The changing face of private banking was clearly on display at a recent London conference when two of the biggest players in the market disc...
The changing face of private banking was clearly on display at a recent London conference when two of the biggest players in the market discussed the new directions that they were taking. UBS, the world's leading private banker, promoted its use of open architecture technology to develop domestic onshore markets in five European countries while Swiss rival Credit Suisse Private Banking explained its move into the affluent retail market.
Gilbert Benz, executive director at UBS Private Banking, said the open architecture approach had a number of advantages for both clients and institutions, including the provision of more objective investment solutions. Benz also admitted, however, that there were some major challenges to be faced by UBS as it tackled the UK, French, German, Spanish and Italian markets. First and foremost were the difficulties that came with dealing with complex and different regulations in each of the markets. In some cases, such as in Spain, regulation is not only complex but in the process of change. "That has an impact on what you roll out in the domestic market and how you roll it out," said Benz.
Another challenge was the independent operation of each market. "We will have a distinct IT or operations team in each market and they are not necessarily working on the same systems," said Benz. He said bringing the systems together to work off the same backbone should improve the quality of information to clients. A more general gripe was the lack of a global sensibility in the private banking world. "There are very few people who actually think global or who think in a pan European context so one of the challenges I have had is simply getting people in, for example, Spain to think about Germany, France and the UK as well as Spain," said Benz.
UBS' ambitious plan is part of the move by private banks across the board to open architecture platforms as outsourcing continues to make inroads into the industry. Upto the early 1980s, private banks provided almost every product or service from in-house resources. Now an increasing number of private banks are prepared to outsource activities such as account administration, custody and transactions processing to other providers.
Another change in the sector is the widening of coverage by some players. CSPB's move into the affluent retail side of the market is one example. Dr Burkhard Varnholt, managing director of CSPB, brushed aside claims the bank was moving toward "private banking for the masses." Varnholt said there were some natural synergies between private banking and affluent services. "We believe that we have introduced a number of essential success factors for asset management business which we believe should leveraged on a bigger platform," said Varnholt. "There is no reason to keep them away from retail investors as long as we have the technology business platform and the scaleable model. You should use the opportunity to scale that business model."
The Credit Suisse Group initially launched Credit Suisse Personal Finance, to target onshore European investors with €50,000-€1m, as the tip of the iceberg in the bank’s ambition to move into the upmarket retail sector. New chairman Lukas Mühlemann followed that announcement with the creation of a new operating unit Credit Suisse Financial Services, which will account for well over half the bank’s capital and staff. The operating unit will incorporate Credit Suisse Banking, the domestic Swiss bank, Credit Suisse e-Business, the online bank, and Credit Suisse Personal Finance, the pan-European initiative.
Varnholt said CSPB had no intention of a full merger of the personal banking and affluent services divisions. "As long as relationship managers are not dealing with two different clients and there is a clear segmentation between retail affluent and private banking systems," he said.