Europe’s one-stop shops fail their wealthy clients

The debate on whether institutions in Europe should sell each others’ funds and embrace the free-for-all that is quaintly known as “open architecture” has begun with a vengeance. And Professional Wealth Management has conducted the first definitive research to be published on this contentious issue. The research shows that what the institutions do and what they say are two different stories. All major private banks, such as JPMorgan, UBS and Credit Suisse, claim to offer open architecture – that is shelf space to the entire universe of funds. Yet, in reality, only a small number of external funds is offered on a select internal list. What is more, most of the banks, which pride themselves on being one-stop shops for the wealthy, can not even offer basic advice on many of the products they sell. The PWM research reveals that the distributors that offer true freedom of choice are those that do not make such a noise about it. We name them here for the first time: they are French retail bank BNP, German retail bank Hypovereinsbank, German insurer Allianz, UK insurer Scottish Life International, London private bank Coutts, German funds supermarket Direkt Anlage Bank, Austrian independent adviser Epicon, international advisory firm Interalliance and UK stockbroker Gerrard. The institutions that make the most noise about embracing the new philosophy are the banks that sell predominantly their own funds. This European reluctance flies in the face of the US trend towards open architecture, described in the “World Wealth Report 2002”, published by Cap Gemini Ernst & Young and Merrill Lynch. There is also a strong regional variation in investment houses’ approach to selling competitors’ products. Italian institutions, including Silvio Berlusconi’s Mediolanum, the post office and fund house Arca, are increasingly making external managers available to wealthy clients through fund of funds vehicles. But the French, with the exception of BNP, are as protectionist in financial services as they are in farming and fishing. There has been some liberalisation but the process will be a long one. Crédit Agricole is typical of the French approach. It is happy to follow the open architecture model in foreign countries, but not in France. The thought of offering products bearing the labels of BNP, Credit Lyonnais or SocGen is treated with horror by top brass at the bank. It seems that it will be many years before there is open competition. Wealthy individuals will still suffer from lack of choice, until their distributors and wealth managers pay more than lip service to a single European market. Nicolas Moreau, chief executive officer of Axa Investment Managers in Paris, sums up the situation: “We are not against open architecture. It is valuable but only for specific clients who have sufficient wealth to purchase asset management products at the right price. But in Europe, products differ so much from one country to another that it is almost impossible to sell the same product across Europe to the mass affluent market.”