M&A deals, client re-segmentation and other developments make it more necessary than ever for clients to have options in case their existing providers no longer serve their needs.

While stock markets have recovered from the nadir of early 2009, clients of wealth managers haven’t had a lot to smile about lately. Some have discovered that their wallets aren’t large enough to make them profitable clients any more, and have been locked out, or “re-segmented”. The rising burden of regulation means getting an account, or switching one, can be a chore. It is also bewildering when a client’s firm is taken over and an experienced relationship manager is replaced with a relative rookie. For clients that might have been used to polite service and blissful continuity, this is alarming.

With a number of merger and acquisition deals going on in different markets, there is plenty of this sort of upheaval. Several organisations are working in this space to make the M&A fallout as painless for clients as they can. An organisation that produces regular reports covered by this publication is MyPrivateBanking Research, based in Switzerland. As well as providing a range of research reports, the organisation also helps clients with issues such as negotiating fees. On the corporate side of the fence, is a recently-launched service in Europe called CATCH, created by Millenium Associates.

Yet another business seeking to tap the consequences of all this change is the findaWEALTHMANAGER.com business. Co-founder Dominic Gamble recently spoke to this publication in a recent telephone interview from his base in Singapore, to where he moved about two months ago. (His firm has a London office and was founded in 2011.)

This business aims to put clients in touch with the kind of wealth firms ideally suited to the client and to take some of the pain out of searching for the ideal manager. It is a bit like one of the more salubrious dating agencies.

And just as people might turn to an introduction agency to mend their broken hearts if an old relationship has gone sour, so this organisation hopes to help clients left “orphaned” by re-segmentation and M&A. It also focuses on people who, despite their riches, just haven’t a clue about where to start finding the wealth management version of “Mr or Mrs Right”.

One sub-trend in the recent raft of M&A deals has been that of private equity firms buying up wealth managers, something that Gamble is particularly concerned about, given the usual time-frames and business methods that private equity firms employ.

“If I was a client of a private bank that had been acquired by a private equity firm, I would be watching carefully what unfolds,” he said.

As examples of such deals, Deutsche Asset & Wealth Management recently agreed to sell its UK regional business, Tilney, to a company controlled by the Permira group of funds. This means Tilney, founded in 1836, will be owned by the same structure that owns Bestinvest, the wealth advisory and investment firm that agreed to be bought in November last year. Deutsche Bank originally bought Tilney from private equity house Bridgepoint in December, 2006. Another deal involving Bridgepoint concerned the coming together of Quilter and Cheviot Asset Management, two UK-based firms. Last year Morgan Stanley Smith Barney (now Morgan Stanley Wealth Management) sold Quilter to Bridgepoint, having initially sold it to Citigroup in 2006. Morgan Stanley then reacquired the unit in 2009 as a result of its joint venture wealth management deal with Citigroup. Clients of Quilter must hope that the marriage with Cheviot proves more durable than previous relationships.

More generally, M&A has been relatively lively in the wealth management arena both in the UK and further afield; developments such as the UK’s Retail Distribution Review regulations are helping to drive deals as firms scramble for scale and the associated economies thereof. For slightly different strategic reasons, M&A on the continent has been lively. Last October for example, Swiss wealth management boutique Falcon Private Bank agreed to buy Clariden Leu (Europe), the wholly-owned London-based subsidiary of Credit Suisse Group.

One of the biggest deals to affect clients was Julius Baer’s acquisition of the non-US wealth management arm of Bank of America Merrill Lynch. (Julius Baer, to its credit, went to considerable length explain how it handled clients in the transition. See here.) A few weeks ago, Singapore-headquartered DBS bought the Asia private bank of Societe Generale. There is expected to be further consolidation in Switzerland’s heavily fractured independent wealth management sector, and in the global trusts industry, bank owners of such entities have been spinning them off. The M&A advisors are busy.

Gamble chooses his words carefully, but the involvement of private equity firms in buying wealth managers bothers him. He’s not alone; Brian Spence, of the eponymous Hamilton Spence advisory firm, has also told this publication about his concerns. (See here.)

“It is no surprise that in the pursuit of maximising value private equity firms look to strip out costs, and re-sell or list the entity for a profit after a few years – this can sharply conflict with the interests of the private client,” Gamble continued.

“From the client’s side, the cushy relationship they may have had for, say, five or ten years could come to an end as the person he had dealt with moves on, either fired or leaves to a perceived nicer place to work; usually he gets a much younger RM replacement, who is a lot cheaper. And the other thing the client finds is that fee levels get re-structured and typically go up,” he said.

Although he dislikes such a clichéd term, he says wealth management really is about "relationship management" and not just brands – the M&A merry-go-round and the changes to segments and minimum AuM requirements has been unsettling.

Mind the gap

Banks have hiked minimum AuMs on clients in the last two years or so – driven to some degree by regulatory costs; Gamble gave an example of a client who, when told that the AuM wasn’t high enough to stay on board, was offered the option of paying double the amount of fees as before.

There have been several examples of firms increasing minimums to stay profitable, such as HSBC and Barclays.

“The theme that emerges is what happens to all these clients?” Gamble said.

Competition, and the sort of services that Gamble’s firm provides, are making the industry less opaque and it is now easier for clients concerned about their service to switch providers than before.

For what is clear from these organisations, and the growing power of the Internet, is that while some of the disruption is unsettling, businesses and tools are expanding to help individuals get a better, faster and clearer idea of the people and institutions most likely to serve their needs. For decades, private banking has benefited from its very obscurity and opacity. Those days are hopefully coming to an end.