Morally corrupt to politically correct

The great product push is still being re-invented and refashioned, in a politically correct and acceptable format. Gone are the days of the legendary “independent” networks, which plagued Europe, Asia and the Middle East during the freewheeling 1980s, and survived deep into the 1990s. Thousands of men and women would gather frequently in exotic locations to learn about which products – nearly always domiciled in loosely regulated offshore jurisdictions – paid the highest initial commissions. They would swap details of aggressive, often morally reprehensible sales techniques and discuss which jurisdictions were the softest touch as an operating base, and how to avoid the regulator when he called. These unethical distributors could not have existed without the collaboration of many life companies and fund management groups, which operated in one, more acceptable way when selling domestically regulated products, and in another, outrageous, unaccountable way when marketing similar products registered offshore. By the mid-1990s, Europe began taking a lead, spreading the bancassurance and bank distribution models further afield. Products were still being pushed, but advice began to emerge. Today, the model has changed once more, with remuneration and commission kick-backs commanded by distributors now under scrutiny. What we can see is big institutions, such as Credit Suisse and Deutsche Bank, looking at alternative models of distribution, involving much more dialogue with customers. Only 10 per cent of the discussion should really concern products, with the remainder concentrating on asset allocation and investment themes, according to Credit Suisse. KBC, the Belgian bank famed for its innovation in structured products, and widely seen as an ideas “factory” is also pursuing the increased use of advisers, while still generating technology- led tranches of new products each month. There is no escaping from the fact that it is product sales which currently generate revenue. Anybody attending a private banking course knows that advisers are instructed not to get too carried away in general discussions. Budding bankers are told how much in fees they need to make from a client, and to introduce talk about products – particularly structured products – reasonably early in the game. The latest generation of products for private bankers and family offices, with a particular focus on hedge funds, and how to translate investment themes into definitive product opportunities will be among the key themes in the PWM private banking summit – sponsored by Barclays Capital and BNP Paribas - to be held in Geneva on 7 November. Speakers will include Eric Sarasin, partner at Sarasin Private Bank, Hansjoerg Borutta, head of hedge fund selection at UBS, Christian Sterckx, head of products at KBC and Christoph Hott, chief investment officer for private banking at Sal. Oppenheim. To register, PWM readers and other private bankers, family offices and advisers, should visit www.ftbusinessevents.com.