At Société Générale Private Banking Hambros, the firm offering services to intermediaries such as high-end IFAs, negotiating a share of revenues is the aim, rather than grabbing a whole slice of territory.

For large private wealth managers looking to win a slice of the UK market pie, it seems futile to persuade clients to dump long-term advisor relationships. But if you can’t beat them, partner with them.

At Société Générale Private Banking Hambros, the firm – part of the French banking giant – is offering services to intermediaries such as high-end independent financial advisors, negotiating a share of revenues from such arrangements rather than trying to grab advisors' business.

This is early days, but the collaborative approach appears to be bearing fruit, one of its senior executives told WealthBriefing recently.

SGPB Hambros feels there is a gap in the market where most private banks are not, in its view, collaborating effectively with independent wealth advisors, said Stefano Del Federico, head of UK financial intermediaries, Société Générale Private Banking Hambros. He spoke at his offices in St James’s Square in London’s West End.

“Some of the private banks just don’t take these [IFA] firms seriously,” Del Federico said. “There are some really good independents out there and what they needed to have to compete was access to a private bank’s services, experience and infrastructure,” he continued.

“We are in the people business and that means are we unlikely to be able to compete for clients who have strong relationships with the independents [wealth firms]. How are you going to compete with someone who has had a 20-year client relationship unless they are about to retire or if they have done something wrong?” he said.

To deal with this issue, Del Federico said, SGPB Hambros has an RDR-compliant and transparent service which allows the independent wealth advisors to charge fees for managing their clients’ assets, providing access to the suite of the bank’s services, such as custody, execution and research, while allowing them to continue to operate as separate, independent businesses.

He was referring to the Retail Distribution Review, the programme of reforms by the UK authorities designed, among other things, to stamp out the use of commission payments and replace these with fees, in order – so it is hoped – to foster more professional and objective financial advice.

There are other private banks which have intermediaries businesses, though they are not strictly identical. HSBC Private Bank, Barclays Wealth and UBS, for instance, have such operations. UBS, for example, works with asset managers who want to use the Swiss banking group’s brokerage, support and risk management systems.

Young approach

This intermediaries business at SocGen is relatively young. Del Federico joined the firm two years ago, after having worked in the intermediaries space in wealth management for more than 20 years. For example, he previously worked as UK sales director of Abbey Wealth Management (now Santander).

Federico argued that there are relatively few other firms such as SocGen that offer this kind of service to intermediaries.

“Our intention is to help our independent wealth advisory partners to grow their business by sharing ideas and by providing an insight into how a modern private bank may interact with the high net worth community,” he said.

The intermediaries business at Société Générale Private Banking Hambros was launched last year; the bank has worked with such firms in Switzerland for much longer – ten years and more.

The bank charges for its services on a simple ad valorem basis, as an agreed, flat fee. It does not charge transaction fees. Del Federico said transaction fees can make it difficult for underlying clients to know the extent of the additional costs that are likely to be levied.

Among the clients working with the bank today are one of the big-four accounting firms (this was undisclosed), an Asian private bank which needed access to services in the UK as it does not yet have a UK banking licence and a number of boutique financial advisors. SGPB Hambros is about to sign up its tenth client, said Del Federico.

The high-touch, close relationships involved means that SGPB Hambros only intends to have 20 intermediary relationships, as part of its initial phase, in order to ensure the enhanced level of service is maintained, he said.

Differences, distinctions

One important issue is the difference, in payment and business model, between firms that acted as an “introducer” and an “intermediary”.

Del Federico said that most private banks work on an introducer model, whereby introduced clients become full clients of the bank, where the introducer has little control over the products and services that may be introduced. Any revenues derived from these introductions are normally shared with the introducer; however, in the spirit of transparency, these payments are likely to be fully disclosed in the future.

The model adopted by SGPB Hambros is to deal with these independent firms on an intermediation basis, allowing these firms to have full control over what product or services are introduced to their clients.

“We are simply executing our partners’ instructions via our whole of market, multi-jurisdictional platform, with full lending and private banking capabilities thrown in. It goes much further than the traditional retail wrap platform they have historically had access to, and truly resonates with the high net worth end-user client community. Think of it as a platform-plus service,” said Del Federico.

In terms of scale, SocGen targets intermediaries that have at least £50 million (about $80 million) of assets under management or are considered able to deliver it.

Del Federico said that as part of any relationship with intermediaries, SGPB Hambros can help a firm in its due diligence and assessment of the more complex products, such as hedge funds, structured products, private equity and other areas. He said the bank can help an advisor frame its decision-making processes and checks; it also gives access to integrated reporting and banking services, as and when required.

SGPB Hambros' own platform is integrated with private banking and asset management technology firm Odyssey (now owned by Temenos).