The private banking services of Nordea, Sal Oppenheim and UBS are leading the way on client service standards, but most large European private banks are failing to adequately address their clients’ needs, a new study by MyPrivateBanking.com has concluded.

MyPrivateBanking.com, which is an independent information and networking platform for private banking clients, sent analysts to the Swiss branches of twenty wealth managers to act as test clients. These analysts obtained an investment proposal and cost estimate for an identical investment amount from each firm, and these were then assessed in the categories of client meeting, investment proposal and costs.

The first major shortcoming identified by the study was that clients were not listened to: MyPrivateBanking.com found that more than 25 per cent of the advisors tested “practically asked no questions at all.”

The second major failing among the private banks assessed was that investment proposals were often not in line with the client’s needs. The study found that more than half the banks presented an investment proposal that did not adequately take the client's risk appetite into account, but even more startlingly, the research revealed that in 25 per cent of the cases the proposed investment was actually completely opposed to the client's preferences.

Thirdly, MyPrivateBanking.com found that misleading cost proposals were prevalent, with one-third of the banks assessed having fee structures that included a significant amount of hidden costs - through a large number of managed funds and in-house products.

"We were surprised by the high percentage of banks that did not address the investment goals of the client adequately and just recommended their off-the-shelf proposals. Further, banks should be more transparent, so that clients know about hidden costs that often can be as high as the stated direct fees," said Christian Nolterieke, managing director of MyPrivateBanking.com.

But the study’s findings were not wholly negative as it was found that the investment proposals on the whole were highly diversified across the various investment categories. In addition, the banks assessed were beginning to rely increasingly on questionnaires to fully understand their client' wishes.

Emerging as a clear winner from the study is Nordea; while perhaps not the best known wealth management brand in Switzerland, the Scandinavian bank scored a convincing 79 out of a possible 100 points. MyPrivateBanking.com’s analysts’s lauded Nordea for its professional handling of the customer interaction, its comprehensive inquiry using a questionnaire and a proposal that showed how the bank really understood the preferences of the test client. Nordea’s use of ETFs and the avoidance of high hidden cost were also praised.

Next was Luxembourg-headquartered Sal Oppenheim, which MyPrivateBanking.com said “showed how straight forward and cost-efficient wealth management could be” through its use of an all-inclusive 1 per cent fee and the avoidance of hidden costs. In third position was UBS, of which it was said the proposed asset allocation was an excellent fit for the preferences of the test client.

Overall, the study found a large degree of variance between the banks, with scores ranging from between 26 to 79 points. While most banks scored between 50 and 70 points, more than a quarter were at or below 40, reflecting the fact that most banks had substantial weaknesses in one or more areas of the assessment areas, MyPrivateBanking.com said.

"On average, all surveyed banks attained only 52 of a total of 100 possible points. A very mixed result" said Steffen Binder, research director of MyPrivateBanking.com. "However, there were big differences among the banks and not only our winners showed good approaches."