Providing a home for entrepreneurial spirit

Following the merger between Banca Intesa and Sanpaolo Imi in 2007, Intesa Sanpaolo Private Banking has emerged as the heavyweight champion in Italy, with its €75bn of assets under management, although its biggest domestic competitor, UniCredit Private Banking, definitely has the upper hand in terms of pan-European expansion and assets.

Over the past few years, all the private banking divisions within the regional banks in Sanpaolo IMI Group have been gradually integrated within Intesa Private Bank. This represented a separate legal entity within Banca Intesa, whereas in Sanpaolo IMI the private banking divisions sat within the different commercial banks. Banca CR Firenze and Banca di Trento and Bolzano, the latest to be integrated, contributed to half of the total €5bn growth in assets that Intesa Sanpaolo PB achieved in 2010.

“A dedicated, separate private bank is undoubtedly an organisational model which is well suited to our world, where flexibility needs to be favoured,” says Paolo Molesini, CEO at Intesa Sanpaolo Private Banking. This is in contrast with the commercial banking world, where scale is the priority, and where directors move around every three years. A private banker reaches his maximum level of efficiency in the relationship with the client after seven years. “Our careers are much more slow-paced,” he says.

Leveraging on being part of a large financial group, Intesa Sanpaolo Private Banking specialises in entrepreneurs, who represent 70 per cent of its client base. “We are a 360 degree bank and through the corporate and investment banks we can meet entrepreneurs’ personal and business needs.”

The primary source of new private banking clients is the retail bank, followed by the corporate and investments banks. Gaining new customers and increasing the share of wallet of existing clients is also key. “The goal is to slightly increase market share. We have a long term objective and we gain about €3bn net new money from the market every year.”

The winning strategy is segmenting clients according to their needs and, depending on the level of complexity, allocating them to the most experienced executive bankers –with expertise on subjects such as corporate finance or intergenerational transfer – or to more ‘standard’ private bankers.

The bespoke discretionary portfolios offering is something Mr Molesini is very proud of. At the first floor of the headquarters in Via Hoepli, just behind the Milan Dome, sits the “biggest team in Italy” for bespoke discretionary portfolios. Forty “technical” investment professionals, who work alongside the private bankers, are in strict contact with a maximum number of 30 clients each, and they build and monitor performance of ad-hoc portfolios tailored to clients’ risk-return profiles. Individuals that want to access this service must invest at least €3m.

Within the advisory space, Intesa Sanpaolo, like many other competitors in Italy, has recently launched a fee-based consulting service, which benefits those wealthy clients who want to take responsibility for the management of their assets. This service may be limited to just providing advice on asset allocation or, as for Intesa Sanpaolo, be broadened to provide regular monitoring of clients portfolios on all their holdings. “We provide this service and it is not easy at all.”

Operating in open architecture is also a differentiating factor. The bank has established partnerships with 10 to 14 fund management companies. Of the total client assets invested in funds, 60 per cent is in third-party funds, as opposed to funds managed by the group’s fund house, Eurizon Capital. “A bank operating in an open architecture tends to offer a better service to clients,” he says.

The idea, however, is not to be a fund supermarket. “We want to have relatively few third-party fund providers and be very important to each of them,” explains Mr Molesini. “That gives us access to their investments and books and we can monitor them.”

While a large bank enjoys stronger negotiation skills with third-party fund houses, or can offer a more interesting career path to private bankers, it also has some downsides. For example, it needs to spend a lot of resources on monitoring private bankers and portfolios, which has become even more crucial since the crisis. “For us, the monitoring process is much more fundamental,” he says.

Asked why clients’ portfolios may sometimes be misaligned with centrally-determined recommendations, Mr Molesini explains that in the private banking world it is very difficult to sell an investment at a loss. For the client, and arguably for the private banker, that would mean having to acknowledge they have made a mistake. “Some clients think they know a lot, get emotionally involved and intervene a great deal. But taking emotions out of money management is one of the biggest added values we offer.”

Paolo Molesini, Intesa Sanpaolo