‘Bespoke’ private banking: the ultimate in customer service?
Ultra-wealthy clients can pay for customised care in investments, tax and family governance. But they may not get everything they need
Bespoke private banking evokes images of those wearing haute couture and flying sleek private jets, luxuries beyond most of us. While some will have the chance to rest their fingers on the luxurious fabrics within private banks’ waiting rooms, not many qualify for the highest level of service offered.
Wealthy customers of these institutions may well wonder what the price of admission is into this select group enjoying bespoke private banking, a suite of highly personal services tailored to the needs of individual clients.
Some of the most well-heeled clients will ask what they get for their 1-2 per cent fees on their assets, before any additional costs for third party investment funds or services from specialist consultants.
Choosing a private bank or wealth manager that matches your needs requires some homework, with services varying between providers. At its best, a team of advisers covers a wealthy client’s needs across investments, tax affairs, philanthropy, even family governance.
Typically, the bigger the family pile the bigger the expectations on private banking firms. A family with investable assets of tens or hundreds of millions of dollars and more may have requirements spanning multiple jurisdictions. In some cases they will want someone on the team to answer a question or a request for a meeting on a 24/7 basis. Other clients prefer to be left alone, with only occasional contact. The point is, it’s the client’s choice.
Bankers will break down their potential market of clients into tiers of wealth. Start with the sub-high net worth category, those with investable assets between $300,000 and $5mn (£230,000-£3.85mn). Ascend to the next level and one meets those with net assets between $5mn and up to $50mn. Finally there is the wealthiest group, those with investable assets above $50mn and all the way into the billions.
Gaining entry to the select club at the top is another story. This group at the top of the pyramid accounts for about 1 per cent of the global wealthy, about 220,000 individuals. The mid-tier high net worths account for just over 9 per cent. The other 90 per cent are mostly the “millionaires next door”, as consultant Capgemini has tagged them.
The assets of the super wealthy, according to the financial industry experts at Oliver Wyman, total some $56tn as of 2023. These should rise to $82tn by 2028.
Plenty of banks and wealth managers seek out the wealthiest families. Yet the premium services offered may involve less luxurious aspects, perhaps just the basics of management. Most bankers will say that the biggest shift for their business in the past decade has been coping with the generational shifts in service expectations among these clients and their families.
“Earlier in my career, it was more about the mechanics of transferring [the wealth],” says Stacy Mullaney, head of family offices at Goldman Sachs.
Today, she notes: “Clients want much more than just investment management, they want more complex services.” These include not only help with their philanthropic needs, but also planning around family governance, stewardship and conflict management.
Mullaney’s team offers umbrella services for families who might want to wrap up their wealth in a family office structure, but perhaps cannot afford the expense and management time for such a structure.
Wealthy families often spread themselves across multiple legal jurisdictions on tax and regulations. Even getting families to meet in one place can require some work, never mind agreeing on a business agenda.
“Once you have a family asset which cannot be put on one page, you need to consolidate,” points out Iain Tait, head of private capital at wealth manager London & Capital. “To consolidate the reporting system in a way that the family can understand, succinctly, is difficult.”
Another plus that a more bespoke wealth and banking service can offer is access to the experience and knowledge of other wealthy families. “What do they [other families] do differently?” is a question that will come up, according to Priyanka Hindocha, partner and UK head of the family office at Stonehage Fleming.
The group has form with family offices. A merged entity between two multi-family offices South African Stonehage and Fleming Family & partners of the UK, the wealth adviser has a large minority investment (36.7 per cent) from Caledonian Investments, an investment trust backed by Britain’s Cayzer family.
As such, just bringing the family offices — private investment organisations serving the needs of one or more families — under one structure can save money and add scale. The latter makes a difference for those super-wealthy clients keen on maximising the investment opportunities available to them — in public or private markets.
Stonehage Fleming’s client base spans the globe, but a substantial proportion are resident in the UK. Ahead of the Labour government’s maiden Budget on October 30, there is concern from clients about any changes in tax rules.
“It’s a regular topic of conversation in meetings, with some clients considering moving, and evaluating potential alternative jurisdictions, and certain families and individuals having already left,” worries Anton Sternberg, UK chair at Stonehage Fleming.
How do the banks’ services differ? “All these wealth services will look similar on [their] web pages,” points out Honora Ducatillon, head of family advisory at Pictet Wealth Management. “It’s more about the how, than the what.” She sees more entrepreneurs selling their businesses, and their families coming to Pictet before the event.
Pictet, as does Stonehage Fleming, will put dedicated teams to work with these wealthy investors. These advisers will not only cover investment management but also the corporate finance, tax and legal aspects for any sale of the family business. This more personalised service extends to organising all the family governance meetings as well as specialised education seminars on topics including the latest geopolitical situation.
Just as important for some clients is the structured lending on offer from banks to the owners of these businesses. Regardless of what the client’s verifiable net wealth may be, much of that may be wrapped up in their business. Thus the super-wealthy client may be asset rich, but cash poor. They could need the services of a full bank.
This would include HSBC Private Bank, which can offer full multi-currency banking and custodian services, but also specialist lending to enable the entrepreneur to extract part of their wealth without losing control of the company. Asian families in particular will have business and familial needs that span the globe.
In Asia, single family offices are less common than in North America and Europe. About 5 per cent of Asian super-wealthy families use such structures, according to McKinsey. That is less than a third of the proportion of those seen in the West.
“Our ultra high net worth clients want a one-stop shop. They want to reach us 24/7 to deal with any issue anywhere,” says Lok Yim, regional head of global private banking, Asia Pacific at HSBC. In this case it’s not just about banking functions, but the so-called concierge services.
“We can solve problems ranging from concierge services for restaurant reservations to co-investing in private markets,” he added.
“We help clients connect. [At the Hong Kong] Rugby Sevens we offer a dinner to meet fellow billionaires for networking. [We also] took a group of Asian clients to San Francisco to meet Silicon Valley companies.”
Another special service that the wealthiest clients can expect is help with giving away their money to worthy causes and non-profit enterprises. For larger donations, it takes money and a lot of effort to give wealth away.
Oil baron John D Rockefeller learned his lesson the hard way. He noted in an early memoir: “About the year 1890 I was still following the haphazard fashion of giving here and there as appeals presented themselves. I investigated as I could, and worked myself almost to a nervous breakdown.”
Today there are many intermediaries keen to help with the philanthropic goals of wealthy families. This might involve anything from researching specific charities to organising the giving itself.
To help with this Lombard Odier created Philanthropia, a private, not-for-profit, Swiss foundation. This is wholly owned by Lombard Odier. Clients are happy to use an existing structure which can keep costs down, the banking group says. It charges an administrative fee, a fraction of the typical cost to create a separate foundation. Philanthropia can help share and reduce the overheads.
“Sometimes the client doesn’t know what area or charity to support and this foundation can provide a solution,” notes Frédéric Rochat, managing partner at Lombard Odier. Rochat believes that Lombard Odier’s smaller size and specialisation in both philanthropy and especially asset management provide unique selling points.
Philanthropy offers another, more important, benefit. The family can focus on the charitable project together. It varies from family to family as to whether the elders or the younger generations push to use their money for good. “It’s about the intra-family values and the relationship with the estate,” thinks Rochat. “Some families simply want to see the capital invested as profitability as possible”.
What won’t private banks do for you? Even those clients with plenty of money may struggle to get the service they need from just one adviser. Not every private bank or wealth manager can cover every need for the wealthy. Some have decided to avoid those areas in which they have less expertise.
Tait at London and Capital emphasises that his institution is not a bank. Rochat at Lombard Odier prefers to highlight its investment management expertise. Stonehage Fleming staffers and Pictet will put the specialised teams mentioned earlier on to their highest value clients.
One managing partner and chief executive at a Canadian private capital investment firm says he cannot get what he needs from his advisers. “If you have the proper money you’ll get great all-round service. You’ll get attention and something that is well-thought out,” he says.
But he complains that even the best wealth managers cannot show him deal opportunities in which he would like to invest. Others provide the deals but only an off-the-shelf standard of investment products that are not tailored to his needs. In sum, he finds he must mix advisers to get both the deal access and corporate banking he feels he needs with more bespoke advice on his investment portfolio.
“The right arm might be like Charles Atlas, but the left is withered,” he says.
Some may question whether all this effort from both sides is worth the trouble. For advisers this is a highly competitive segment. However, the total revenues available to bespoke wealth advisers chasing the ultra-wealthy segment are enormous and growing.
Client revenues from the wealthiest group are the fastest growing portion of the advisory market. These should climb 39 per cent in the five years to 2028 to $99bn, according to Oliver Wyman estimates. By that point such clients should account for more than a third of all wealth assets worldwide and a healthy 15 per cent of the related income.
But do the wealthy need all this attention and service? Probably. A multigenerational family structure will multiply the number of stakeholders with a call on the original source of the wealth. That requires some paid, external professional management and advisers. Even John D Rockefeller had to call in help.
In such a competitive market, advisers will do their best to maintain the closest ties possible to these individuals and their families, but within reason and the bounds of profitability. As Ducatillon at Pictet, remarks: “We don’t get ‘bring me an elephant’ requests. We have reasonable clients, I have to say.”
