Global Private Banking Awards 2018 - Analysis: US private banks spread their wings

As we mark the tenth anniversary of our Global Private Banking Awards, a broader range of competitors for the top accolades is emerging.

UBS remains one of the strongest wealth managers globally, able to compete not just in a handful of categories, but across most niches and territories. But Citi has had an extremely strong showing, unseating the Swiss giant and narrowly pinching the global crown.

This is partly testament to Citi’s foresight in responding to the global financial crisis of 2008, by imbedding private banking within its institutional division. This allowed the US bank to offer capital markets expertise and equity trading from neighbouring departments, rather than across deep internal divides. 

But it is also part of a broader wave of US banks, including JP Morgan, enjoying a renaissance in private banking. The latter has hit the jackpot, winning prizes for the US, Latin American and ultra-high net worth categories. Many of these institutions have shown much broader global ambition at a time when European banks have scaled down internationally. Witness top tier wealth servicing specialist Northern Trust, which has scooped the coveted family office award as well as a customer service prize, starting to test waters in Europe, where it feels products, asset allocation services and technology pioneered in North America might be ready for a newer, fresher hearing.

UBS has merged global and American wealth management operations, so that it too can leverage US expertise across the whole group. But it is too early to say what effect this will have on Swiss-style private banking which was so successful under long-time boss Juerg Zeltner, recently replaced by Martin Blessing, formerly at Commerzbank.  

Will Euro-centric notions of service and investment be trumped by a brasher, US-led product push culture at UBS? According to awards judge Ray Soudah, founding partner at MilleniumAssociates, private banking at UBS is being further standardised as costs are cut and flexibility lost. 

This change in structure, increasing global consistency of services, could prove the biggest challenge, believes Alois Pirker, head of research at Aite Group in Boston. “The firm has to be careful not to rationalise away those elements that make its regional units appear to be domestic,” he says. “If that transformation is successful, I am certain UBS will be back in the top spot again.”

It is certainly far too early to lament the death of traditional private banking, based on Swiss values. The UBS global ultra-high net worth nerve centre still operates out of Zurich. Credit Suisse is also deepening its footprint in Europe, the Middle East and Asia, where old foe UBS was top dog for so long. 

Pictet and Lombard Odier, two traditional white-gloved private banks, continue to trailblaze in Europe, with Pictet seen as a real heavyweight in both Switzerland and Europe more broadly, despite its medium size compared to global giants. Lombard Odier clinched accolades for branding and customer service, reflecting increased emphasis on brand and customer experience pointed out by Helen Westropp, managing partner at consultancy Coley Porter Bell.

Other European banks such as BNP Paribas and Société Générale continue to innovate at home and across the continent. With BNP Paribas winning the newly-launched award for working with millennial clients, and Société Générale also active in this sphere, topping the league for succession planning, there is evidence that Europe’s banks are refocusing and staying abreast of key demographic and market trends. 

Continental bank LGT has clinched crucial awards for growth strategy and alternative investments. UBP’s CEO Guy de Picciotto is rewarded for his leadership abilities, mainly relating to an ambitious and well-executed growth plan.

Some old faces are also coming back in from the cold. HSBC has long been a strong player in Hong Kong, where its iconic HQ is a stalwart of the territory’s dramatic skyline. But its
triumph in the UK private banking market shows banks which make concerted efforts to reshape offers, shake-off anachronistic ways of doing business and create new legacies without historic baggage, can reap the rewards.

In Asia, European banks continue to be strong, but indigenous players such as DBS, which has won an incredible four awards in 2018, for the top innovator, the best regional bank, the best in Singapore and best for client service, show that a new landscape is fast taking shape under the feet of local and global competitors.

The concerted efforts of banks to thrive in specialist sub-sectors are highlighted by family wealth adviser and former private banking leader Gerard Aquilina, naming Northern Trust, JP Morgan and UBP for prowess in alternative investments. He also singles out Coutts for succeeding in the sports and media sectors.

“The shrinking wealth management sector in Europe is making the industry even more competitive and creates high pressure on private banks to distinguish themselves in certain niche areas such as sustainability, real assets and crypto-currencies,” confirms Shelby du Pasquier, head of financial services at Geneva law firm Lenz & Staehelin. 

Identifying differentiating factors and seeing them through to maturity is a major challenge for private banks, says Sebastian Dovey, board adviser to wealth firms. Philanthropy and impact investing are two such fields where banks are failing to see a fundamental shift in client demand, he believes. “Both these activities are catalytic to the operating model and also can be commercially hugely relevant. But they are not overnight unicorns.”

Diversity is another area through which private banks can hope to gain commercial advantage. Deutsche Bank’s wealth management division has won hands down in this new category. Our judges report the importance of diversity and its influence on successful business models is almost totally ignored or under-estimated by private banks, although most will be forced to “follow suit” when a handful successfully tackle this key “global issue”. 

“There is a huge inter-generational transfer of wealth coming. Those banks who just talked to patriarchs will only get what’s coming to them when the widow recalls the male private banker always talked to the husband when they met,” says Mr Aquilina. While efforts have been made to address female clients and approach large and wealthy gay communities, banks need to recognise more diversity is needed in their workforces. “In my experience, the best private bankers are women,” says Kim Cornwall, CEO of training consultancy Cornwall & Co Consulting, active in Europe and the Middle East. “They work harder, have greater empathy and take fewer big risks.”

Consolidation will continue, despite this increased competition, as profitability is continually squeezed by rising costs in compliance and remuneration. “The national consolidation will happen in most markets at the retail business level and private banking divisions will be dragged along, resulting in half a dozen or less major players,” active across the EU, suggests Mr Soudah, with technology proving the key driver of this wave. 

The judging panel decided to clamp down heavily on any rule-breakers in the banking world, declaring a “zero tolerance” of money laundering and other serious legal transgressions, which knocked several key contenders out of the ranking for our awards. 

The prevalence of such practices was a matter for heated debate among our judges. Mr Soudah suggested incidents of money laundering have been falling in recent years as scrutiny increases, with legal capital flight sometimes confused with more suspicious activities.

Although regulatory clampdowns have been widespread, the lack of custodial sentences sends the wrong message to the private banking community, believes Amin Rajan, founder of the Create consultancy. “The only thing that would stop money laundering would be to send the individuals concerned to jail,” he says. “Simply imposing large fines on the banks will not change behaviours. Financial crimes should be treated like normal crimes, not civil offences.”

Critical to this new environment, believes Mr Dovey, is how the leadership of private banks responds to these compliance challenges.