With 250 family offices in Europe each with $1 billion of assets, it is no wonder that private banks are ramping up their efforts to engage with this type of client. Among the banks determined to make big inroads into this market is Credit Suisse.
With 250 family offices in Europe each with $1 billion of assets, it is no wonder that private banks are ramping up their efforts to engage with this type of client.
Among one of the banks determined to make big inroads into this market is Credit Suisse. The Zurich-listed bank set up a dedicated family office team about a year ago, led by Bernie Armstrong, who joined last September from Parly, a Geneva-based family office, where he worked as director of advisory.
"My team is not comprised of traditional private bankers. We are hiring professionals with institutional experience, bringing an additional skill set to the relationship," Armstrong told this publication in a recent interview at Credit Suisse's Canary Wharf offices.
"We realised there was an opportunity to establish a dedicated service offering for family office clients,” Armstrong continued. "The integrated banking model provides Credit Suisse with a tremendous competitive advantage [in the family office field]," he said, not surprisingly enthusing about the “one bank” model that Credit Suisse adopts.
Credit Suisse already covers a sizeable chunk of the family office market, but the scope for further market share is considerable. Besides the number mentioned above, there are estimated to be 1,000 family offices in the EMEA region each with $250 million of assets under management.
As part of its approach, the family office unit at Credit Suisse deals with the professionals who run FOs, ensuring they receive institutional-level service of the sort that a big, integrated banking group such as Credit Suisse sets out to provide. So far, Armstrong said this unit has proven its worth, with plenty of growth opportunities ahead.
Amstrong is based in Geneva, which given its cluster of family office businesses, makes sense, but the scope of his operations takes him across a wide geographical field. The Credit Suisse family office unit is building teams in EMEA. The bank also operates different models of family office business units in North America and Asia in response to market developments in these diverse regions. For example, in Asia, the bank recently opened its first ever Family Office Hub, appointing Bernard Fung as head of Family Office Services Singapore. as part of its effort in expanding its Family Office services and its offering for ultra high net worth (UHNW) clients.
With a background in the industry at Parly, and before that, as an executive director at Goldman Sachs, Armstrong has plenty of experience. At Goldman, for example, he worked in institutional wealth management, covering family offices. He also had a six-year stint at HSBC, working as head of European investment advisory.
Other big private banks operate in this space, if not exactly in the same way as Credit Suisse. Banks such as Citigroup have bankers who focus on this segment. Over at UBS, the Swiss bank has created a family services unit in Asia for UHNW clients.
The family office can grow quickly in Europe, analysts have said. In 2008, Celent, the research firm, said family offices only penetrated 18 per cent of ultra-wealthy individuals. The upside potential, in terms of growth, is therefore considerable.
"Family offices behave like small money management businesses and expect a coverage offering that provides access to the entire bank,” Armstrong said.
There are similarities between some family offices, in terms of how they approach issues such as asset allocation, and institutions such as endowments and pension funds, a fact that has been noted before by the industry. Armstrong agrees: "They [family offices] are focused on the long term, and are often looking after perpetual pools of capital."
"Family offices are very familiar with sophisticated investment concepts and can respond quickly to these types of opportunity,” Armstrong continued.
Crucial to making the family office unit work without causing internal ructions is a clear agreement between different bankers about how client relationships are covered, he said.
“We have agreed between our divisions how relationships are covered effectively. If you don’t have this kind of integrated coverage model then it is much more difficult to effectively leverage the entire bank for your clients,” he said.
"Family offices place a lot of value on advice and on the relationship aspects of what they do. To serve them effectively you need to be very agile and client focused,” he said. "Family offices value being able to put deals of varying sizes via one bank rather than negotiate a large number of smaller, separate deals and organisations. Consolidating relationships allows family offices to more effectively manage their assets and spend more time on asset allocation strategy and investments,” added Armstrong.