Deutsche Bank Australia has almost halved its private banking headcount and refocused on ultra high net-worth clients, in response to an inc...
Deutsche Bank Australia has almost halved its private banking headcount and refocused on ultra high net-worth clients, in response to an increasingly crowded domestic marketplace. Deutsche's private banking team will shrink from 28 to 15, as the bank concentrates on a smaller number of more profitable, high-end clients.
Ralph Morton, Deutsche Bank Australia's head of private wealth management, told Private Client Management the move was in line with the bank's global migration towards a 'private wealth management' business model. In real terms, this involves a four-fold leap in the target client's asset base from $2.5m to $10m.
Morton said the job cuts did not reflect a weakening domestic private banking industry. However, he said the 'low end' of the market was becoming an increasingly competitive and less profitable space.
"What we've found in this country is our strategic advantage is more on the complex products and bringing our clients closer to the investment banking side. So what we're doing in Australia is repositioning upwards from a target market of the 'sophisticated investor' with about $2.5m and above, to the professional investor who typically has $10m and above. We see a strategic advantage in being able to offer these clients things that they might not be able to get anywhere else," Morton said.
Deutsche Australia already offers its HNW investors third-party products such as hedge funds and private equity from the US and Singapore. Morton said the new 'private wealth management' model would focus more on "complex structuring requirements, certain trust arrangements, the ability to hedge total positions, risk management a combination of corporate finance and structuring advice". These are products that Deutsche's investment bank typically offers to wholesale investors.
Morton explained: "That's very much in line with what Deutsche Bank is doing around the rest of the globe. So what we're doing is basically rebadging ourselves from private banking to private wealth management and forming part of that global strategy."
A large part of the pressure in the Australian private banking market has come from new players, such as independent financial advisers and retail banks. Morton said Deutsche Bank had become increasingly concerned that it would be competing with the 'big four banks' ANZ, Westpac, National Australia Bank and Commonwealth Bank of Australia for a shrinking slice of the HNW client base.
"What we're finding in Australia is that the big four banks are starting to wake up, which was always going to happen. Eventually we can see them getting their act together and moving into the more affluent market. Also, there's a number of very good boutiques out there and high quality IFAs top financial planning firms and they offer some very competitive products.
"Now we're happy to compete with them at that level but our real standout advantage comes when the client's a professional investor. So it's a case of 'let's get out of a space that's beginning to be crowded and move into a space where there's not as much competition'. Now that of course means we're going to be dealing with fewer clients, which means you really don't need the staff numbers that you were carrying before," Morton concluded.