From my lens, Private Banks and most universal banks with a Private Banking activity have over recent years put a lot of effort on reducing costs by looking for economies of scale, on consolidation to increase assets under management, on standardisation of their product offerings, on digitalisation to adapt to new trends usually with the help of Fintechs, on simplification of their processes and more importantly on adapting to new regulations (MiFID II, AML, DAC6, …).
In a way, their attention was drawn away from their most important asset: the UHNWI. Even though most of the changes operated by private banks were necessary, I truly feel that the real essence of what it means to be a UHNWI has not been addressed by most banks. Having served in both single and multi-Family Offices over recent years, I was privileged to witness from up close what these UHNWI are looking for from their Bank. Their needs, wishes and goals have greatly evolved over recent years. In today’s world, aside confidentiality, alignment of interest and value for money, they look for three key attributes from their Bank: a truly personalised service, access to well-chosen illiquid private equity and debt investments, and a clear ESG approach to investing.
Our clients are regularly invited to Private Equity presentations where they get to have deep insights on top investment opportunities carefully selected by the private equity experts of our Group.
When it comes to personalised services, the UHNWI definitely do not want to be treated as a number. With the wealth they have built over the years or inherited, they rightly demand for tailor-made and personalised services. They want to experience they are addressed differently from any other client. The relationship they have with their Private Banker and all the Experts within the bank (from Estate Planning to Credit to Financial Specialists) is key as it helps to crystallise exactly what suits them in harmony with their unique needs, wishes and goals. The reality today is that these clients are becoming even more international than before, with interests based in different locations, thus complexifying their financial situation and investments. As a private banker, the everyday challenge is to ensure that the right solutions are presented and provided to the client. Furthermore, they are in for the long term when it comes to investing, more likely running a marathon than a 100-meters sprint as a stock-picker would normally do. Long term means properly selecting the right investments with the help of the bank’s experts with a deep knowledge of the underlying.
These UHNWI usually know exactly in what type of products they want to invest. Plain vanilla investments like stocks, bonds, funds, ETF’s are no longer on top of their list. Over recent years, I have observed that wealthy clients are making a structural shift from liquid public assets towards illiquid private assets. Indeed, these clients have been systematically increasing their private debt and equity commitments in a shift away from lower return public markets towards higher return private investments with the aim to capture the illiquidity premium against a background of zero or negative interest rates. That’s why we continue to build out our Private Equity offering. Our clients are regularly invited to Private Equity presentations where they get to have deep insights on top investment opportunities carefully selected by the private equity experts of our Group. They know that these investments are not available to everybody and that’s what makes them very attractive to them.
Wealthy investors are very keen to know where they are actually investing and do so by gathering with the help of their private bank as much information as possible to make sure their choices are accurate and certainly are aligned with their values, goals and objectives.
Last but not least, UHNWI are eager to invest into environmental, social and corporate governance (ESG) proof solutions. They want to be sure to make an impact with their investments as they know that by doing so, they can make a difference for the generations to come. It’s like their legacy whether visible or not. In the light of the current Pandemic crisis, it even makes more sense that we collectively could have done more to prevent it from ever happening. Take Bill Gates, the philanthropist, who feels he should have done more to raise awareness on the threats of such a virus on the world and the global economy. Wealthy investors are very keen to know where they are actually investing and do so by gathering with the help of their private bank as much information as possible to make sure their choices are accurate and certainly are aligned with their values, goals and objectives.
To conclude, I would say that for Private Banks servicing the UHNW segment, it is an everyday challenge that requires strong expertise, long-term vision, adaptability, flexibility, commitment to the client, commitment to sustainability, alignment of interest and true independence. And this is exactly what a Private Bank like Degroof Petercam, who’s been servicing this segment for more almost 150 years, can provide to them.
Kris De Souter, CFA, CAIA, Head of Private Banking and Member of the Executive Committee of Banque Degroof Petercam Luxembourg since May 1, 2020.