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European Family Businesses Lose Trust In Private Banks

Devina Shah

15 September 2010

Many European family businesses and their family office advisors are losing trust in private banks as more than a third do not believe the institutions are essential for managing their wealth, according to a study conducted by Campden Wealth.

Only eight per cent of those surveyed thought that private banks were crucial for managing their wealth.

A significant 85 per cent believed private banks could not be completely objective when it comes to offering them products and services, citing concerns that wealth managers are often too product-orientated and could be influenced by commission payments from product providers.

“Many private banks are working hard to regain the trust of family businesses. Part of this process will be that they need to listen to the concerns of these very important wealth holders to a much greater degree than they have in the past,” said David Bain, head of research at Campden Wealth.

More than 20 per cent of respondents with private banking relationships said they were planning to reduce the amount of wealth they hold and the number of products and services they buy from private banks over the next year.

When asked about what products private banks should offer, respondents said they wanted products and services that demonstrate an alignment of interest when it comes to proportioning risk. Respondents also want greater visibility of fees. Above all, mistrust of the private banking model among family businesses was a prominent theme.

“Family businesses have been among the most vocal critics of private banks during the financial crisis and in its aftermath. Many of them have been particularly frustrated with some of what they see are the mis-selling and the high fees of complicated investment vehicles like structured products and fund of hedge funds structures,” Bain said.

Campden Wealth surveyed more than 100 family businesses and offices across Europe in the second quarter of 2010.