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Secrets to winning UHNWIs
Private bankers compete fiercely to win UHNWIs (ultra high net worth individuals), the creme de la creme clients who are able to move billions of dollars of funds with the stroke of a pen. But what does it take to keep and win new UHNWIs in this competitive environment?
Daniel Yu 30 Jul 2014

Private bankers compete fiercely to win UHNWIs (ultra high net worth individuals), the crème de la crème clients who are able to move billions of dollars of funds with the stroke of a pen. But what does it take to keep and win new UHNWIs in this competitive environment?

 

At the heart of it is still a matter of trust and competence - being able to do a good job. While in the US, bankers are able to cold call potential UHNWI with some success - "it is more culturally accepted", says Michael Jacoby, head of the global family office group and private banking at Deutsche Asset & Wealth Management (DeAWM), elsewhere, it is less straight forward.

 

At a recent panel on private client trends organized by DeAWM in London, Lynn Hermijanto, senior relationship manager at the bank suggests Asia is different in that aspect. "When you are dealing with UHNWIs, you cannot just pick up a call and ask for a meeting," she relates. "They place a premium on longevity and the stability of relationships."

 

This is why, she says, the strategy in the past years has been to focus on existing clients and to win wallet and mind share. "Then a natural thing happens - you find new clients through them. They introduce you to their other friends in the circle. That is the most effective means of being known in this space - rather than through cold calls or referring agents."

 

In Europe, apart from referrals from satisfied clients, DeAWM is able to win business through referrals from the commercial and investment bank side of the firm. "There is a common misconception that clients want to separate their business decisions from their private decisions," says Klaus Runow, co-head of family office coverage and key client development, Germany, for DeAWM. "In almost every conversation we have, we find that people do not make that separation."

 

In a recent study, he cites that two-thirds of the people surveyed would like to be serviced out of 'one hand'. "This traditional split was the result of being risk-averse: UHNWIs do not want to have business liabilities carried over in their private lives," he explains. But in this current market environment, Runow notes that clients feel very confident and keep actively asking for one bank to deliver those solutions. "Not a lot of institutions today are able to deliver in such a manner."

 

In Asia, Hermijanto notes, the case is similar. "A lot of UHNWIs in Asia are either the first or the second generation of the wealth creation cycle," she relates. "They are therefore extremely hands-on in terms of their personal money as well as their business money."

 

When they talk to any bank, UHNWIs in Asia expect the bank to provide an integrated solution and dialogue not just on asset allocation but also to understand and contribute to their corporate aspiration. "They also expect an understanding with regards to their dreams and plans for the next generation," she adds.

 

One common need and a growing factor in winning new business is a bank's willingness to use its balance sheet to support clients. In Asia, lending is key, offers Hermijanto. "It is extremely important because you are dealing with entrepreneurs. They typically would say, 'show me the money before I show you mine'."

 

In the Middle East, it is the number one way to acquire clients, adds Serene El-Masri, head of DeAWM for Middle East and Africa and head of Deutsche Bank (Suisse). "As in Asia, a client will not show you his money unless you allow them to use your balance sheet; it is clearly a door opener in the Middle East."

 

"In the US, lending is also extremely important. "Our clients tend to be involved in highly complex series of entities," says Jacoby. "Having the ability to understand the complexity and to tie them together to get the best result for the client also requires tremendous amount of expertise."

 

In the UK, DeAWM's head of wealth management Tom Slocock relates the bank has a case where a client has a large and complex pool of assets often with some financings against specific assets. "Actually, if you look at the portfolio as a whole, you can come up with a far more efficient solution by taking a look at the overall asset pool." He adds that DeAWM is able to look at transactions significantly larger than many of its competitors.

 

While lending is critical, Hermijianto says that as the relationship grows, stability and longevity are [also] tremendously important. "It is not just to going to any lender that will provide them cheap funds," she says. "But it is a bank that is able to stick with them through hard times, which is also important."

 

Even so, she admits that banks such as DeAWM are facing a lot of competition in this area. "We are seeing a lot of local corporate banks that are going into private banking because they have a natural advantage in terms of a strong balance sheet and good local market knowledge in terms of access to CFOs and CEOs of companies."

 

Concurs El Masri in the case of the Middle East. "There is a lot of competition from the local market but where we differentiate is not on our pricing but on our structuring expertise," she says. "The kinds of things we can structure, particularly for entrepreneurs who hold shares in their own businesses, allow us to acquire new UHNWIs and gain market share."

 

An overarching concern affecting private banking is the increasing regulation. "It greatly impacts our lives and the lives of our clients," comments El-Masri. "There is not a single meeting for instance where we do not have to talk to clients about signing additional documentation. There is an educational process where we have to explain to them that most of these regulations are for consumer protection - suitability and appropriateness."

 

Clients remember the days when the account-opening form will be five pages long, she shares. That is no longer the case. Some clients still have trouble accepting the new norm. "It is an ongoing discussion we have with clients because we need to implement all the new regulations. They don't like to sign additional documentation, for sure."

 

The challenge sometimes, says Hermijanto, is other banks may have different levels of requirements. "We have clients who complain, saying other banks do not require such declarations. But we need to abide by what we need to."

 

As a result of regulations such as FATCA (Foreign Account Tax Compliance Act), Runow says there clearly is a lot less cross-border business from the US. "When we advise a large German multi-generational family in which some family members are in the US and some in Germany, we cannot talk to them from our German office to the New York office and provide one solution out of one hand because of US regulation. Clearly, it makes it more difficult."

 

"We try, out of the regulatory environment, to make an opportunity for us," adds El Masri. "We have scale and we have dense legal and compliance teams, we have front office staff trained in various regulations coming into place. We are able to implement projects at a relative quick pace. You are best served by an institution that is up to date on regulation."

 

Notwithstanding all these factors, relationship still matters the most to win and keep UHNWI, especially in places like Asia. "We sometimes underestimate the needs of UHNWIs for us to know what they need," says Hermijanto. "In theory, understanding a client's needs and establishing a relationship with them seems very easy and simple to do. In reality, it is a very complex process to execute. The successful banker is one that is able to understand the complexity around the issues [facing UHNWI] and be able to create a solution that fits the client's requirements."

 

 

 

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