations to accommodate the spread of countries’ economies beginning to falter and During this year alone, Falcon Bank sold money across Europe. However, some are asking whether this can last, given a series of scandals that have Twice a year you have 260 pages of prompted regulators to look more closely at the international flow of wealth, and the visas new law, so unless you’re focused, it’s which permit it. THE INDIVIDUALS dangerous. There are a lot of risks

Evidence shows that wealthy people often other political uncertainties”. its UK branch to Dolfin, Investec offloaded move country, or apply for a second “A year later, we hear the economy its Irish business to Brewin Dolphin, and citizenship, during periods of political or starting to falter. Suddenly the president gets Vontobel brought Lombard Odier’s US economic instability in their home countries. impeached and the Petrobras story breaks”. private clients portfolio. Take Turkey. A crashing lira and associated According to a survey of applicants to the Others have announced plans to cut back: economic turmoil caused around 4,000, or Tier 1 Visa by Shard Capital – “the last time Julius Baer said it was pulling out of “non- 10% of all HNWIs in the country, to leave anybody surveyed the investor visa space was core markets” after it missed profit targets in 2018, according to wealth researcher New in 2014,” says Yazdi – 60% are attracted to at the end of 2018, and UBS is expected to World Wealth. According to its report, Global the scheme due to political uncertainty in make around 150 job cuts globally this year. Wealth Migration Review, the next-largest their home countries. As well as the buying and selling of onshore wealth movement as a percentage of HNWIs But the UK has its own set of issues, which operations, the same has been happening in was Russia where 6% left the country. are mostly Brexit-associated. “What we the offshore markets. A flurry of deals in April Report author Andrew Amoils tells PBI have noticed, especially with Brexit, is Brits saw J Safra Sarasin buying Lombard Odier’s that people were leaving Turkey due to with European ancestry looking to apply to private banking operations in Gibraltar, NT political and economic problems, religious second citizenship. Brits with Irish heritage, Butterfield & Son acquiring ABN Amro’s

12 | June 2019 | Private Banker International

PBI June 369.indd 12 12/06/2019 10:50:26 feature | investor visas

Channel Islands business and, in a local these schemes. “The OECD has been working for at least two years, rather than 90 days, arrangement, Oak buying International tirelessly to increase due diligence to avoid or provide evidence of the source of those Administration Group in Guernsey. money laundering and tax evasion on the GV funds,” the Home Office said in a statement The last few years have seen similar deal programmes, which seem to have proliferated announcing the changes. flows in other financial centres, as private in Europe,” says Casaburi, whose Global “What has changed is they have brought banks seek to refocus their operations on core Citizenship Solutions advises on CBIs and the source-of-wealth criteria more in line with markets. financial regulations,” explains Yazdi. THE VISAS COMPLEXITY

Two other notable offshore moves have come Though many applauded these reforms for from Deutsche and Danske Bank. Authorities the increased their role in curbing corruption, there is a raided both banks this year, Danske over downside to the increased complexity. While the flows of illicit Russian wealth through visibility has many of the major private banks in the UK its Estonian branch and Deutsche due to previously employed in-house experts to dealings in its British Virgin Islands division, attracted a higher manage the Tier 1 Visa process, few of them which was allegedly complicit in tax evasion. do so now. Both overseas units have since been closed, level of scrutiny “A lot of financial institutions have pulled but the cases highlight the risks of banking out of this space due to the complexity and wealth across borders. Banks and regulators risks associated with the investor visa”, says are upping their AML and due diligence Yazdi. “Organising and managing an investor requirements as a result. But this also adds RBIs. visa account rather than an ordinary account cost. Proving an HNWI’s source of wealth Feeling the pressure, the UK bought – it’s a big difference. You can’t compare the is made harder when dealing with clients forward reforms to its Tier 1 Investor Visa two. originating from countries where information earlier this year. The UK Home Office said it “Twice a year you have 260 pages of new is not freely available. A ‘boots on the ground’ was necessary to “better protect the UK from law, so unless you’re focused on investor due diligence check is very expensive. illegally obtained funds”. visas, it’s dangerous. There are a lot of risks Most applicants to Europe’s Citizenship by “Applicants will be required to prove that associated with complying with immigration Investment (CBI) or Residency by Investment they have had control of the required £2m requirements.” < (RBI) schemes are from Russia, China, Turkey, the Middle East and Central Asian UK TIER 1 INVESTOR VISA: SUCCESSFUL APPLICANTS BY COUNTRY OR ORIGIN countries, according to a report from the European Commission this year. Country Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Total “With applicants from abroad, you can’t China 40 36 46 46 66 234 just check if they’re on the electoral roll. It’s an entirely different onboarding process, Russia 8 13 2 6 6 35 which is very expensive,” says Farzin. US 3 4 7 7 6 27 This process is expected to become harder India 8 5 3 1 17 as regulators ask for more diligence on source Canada 2 3 3 3 6 17 of wealth. “The industry’s increased visibility Pakistan 3 3 3 1 7 17 has attracted a higher level of scrutiny from Saudi Arabia 3 3 8 1 15 the media, policy-makers, and the wider public,” Henley & Partners, which offers Turkey 5 2 5 1 1 14 citizenship and residency planning, said in a Brazil 2 2 8 12 statement to PBI. Australia 1 5 1 1 2 10 Despite an estimated €25bn coming into Japan 3 3 1 1 8 the EU since 2010 on the back of CBIs South Africa 3 2 1 2 8 and RBIs, according to Henley & Partners, Iran 1 1 2 2 2 8 European policymakers are already on the case. In January, the European Commission Hong Kong 7 7 (EC) appointed a “group of experts from Israel 1 3 3 7 member states”, who, by the end of this year, Kazakhstan 1 2 2 2 7 will develop “a common set of security checks Ukraine 2 2 2 6 for investor citizenship schemes, including Singapore 1 1 2 1 5 risk-management processes that take into account security, money laundering, tax UAE 3 1 4 evasion and corruption begin to emerge,” a Qatar 2 1 3 statement from the commission said. 96 92 96 93 130 507 The EC is not the only one looking into Source: UK Home Office

www.privatebankerinternational.com | 13

PBI June 369.indd 13 12/06/2019 10:50:26 feature | cannabis

pot of gold: why hnwis are taking to cannabis

As more countries legalise cannabis, the sector is seeing a windfall of investments from HNWIs. Mishelle Thurai finds out why so many are placing capital in a drug that is still outlawed in most countries

espite the freezing temperatures “We are experiencing the end of marijuana as well as the overall supplemental which graced Toronto, Canada prohibition and the normalisation of cannabis aspect of hemp-derived CBD [cannabidiol], Don 1 April 2019, crowds gathered consumption, for both recreational and about 50-50.” outside for the opening of Honey Pot medicinal use, opening the floodgates for The line between the two is similarly cannabis dispensary to get their fill of capital to invest in farming, manufacturing, blurred at Poseidon. “The fund invests in legalised pot. distribution and branding,” Garibaldi notes. the legal markets and does not draw a firm The store, which has four floors of cannabis Investments in cannabis can be divided into line on recreational verses medicinal,” says and various associated products, is not the two types: medical and recreational. Although Paxhia. “Recreational-use markets open up only store in Canada like this. The craze for larger addressable consumer bases, so this cannabis has hit the world’s markets, allowing is obviously attractive from an investment companies such as Honey Pot, as well as perspective.” others up and down the supply chain, to raise But the rise in cannabis as an asset class capital from individual investors. is curtailed by the legislation surrounding The North American Marijuana Index has various uses of the drug. “I would say there more than doubled since Canada legalised use Deployment of is not necessarily a sudden trend, but a of the drug in October 2018. building momentum on the trend of investing Canada, along with Uruguay, are currently capital from HNW in cannabis,” Paxhia notes. “We have seen the only countries where marijuana is legal. In interest in the space growing, and this started the US, legislations differ from state to state, portfolios is still over the last six years that we have started and so far a handful have legalised the drug. investing in the sector. It is usually driven cautious by policy or regulation events, new states THE GROWING WEED or market openings, or new positions by lawmakers.” “We have seen high-net-worth individuals and family offices investing in the industry supply chains and consumers normally differ MONEY INTO THE POT for years, but this is only increasing,” says between the two, HNWIs often invest in Emily Paxhia, co-MD of Poseidon Asset both. Due to the myriad legislation surrounding Management, which has been managing funds “We don’t have any official funds on the cannabis, many HNWIs are concerned about for cannabis investments since 2014. platform that are investing in cannabis or how they invest. “Deployment of capital This is a result of cannabis being more hemp at the moment,” notes Garibaldi. from HNW portfolios is still cautious due widely accepted in society, adds Tomas “However, most of my clients invest directly to the lack of clarity regarding valuations Garibaldi, vice-president of US-based wealth in cannabis-themed funds away from Bel Air, and legality,” explains Garibaldi. “Many manager Bel Air Investment Advisors. focusing mainly on the recreational aspect of investments are speculative, but there is no

14 | June 2019 | Private Banker International

PBI June 369.indd 14 12/06/2019 10:50:28 feature | cannabis

denying that there is definitely an appetite for more cannabis investment, and more than enough cash sitting on the sidelines looking for potential returns.” Canada is the largest G7 country to have a fully federally legal program, and this has resulted in the opening of a truly global market. Companies listed on the Nasdaq and NYSE make it possible for more investors to participate in the industry. Last year, the MSCI found 100 publicly traded companies with some form of link to cannabis. This has given rise to cannabis- linked ETFs, says Garibaldi. “ETFs are gaining popularity, such as ETFMG, which tracks the Prime Alternative Index and includes some of the biggest names in cannabis on the public side. Tomas Garibaldi, Bel Air Investment Advisors “The reality is that there are many globally, and it is key to have discipline and exclude tobacco companies but not cannabis, peripheral businesses that you can invest in consider the right entry points or structures of however, meaning many ESG ETFs are that touch or support the plant marijuana or investment to fit the type of company,” says unknowingly exposed to cannabis. hemp in some way – growers, manufacturing, Paxhia. Arguably, investors who screen tobacco packaging, dispensaries, real estate, brands, Also at the top of many investors’ minds are from their portfolios should do the same pharmaceuticals, beverages, software and the ethics of investing in cannabis. Although with recreational cannabis, given the well- hardware companies, accounting firms, the stigma that was initially tied to cannabis documented health risks. insurance and so on.” seems to be slowly disappearing, HNWIs Even in the medical arena, cannabis has side Paxhia sees these as major growth stocks, are increasingly taking ESG considerations effects. The opioid epidemic in the US shows which in an area of low returns might stand into account when designing portfolios. The how addiction to painkillers can affect health and social welfare. It is estimated that around 10% of cannabis users become dependent on There are few sectors growing at this the drug. However, Paxhia disagrees: “I don’t see rate, so it can add an attractive potential an ethical reason to not invest in cannabis. Legalisation and regulation have been shown return profile to investment strategies to have positive impacts, based on studies run by states like Colorado. Specifically, legal states or countries tend to see drops in opioid out in an HNWI’s portfolio. “We believe question of whether cannabis is ethical is often addiction and drinking. Most states tend to high-net-worth individuals like adding raised, but less easily answered. see a decrease in illicit market activity.” cannabis as a piece of the growth portion An ESG portfolio cannot invest in an to their portfolio,” she says. “There are few asset that is sold illegally; therefore, the ‘G’ CANNABIS INVESTMENT sectors growing at this rate, so it can add an element of an ESG portfolio will fall down attractive potential return profile to their if a company is selling its cannabis beyond As cannabis investment is still an emerging investment strategies.” countries or states where it is legal. area that has not yet found a footing in the She adds a note of caution about making NEI Investments, a Canada-based provider global markets, it will be interesting to see direct investments, however, saying: “Direct of responsible investment solutions, takes a what the future holds for the commodity. investing is interesting, but there are many case-by-case approach to investing. This is not just a trend to watch in the diligence items that can be easily missed in “For our funds that incorporate ESG Americas, as Garibaldi notes: “Cannabis is this industry if someone does not have the evaluation, rather than screening out cannabis consumed (illegally) almost everywhere in experience to look around corners to see what stocks, we will assess cannabis-related the western world. Attitudes in Asia will be issues might arise due to the nature of a fast- companies based on their capacity and interesting to watch. South Korea, a generally growing, newly emerging market with heavy commitments to satisfy our expectations for conservative country, recently legalised regulatory influence.” managing the previously described material cannabis for medicinal use – although the ESG risks,” NEI Investments recently wrote terms of the legislation are still very strict CANNABIS CONCERNS in a proposition paper, Investing Responsibly in relative to that of the US. Canadian Cannabis. “The growth expectation for marijuana and One aspect of the cannabis industry that The paper compares recreational cannabis hemp demand far exceeds that for wine and concerns investors is its volatility. “Cannabis to tobacco products, which are excluded from alcohol. It is called weed for a reason: it can is one of the fastest-growing industries ESG funds. ESG indexes, such as the MSCI, grow anywhere, and it grows quickly.” <

www.privatebankerinternational.com | 15

PBI June 369.indd 15 12/06/2019 10:50:28 feature | pbi germany

PBI Germany: plotting a future course in frankfurt

PBI’s second Germany conference took place in Frankfurt at the end of April. Event chair Oliver Williams reports back on the discussions over the future of private fter talks stalled between Deutsche ASSET ALLOCATION throughout the world, but it is more pressing Bank and Commerzbank in in Germany than most places. AApril, rumours have circulated While warding off competition, Germany’s “The demographics require new solutions: concerning other potential suitors for wealth managers still have to make a return 50% of our clients might have no successor Deutsche, the latest being UBS. for their clients. so there is nobody to inherit; 25% to 30% But a Deutsche marriage would just be This is challenging given the current of our depositors are leaving us because of the start of a series of mergers in Germany, market outlook, which Gerit Heinz, global people dying,” Kohl told PBI Germany. Michael Kohl, MD of Commerzbank AG chief investment strategist at Just 3% of German UHNW entrepreneurs told PBI Germany, adding: “There is no clear Wealth Management, said was about growth are in the process of transferring their market leader [in Germany]. Everything is deceleration but no recession. “That’s the company to the next generation, according quite segmented”. key message for 2019. Stock markets are as to BNP Paribas’s Entrepreneur Report. Over The German market therefore needs high as they will be this year, but that does a third of UHNW entrepreneurs say their consolidation to ward off competition, not mean you should go out of the markets primary five-year ambition is to enable the Kohl believes. “We talk about intensified completely.” careers of the next generation in their families, competition. We have new entrants in the With German HNWIs currently allocating whether or not that means taking on the markets. Sale and banks are going further around 40% of their wealth to equities, family firm. in their coverage – they are looking for according to GlobalData, that seems unlikely. Despite the best intentions of owners to HNWIs and UHNWIs. And then we have However, it does open the door to other asset pass on their family businesses, however, Kohl new offerings.” classes. “We do see a shift towards real estate believes successors often think differently: These “new offerings” include fintechs businesses,” said Kohl. Property currently “People no longer want to run their family and their robo-advisory platforms. But he is makes up 10% of an average HNWI’s business. They want to sell it because the also seeing French and UK banks entering portfolio in Germany, GlobalData estimates. market is quite good”. the German wealth management market Wealth managers can expect this to increase. alongside their corporate clients. When it comes to managing their wealth, BREXIT BOOM OR BUST? Last year BNP Paribas Wealth Management there is a shift towards fee-based advising, he went on a hiring spree in Germany, promising says. “There is a trend of clients to do it on Up to 2,000 financiers are expected to 150 local hires by 2020 and appointing a new their own.” relocate from London to Frankfurt by 2020 CEO. Low barriers to entry in the wealth according to a study by German bank Helaba. management sector, unlike the retail market SUCCESSION IN GERMANY At least a dozen global banks, including where Deutsche and Commerzbank operate, UBS, Wells Fargo, Citi, JP Morgan, have all mean pure-play wealth managers, like BNP, Managing intergenerational wealth is one announced plans to increase their Frankfurt can easily set up. of the largest issues facing private banks presence.

16 | June 2019 | Private Banker International

PBI June 369.indd 16 12/06/2019 10:50:30 feature | pbi germany

Surely these wealthy financiers will joined by Christof Roßbroich from Avaloq last year. Moneyfarm, one of the largest with supplement banks’ domestic client books? and Leena Iyar from Moxtra, was clear on the operations in the UK and Italy, acquired Frankfurt financiers at PBI Germany think answer: no. German peer Vaamo in November. Then, not. “I think there have been a few more local Germany falls behind Asia and Scandinavia last month, Goldman Sachs invested an hires and maybe some people have moved when it comes to the use of robo-advisors undisclosed sum in Elinvar, a Germany-based here [from London], but it’s not been a big and other fintech products. Even cash is still wealth technology startup. movement”, said one. widely used in the country, despite being Blockchain is another frontier for the Data shows this to be true. Though almost ousted in Sweden, 50 miles north of German fintech market. According to a Goldman Sachs, Citigroup, JP Morgan, Germany’s seaboard. survey by financial consultancy deVere, Morgan Stanley, Bank of America, UBS, Just 7% of German investors have used 68% of HNWIs in the US, UK, Japan and and Deutsche Bank posted a robo-advisors when arranging investments Germany, will invest in cryptocurrency in total of 1,545 jobs for bankers in the UK in in the past year, according to GlobalData. the next three years. But as Invao Group January, just 301 were listed in Germany and However, wealth managers believe it is only CEO and founder Frank Wagner pointed out France, according to Reuters. a matter of time before that changes. When during PBI Germany: “Crytocurrencies do GlobalData conducted its survey in mid- not exclusively mean Bitcoin. And blockchain DIGITAL MANAGEMENT 2018, 57% of Germany’s wealth managers doesn’t necessarily mean crypto.” thought they would lose market share to To Wagner, “blockchain feels a lot like the Asked whether Germany could be considered robo-advisors in the subsequent 12 months. internet did in the 1990s. Nobody knows a market leader in digital banking innovation, This fear has been compounded by several quite how to figure it out, but everybody can a panel comprising Heinz and Kolh, and fintechs entering the German market in the see there is potential.” < Private Banker International Germany Awards Private Banker International’s Germany Awards are designed to identify leading institutions that are setting new standards in private banking and wealth management in Germany. The shortlist of finalists underwent a rigorous selection process and our independent judging panel chose the awards winners:

Unblu Stonehage Fleming swissQuant

Outstanding Private Bank, Germany – International Players Outstanding Front-End Digital Solutions Provider BNP Paribas Wealth Management swissQuant Outstanding Private Bank, Germany – Domestic Players Excellence in Customer Experience (Technology Provider) Berenberg Unblu Outstanding Family Office Proposition in Germany Outstanding Wealth Management Technology Provider Stonehage Fleming Avaloq

www.privatebankerinternational.com | 17

PBI June 369.indd 17 12/06/2019 10:50:31 opinion | malta stock exchange

tokenisation: transforming the capital markets

Tokenisation will transform capital markets in Europe for investors and companies alike, writes Joseph Portelli executive chair of the Malta Stock Exchange

s chair of a European stock a single investor. By pairing yield-hungry which allows entrepreneurs to tap a wider, exchange, you might not expect investors with capital-starved startups, deeper pool of international capital. A me to highlight the financial crowdfunding platforms such as Seedrs and For investors, the ultimate holy grail will be downsides of taking your company public – Crowdcube have helped to raise hundreds of the development of a viable secondary market including the cost. millions of pounds for growth companies. for these tokens. I can see that happening Anything from 7-10% of an IPO can get Now blockchain promises to massively either by leveraging the existing exchange eaten up by adviser fees – for underwriters, expand this fundraising method through ecosystem, or through the establishment of lawyers, accountants, brokers and PR. tokenisation. This involves creating digital standalone token exchanges. For larger PLCs looking to tap a deep shares in companies to sell to investors. These This last solution could see the pool of international liquidity, that can make so-called ‘equity tokens’ offer the same rights development of a cross-border network of sense; for smaller companies, it makes for and protections that ordinary shares provide trading venues where tokens can be bought an expensive endeavour. As a result, fewer – including dividend, voting and ownership or sold, any time of day, and day of the year, companies are coming to market. At the rights – precisely because they are regulated. offering deep liquidity for both companies same time, a wall of private equity money and investors. that needs to be put to work means many I am pleased to say that Malta is playing listed companies are being taken private or its role in making this a reality. In 2018 swallowed up by M&A. the Malta Stock Exchange signed two The results of these two trends are clear memorandums of understanding with to see: the number of public companies Binance and OKEx, two of the world’s has been steadily diminishing. There were tokenisation is not leading cryptocurrency platforms, to develop approximately 3,600 listed firms in the US exchanges to trade tokens. as at the end of 2017, a decline of more than just for startups Importantly, tokenisation is not just for 50% over the last 10 years. startups raising capital for the first time. It I will call this out for what it is: a raising capital for can be used to unlock value on an established weakening of democracy in modern company’s balance sheet, or to make it easier capitalism. Ordinary investors, even high the first time and cheaper for a business to sell debt. net worth investors, are being shut out of I can well imagine a future where a CEO investment opportunities and the healthy might seek to unlock the value of property on investment returns they can generate. In a their balance sheet by tokenising their office low-yield environment and with people living Indeed, earlier this year the UK’s FCA building or factory, or a finance director who longer, that makes it even harder to plan for approved the first STOs, or ‘security token might tokenise a tranche of an upcoming debt retirement or to accumulate wealth for the offerings’. sale in order to widen their investor base and next generation. Building and managing security tokens reduce borrowing costs. Crowdfunding has provided some respite with blockchain technology is a faster and In due time, I believe we will use by offering interesting opportunities for cheaper way to raise money. Post a fund- tokenisation to unlock value in a whole range sophisticated investors that would previously raiser, it also promises lower administration of assets, from real estate to art, forestry, have been the reserve of VC funds and angel and management costs for both companies intellectual property and even fine wines. For investors. At the same time, crowdfunding and their investors. investors this promises a wholesale revolution has provided an alternative source of finance And there are other important advantages in capital, dramatically widening their for promising companies and their founders, over traditional crowdfunding, not least the investment opportunities and helping in no without them having to cede control to transnational aspect of this nascent market, small way to re-democratise finance. <

18 | June 2019 | Private Banker International

PBI June 369.indd 18 12/06/2019 10:50:32 opinion | globaldata

buffers to self-insure against economic and market shocks is unsurprising given the make- wealth managers: up of the global HNW population. According to GlobalData’s figures, 46% of HNW investors have sourced their wealth through some kind of entrepreneurship. In provide liquidity, or many instances, their private and business operations and their financial affairs are highly intertwined. As uncertainty picks up, entrepreneurs will feel the need to increase tie up aum in cash cash holdings as a safety buffer. While wealth managers should ensure that HNW investors are able to meet their Wealth managers need to provide clients with liquidity or see liquidity needs, over-high cash holdings are a more of their AuM tied up in cash, according to GlobalData wealth manager’s worst enemy and generally depress returns given the minuscule APRs. The likes of Goldman Sachs’ securities- NW investors’ growing demand 23.5% in 2015 to just13.2% in 2018. Yet based lending service represent a solution in for cash and near-cash products the data suggests this is changing, with the this context. Goldman Sachs Private Bank Hin light of rising uncertainty majority of industry participants expecting Select allows customers to apply for of poses a challenge to wealth managers. HNW demand to rise. $75,000–25m against securities portfolios of Navigating this means walking a fine line A move into deposit products is welcome at least $150,000 in non-retirement AuM. of addressing customers’ liquidity needs while in that it balances HNW investors’ rising Underwriting is automated, and the loan meeting return expectations without a drop in exposure to alternative investments, which can be repaid at any time, allowing investors fee income. In order to succeed, offering cash in many cases are illiquid and leveraged. to manage liquidity needs more effectively management tools is a must. However, it also has a direct effect on wealth without being excessively dependent on cash HNW investors have had little incentive managers’ fee-earning potential. In addition, and near-cash products. to allocate funds to cash and near-cash wealth managers will struggle to achieve the As global uncertainty is unlikely to subside investments in recent years, with rates at returns clients have become accustomed to in any time soon, HNW demand for liquidity record lows in most of the developed world. the past few years as interest rates remain low. is expected to persist, meaning offering cash According to GlobalData’s Global Wealth But considering the current global management tools and credit is mandatory for Managers Surveys, allocations dropped from economic outlook, a desire to build liquidity any wealth manager. < Goldman Sachs looks to the masses to grow As competition rises and revenue growth slows, traditional wealth managers aim to find new avenues. Goldman Sachs has announced it will be expanding its wealth management service to attract the mass affluent through a technology and human-influenced investment platform Goldman Sachs’s first-quarter 2019 letting them look to other segments with a minimum of £15,000 to invest – investment management revenues for growth. This means once-neglected in the UK due to lacklustre traction. were 12% lower than the first quarter mass affluent clients are now seen as To compete, Goldman Sachs will need of 2018 and 9% lower than the potentially lucrative. GlobalData’s 2018 to tailor services that offer value, as fourth quarter of 2018. However, Global Wealth Managers Survey shows well as leveraging its reputation as a the company aims to combat this by that 59% of respondents agree that premier Wall Street bank. Its Marcus focusing on the mass affluent. targeting this demographic would make brand has shown it economically growth easier. Its next fintech-related initiative is to attract deposits from the mass market, target these individuals with a wealth It is little surprise, therefore, that this so GlobalData believes it can build a proposition, following its recent Apple is the next venture for Goldman Sachs, hybrid-robo advice service that can collaboration. Although especially after the introduction of its economically attract investments from nothing is set in stone, CFO Stephen Marcus neo-bank in the UK and US. mass affluent investors. Scherr has stated it will be a technology Adding wealth management to Marcus According to GlobalData, the US mass and human-influenced investment is a natural evolution of its offering. affluent sector held $27trn in liquid platform – likely some version of a Providers known for catering to the assets at the end of 2017 – almost hybrid robo-advisory service. wealthy have struggled to go down $7trn more than the HNW segment. Technology is opening the horizons market via a robo-advice offering. For The size of the prize makes mass of wealth managers that historically example, UBS closed its SmartWealth affluent individuals a worthwhile catered solely to the upper echelons, robo-advisor – designed for investors category to target. <

www.privatebankerinternational.com | 19

PBI June 369.indd 19 12/06/2019 10:50:32 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

USA Franciso Aristeguieta Citigroup CEO – Asia State Street CEO – international

China Asset China Tony Tang CEO BlackRock Head – China Management

Sweden Karine Hirn East Capital CEO – Asia East Capital Chief sustainability officer

Savills Investment UK Alex Jeffrey M&G Investments CEO CEO Management

Europe Yves Stein Edmond de Rothschild - Edmond de Rothschild CEO

Head – private banking, New USA Michael Zaremsky Bank Leumi Bank Leumi Head – private banking, US York Compagnie CEO – Barclays Private Bank Monaco Francesco Grosoli Barclays Monégasque de CEO EMEA Banque John Patrick Australia AMP Capital CFO AMP CFO Moorhead

Europe Michael Longhini UBP Head – private banking Edmond de Rothschild Head – private banking

Scotiabank Global Canada Glen Gowland Scotiabank - Executive vice-president Wealth Management Director – active portfolio Indosuez Wealth Singappore Woo Ting May UBS Head – investment advisory advisory Management RBC Wealth Head – wealth management UK Dave Thomas RBC Capital Markets Managing director Management international BNY Mellon – BNY Mellon – UK James Crowley COO CEO Pershing Pershing Head of global private Denmark Chris Vogelzang ABN Amro Danske Bank CEO banking

20 | June 2019 | Private Banker International

PBI June 369.indd 20 12/06/2019 10:50:33 news | tech and regulation

First ever tokenised issuance of equity completed news round-up: Blockchain company 20|30 has offered 5% equity in its stock, as a test of a tokenised equity offering issuance involving the LSE tech and regulation Group sending settlement instructions to a public blockchain.

The latest technology and regulation news to impact Citi partners with Schroders to private banking and wealth management. Read the build behavioural finance tool Citi has teamed up with Schroders to roll stories in full at privatebankerinternational.com out a behavioural finance investment tool developed in association with behavioural Fidelity to offer crypto trading The NapoleonX Copy Portfolio will scientists. within weeks aim to give retail investors access to a professional trading strategy for Digital wealth managers buys Fidelity Investments will reportedly cryptocurrency. Athena Art Finance offer cryptocurrency trading YieldStreet has acquired Athena Art targeting institutional investors UK Treasury Finance for around $170m. within the next few weeks. announces FinTech YieldStreet is a wealth platform for Fidelity created a digital Alliance alternative investments, specialising in assets company for the The UK Treasury has areas such as real estate and shipping. custody of cryptocurrency launched the FinTech Alliance, last October, saying that over- an organisation that will aim UK to take disciplinary action the-counter trading would follow to unite the financial technology against 26 law firms in early 2019. sector through bringing together “the The UK has reprimanded 26 law firms, which Jefferies chooses Behavox for strengths of the UK’s fintech ecosystem in will now face disciplinary action for failing to compliance supervision one destination”. fight money laundering effectively. Jefferies Group has chosen Behavox Funds service provider JTC to offer compliance supervision for its Nutmeg to expand into Asia in bags Cayman Islands licence operations across the world. partnership with Taiwan bank JTC, a provider of fund and private wealth The vendor’s Compliance Supervision Nutmeg, the UK’s largest digital wealth services based in Jersey, has secured a trust platform will substitute for Jefferies’ manager, is expanding into Asia. licence in the Cayman Islands from the existing email supervision solution. It has announced the launch of its first Cayman Islands Monetary Authority. strategic partnership, in a deal with Taipei Credit Suisse faces complaint over two-thirds of HNWIs will Fubon Bank. have invested in crypto by 2022 over Mozambique scandal Morningstar rolls Public Eye, a non-government organisation headquartered out retirement plan in Switzerland, has lodged a platform criminal complaint against Morningstar Investment Credit Suisse over undeclared Management has introduced loans to Mozambique. a new platform that will Japan and China enable registered investment advisers to provide managed agree to support ETF Sixty-eight per cent of HNWIs will be accounts solutions to retirement plan cross-investment invested in cryptocurrency in the next customers. Japan Exchange Group and Shanghai Stock three years, according to a survey by Exchange China have signed an agreement to deVere Group. Fintechs build app to transfer facilitate the cross-listing of exchange-traded The research surveyed over 700 deVere funds (ETFs). clients residing in countries including the digital wealth US, the UK, Japan and Germany. Blockchain company PassOn has China Everbright Bank partnered with fintech Synechron to secures wealth management Napoleon Group launches build an infrastructure for the transfer of approval crypto investment strategy digital wealth, aimed at creating the first China Everbright Bank has been cleared to set French asset manager Napoleon Group fully regulated blockchain inheritance up a wealth management subsidiary. The new has issued a crypto investment strategy on ecosystem to transmit digital assets across unit will have an initial registered capital of online trading platform, eToro. generations. $744.8m. <

www.privatebankerinternational.com | 21

PBI June 369.indd 21 12/06/2019 10:50:35 business profile | nykredit

HEAR l NETWORK l DISCOVER l CELEBRATE Digital Accountancy Forum & Awards London 2019 3rd October 2019 l London Many look to the Nordics as the bellwether of changing business profile: consumer tastes in Europe. Does this work with private banking? Oliver Williams talks to the new managing nykredit director of Nykredit Private Banking Elite, Lotte Månsson 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 Oliver Williams: How is Nykredit emotions. LM: We don’t think Denmark has a very big better services in accounting and auditing positioned in the Nordic market? We see that the younger generation giving culture. But, you know, we have high l Getting on Blockchain – hype or reality for Lotte Månsson: We are the challenger of talk about ESG investing a lot, but they taxes, so people think that the state can auditing and reporting the Nordic market. We launched 15 years provide that. l Automation of services in accounting and the ago, but have just started a new wealth Denmark has one of the lowest Gini effect on the businesses management unit. coefficients. That means we are a very Traditionally we have been a mortgage equal society, but we have a culture of l Uncovering the potential of machine learning lender, but we now want to see how we wellbeing. So people like to eat well, for your business can increase our wealth management Why are we a exercise, there is a lot about family life. l Developing future leaders with new technology business. Our goal is to increase wallet However, the Danish are very l Implication of digital transformation on share. challenger? we environmentally aware – much more so accountancy and their firms’ business model Why are we a challenger? We are than anywhere else. l Cloud adoption by accounting firms: Latest innovative, ambitious. We focus on values are innovative, trends and developments of service. We are a small player in a big OW: The Danske Bank scandal (in which market. ambitious its Estonian operations were shown to l Post GDPR review and key takeaways from have received large flows of illicit money small, medium and large firms OW: Challengers generally win market from Russia) has rattled the Nordic private l Creating real business value through your data share by focusing on younger clients. How don’t actually make their investments like banking market. How has this affected strategy is Nykredit appealing to a younger age that very often. Instead we find many of Nykredit? group? the millennial generation just want direct LM: The Danske scandal has meant that Badge and LM: We strive to balance people with investments. They do venture capital and trust in the private banking market has Knowledge Partner Silver Partner Lanyard Partner Lunch Partner technology. We are very careful about how they do private equity. fallen to an all-time low. Trust in banking is we hire. We focus on emotional quotient now as low as it ever has been. (EQ), not necessarily IQ. We need people OW: Is there a big culture of philanthropy This could be a positive for Nykredit as who can talk to others, who can read in the Nordic regions? we can restore the trust.<

For more details please contact 22 | June 2019 | Private Banker International Hannah Leigh on [email protected] or call +44 (0) 20 7936 6689

PBI June 369.indd 22 12/06/2019 10:50:39 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

PBI June 369.indd 23 12/06/2019 10:50:39 1019Timetric_DAF_Ad.indd 1 12/12/2018 10:23 PBI June 369.indd 24 12/06/2019 10:50:41