Monday 21 September 2009
Swiss private banks lower client requisites
While traditionally targeting those with at least one million Swiss francs (S$1.37 million) to invest, firms including Banque Privee Edmond de Rothschild and Credit Suisse Group AG are quietly wooing people with less than half that amount as the financial crisis and attacks on banking secrecy squeeze existing clients.
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Swiss private banks lower client requisites
Bloomberg
18 September 2009
(GENEVA) Swiss private banks, long the home of numbered accounts for the jet set, are going down market.
While traditionally targeting those with at least one million Swiss francs (S$1.37 million) to invest, firms including Banque Privee Edmond de Rothschild and Credit Suisse Group AG are quietly wooing people with less than half that amount as the financial crisis and attacks on banking secrecy squeeze existing clients.
‘There are two badly kept little secrets,’ said Graham Harvey, director at Scorpio Partnership Ltd, a London-based wealth management adviser. ‘A good chunk of private banking clients are way below the investment threshold, more so because of the financial crisis. And secondly, they can be more profitable.’
The so-called mass affluent market offers banks a chance to gather assets and bolster fees after plunging financial markets, a Boston Consulting Group study found, destroyed more than US$12.3 trillion of wealth worldwide last year. The number of millionaires dropped 15 per cent to 8.6 million last year, according to a June survey by Capgemini SA and Merrill Lynch.
Swiss banks aren’t alone in chasing less wealthy customers. A Scorpio survey last year found that initial investments at 25 UK wealth managers were half the advertised minimum.
‘People think that you need two or five million’ francs to open an account, said Boris Collardi, chief executive officer of Zurich-based Julius Baer Holding AG’s Swiss private bank. ‘You don’t.’
Julius Baer, which is splitting its private banking and asset management businesses this month, will look at clients with 500,000 francs if they have the ‘potential’ to multiply their assets, Mr. Collardi said at a private banking conference this month in Zurich.
The new paradigm comes at a time when Switzerland’s pre-eminence as a wealth management centre is threatened by pressure from the US, Germany and France to weaken bank secrecy laws. Swiss banks oversee US$2 trillion, or 27 per cent of the world’s privately held offshore assets. Private banks are also facing competition at home from cantonal banks and cooperative institutions such as St Gallen-based Raiffeisen Switzerland.
Raiffeisen’s wealth management unit attracted 4.4 billion francs in net new money in first half. Zuercher Kantonalbank, the country’s biggest regional lender, lured 3.7 billion francs and Migros Bank, a unit of Switzerland’s biggest supermarket chain, added more than one billion francs.
‘We have a lot of affluent clients around the globe who have less than a million but with the potential to move up,’ Walter Berchtold, CEO of Credit Suisse’s private bank, said at the Zurich conference. ‘We realised we were losing clients to banks like Raiffeisen.’
Credit Suisse, based in Zurich, has broken down its customer base, with the Private Clients Switzerland unit serving those who have 50,000 francs to one million francs to invest. Private Banking Switzerland handles those with more than one million francs, and a separate division caters to ‘ultra-high net worth’ individuals with more than 50 million francs.
Less wealthy customers can be more profitable if banks offer them off-the-shelf investments at set prices, Mr. Harvey said.
Wealthier clients negotiate fees, seek personal investment advice and may demand services such as booking private jets and assistance finding schools for children.
Courting the merely prosperous as well as the truly rich may threaten the appeal of private banks that built their brands by cultivating an image of serving the elite, said Bernhard Bauhofer, founder of Sparring Partners GmbH, which advises banks on reputation management\. \-- Bloomberg
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