Top tier towers over competition

With clients demanding expertise in areas such as ESG, alternatives and technology, PWM’s awards celebrate success for those banks which stay one step ahead.

It quickly became clear while judging the Global Private Banking Awards for 2021 that the Covid-19 pandemic was accelerating key trends, including digitalisation, communication and investment in environmental, social and governance (ESG) strategies.

However, while scrutinising submissions from more than 120 private banks around the world, our panel of 16 judges from four continents also noticed the uncertainty emerging in some players, no longer unequivocal about the purpose of their institution. These challenges were highlighted in recent panel discussion, involving three of our judges, respectively based in London, New York and Hong Kong. “It’s quite debatable, whether or not managing portfolios is a core competency for private banks,” said Cara Williams, global wealth leader at the Mercer Consultancy in London, arguing that where these players have raised their game and become specialists is in the previously nebulous sphere of client servicing. “These banks are really working with clients, so they understand the risks that they’re put under right now,” she said.

This trend of hand-holding, empathy and guidance in steering a clear course through dual public health and economic crises is a world away from the pre-pandemic era, when banks were constantly panned for not connecting with their clientele. “The best banks,” she said, “are the ones recognising that you can’t do it all and certainly not do it to the best of their expertise. So, leading with expertise where they can, outsourcing where necessary and focusing, again, just on their strengths, I think, is the best way forward for them.” This analysis points to clients using a portfolio of private banking providers, with clear division on who provides key services. The client may typically use one specialist private bank for ESG investing, one for alternative investments and a third for succession planning, rather than hiring several very similar global institutions to manage portfolios.

The increasingly important role of alternative investments in portfolio-led solutions was highlighted by Malik Sarwar, head of wealth management at the Global Leader Group in New York, and former senior banker at HSBC, Citi and Merrill Lynch. Mr Sarwar also drew attention to a parallel trend of these key players hiring younger relationship managers and investment staff, in order to understand better the ambitions of the millennial generation, heirs to the ongoing $70tn wealth transfer of assets.“This latest generation tends to want bankers who they can relate to in terms of values,” said Mr Sarwar. “I think the banks have been quick to hire millennials as part of global teams, so they can offer them services fit for their needs.” Many banks, as became obvious in our forensic study of the submissions, had begun to re-orientate themselves as experts, managers or advisers on private equity in particular, kicking off a war to hire expertise in this arena.

The rivalry to secure talent was not just among bank-led wealth managers, but had spread to the family office world. Specialists often headed here to enjoy a more independent and boutique experience, clear of pressures to sell tranches of structured products and other internally sourced strategies. “The talent that the banks want is in very sparse supply,” agreed Simeon Fowler, a leading head-hunter in the Asia-Pacific region, where he founded Fowler Fox and Co. Rather than seeing private banks fighting for specialists in alternative investments, however, he sees a more pragmatic approach. “Banks are now actually upskilling their investment advisory teams,” he pointed out. There was even a suggestion from Mr Fowler that the surge of specialists heading to the boutique firms in Asia may actually be reversed as the global and regional private banks upgrade their offers. “The interesting thing around so many people leaving banks and setting up family offices, and certainly boutique operations, is that we’re seeing the lifespan of these firms is extremely short,” said Mr Fowler. “Many of them are lasting two or three years and they’re finding that they can’t grow. So, the next three or four years, certainly in Asia, is going to be interesting.”
Those banks that fail to upgrade staff and practices in these portfolio management and advisory areas will suffer dearly, believes Mr Sarwar, who highlighted the $330bn in fines levied globally against banks that have mis-sold or mis-managed products, created toxic securities and neglected to adequately protect their clients. He emphasised that leaders of successful banks must exercise the qualities of integrity, competence and compassion to succeed in wealth management over the longer term. However, there is still much work to be done in terms of altering key performance indicators to help improve the emphasis on compassion and client-centricity, he said. “The industry is still rather revenue and asset-based as opposed to being assessed on client outcomes, caring and net promoter scores,” said Mr Sarwar. The pandemic has highlighted some key leadership talent, which has evolved quickly and risen to the top of the tree, says Mr Fowler. “These leaders that certainly stepped up to the plate in this incredible pandemic that we’ve all had to deal with, have shown huge resourcefulness in their ability to think of more consultative ways to approach their staff,” said Mr Fowler. “It’s at times like this that you can see the real shining stars in terms of how they’ve been able to navigate their businesses through choppy waters.”

The lack of authenticity among some organisational leaders was, however, tackled by Mercer’s Ms Williams. “The vast majority of firms that have tried to pivot towards certain client segments – that of women in particular because obviously the transfer of wealth is so abundantly clear there – appear quite superficial,” said Ms Williams. “They often see this just as a means to get more assets as opposed to a genuine desire to improve relationships with female clients and then, most importantly, to improve the outcomes for them and their families.” She also questioned banks’ application of their much-publicised policies relating to diversity and equality of opportunity. “I think there’s a clear desire to improve diversity numbers within firms and banks in particular and certainly in financial services more broadly,” said Ms Williams. “The question is whether or not that is a consistent effort and whether it’s being measured and whether or not we are seeing the changes that we need to see and, frankly, I think we’re absolutely not.” The high-profile recruitment and investment area in which banks have made much more progress is that of ESG and impact investing, which has been very clear in the quality of our award submissions. “The more senior the banker, the more interest and experience they have in this space,” said Mr Fowler. The focus of talented, younger entrants to the job market has certainly switched over the years from unbridled financial returns to technology-led trends, with responsible investing just beginning to make its mark, according to Mr Sarwar. He sees banks with competing claims around “saving the world” striving to attract successful young people. “The industry has made a lot of effort to get them in and make amends for its excesses,” he said. “The youngsters may be a little sceptical, but they remain open-minded.” The realisation that ESG investing will be good for clients is however coming only slowly. “While ‘greed is good’ is absolutely still the mantra, what’s happening is people are recognising that ESG is actually improving those outcomes,” said Ms Williams. “So, you can be greedy and do good. People have recognised the two are integrally linked and you have to take that into consideration if you want to outperform.”

Award categories

The virtual ceremonies

The Global Awards Ceremony and judges panel discussion

The Asia-Pacific Awards Ceremony

The EMEA Awards Ceremony

The Americas Awards Ceremony

winner profiles

Professional Wealth Management content is free to read

To read PWM content for free, register now by completing a short form.

Registered users benefit from:

- Full access to all articles, videos and podcasts

- E-newsletters featuring the latest content

- Coverage of the latest opportunities, challenges, game-changing regulations and competing markets

- Bespoke PWM research: sub-advisory, asset allocation, Global Private Banking Awards, Wealth Tech Awards