Kleinwort looks for period of calm under new owners

Robert Taylor, American-raised chief executive officer of Kleinwort Benson and a seasoned private banker who served time at Merrill Lynch and Coutts, recalls an unseemly squabble for antique family cutlery and china cups when he was involved in the take-over of blue-blooded UK family bank Hambros by French buyers Société Générale in 1998. “Nobody knew who the artifacts would actually belong to, and after the deal was signed, they were never traced,” recalls Mr Taylor with a raised eyebrow. But the latest twist in Mr Taylor’s 28-year career is not about selling off the family silver to a foreign bank. This time round, it is a case of German giant Commerzbank offloading the London-based wealth manager at the end of 2009. This followed the merger, earlier in the year, of Commerzbank with key local rival Dresdner, owner of Kleinwort since 1995 under the UK brand of Dresdner Kleinwort. Indeed, while most private bankers will be toasting the start of the new decade, there will be few houses as relieved as Kleinwort Benson. Reassuring clients to stay put after the worst financial crisis in recent history was hard enough. But achieving this while explaining two changes of ownership – Kleinwort has now been snapped up for €600m by Belgian-listed RHJ International following EU regulatory pressure on banking giants – has been an altogether tougher task. Mr Taylor also suffered a few sleepless nights during the festive season, as all of the bank’s client accounts – holding £6.4bn (€7.4bn) – were transferred to a new ‘integrated’ investment management platform, initially developed at Dresdner over a five-year period, by the German bank’s former long-serving Frankfurt-based private banking boss, Anton Simonet. But the first trades on the platform, bought from Bavarian IT company Die Soft, and also deployed by Credit Suisse and Deutsche Bundesbank, went through smoothly, and now he is able to concentrate on the company’s new structure. Although he is used to working closely with top brass in Frankfurt, Mr Taylor clearly relishes being master of his bank’s destiny once more, no longer subject to the latest investment themes and expected to sell tranches of structured products dreamt up at head office. “Now we can more closely align our investment views with our client base,” he says. He has already added new research staff, who will analyse European and US stocks to construct dedicated “active advisory” portfolios for UK clients, and more recruits are expected, with clients’ equity holdings, estimated at £3bn, seen as the key area of interest. The most important differentiator between Kleinwort Benson and its mass of competitors in the fragmented UK marketplace is the bank’s entrepreneurial focus, claims Mr Taylor, much of whose client base has traditionally come from the City of London, although regional penetration is expanding. “We have a much higher proportion of investment bankers on our books than most competitors.” The marketing push to these individuals and the entrepreneurs they are associated with, is handled by Mr Taylor’s his first lieutenant and head of private wealth management, 13-year HSBC veteran Mark Hussein, responsible for running the regional offices in Birmingham, Cambridge, Edinburgh, Leeds, Manchester and Newbury. “There is no longer the same level of panic as in the past,” says Mr Hussein. “When we talk to clients and come back to the entrepreneurial, innovative way we do things, our strategy is getting a favourable interest. If you just go down the ETF [exchange traded fund] route, then clients will be asking: ‘what am I paying a private bank for?’ Clients want return of alpha, something you can’t get in the high street.” During 2009, Mr Hussein made sure his client advisers manned the phones and did not hide under their desks to dodge uncomfortable questions, leading to contact with customers rising four-fold during the year. “In the end, we had no problem with customers leaving. Our difficulty was in attracting new clients, as for the first six or seven months of 2009, it was unclear who our new owner would be.” The challenge now is to assure potential clients that the ownership of Kleinwort Benson, whose heritage dates back 110 years, is secure. The key shareholders of RHJ International include BlackRock, Merrill Lynch, State Street and Tim Collins, chief executive of US private equity firm Ripplewood Holdings. The Kleinwort management team is adamant that RHJ will use the Keinwort Benson brand to boost its financial services footprint, adding new businesses in areas such as investment management, and attacking the independent adviser space. If Mr Hussein and Mr Taylor can reassert the independent tradition once associated with the Kleinwort Benson name, they could prove to be a formidable force.