Swiss private banks looking to Asia for new clients as expert highlights need to offer compelling investments

News - Funds

Written by Ray Clancy

Monday, 06 September 2010 09:18

Swiss wealth managers must target specific markets and offer compelling investments to survive in an increasingly competitive market where secrecy is no longer acceptable, it is claimed.

Swiss private banks, which manage an estimated 27 percent of the world’s offshore wealth, are under pressure after attacks on secrecy by the US, France and Germany eroded part of their traditional advantage. That is forcing them to expand in Asia, open new branches in Europe and generate better investment returns to win clients.

‘The ones that won’t survive will be those who aren’t large enough to be in the markets they chose to serve or try to do too many things. Clients are ready and willing to pay if the investment work is compelling,’ said Alexandre Zeller, chief executive officer of HSBC’s Geneva based private bank.

HSBC increased client assets by 3.1% to 195.1 billion Swiss francs in the six months through June, making the bank the fourth biggest Swiss wealth manager behind UBS, Credit Suisse Group and Picet & Cie.

Zeller, whose bank targets individuals with more than three million francs to invest, said ‘plain vanilla’ investments no longer allow wealth managers to differentiate themselves.

‘Private Banking is a scale business, you cannot provide the same product and services if you are a 20 billion or 200 billion asset bank. You need to reach critical size to offer a fully fledged strategy, which means choosing the markets you want to be in,’ explained Zeller.

HSBC reported net new money of 4.9 billion francs in the first half as inflows from Asia more than offset net redemptions of 600 million francs from Europe and Israel. Those outflows were probably partly explained by the theft of data on at least 24,000 accounts, which are being scrutinized by tax authorities in France and Italy, Zeller said.

The bank aims to reverse those outflows, said Zeller, who until August 2008 was chief executive officer at Switzerland’s second biggest regional lender Banque Cantonale Vaudoise after working for Credit Suisse’s private bank.

‘This is what we’d like to achieve, whether in 2011 or a bit later remains to be seen. Protecting client data is going to be a major challenge for the future,’ he added.

Switzerland is still attracting wealthy Europeans both as residents and private banking clients because the country offers greater political and tax stability than its neighbours, Zeller explained.

‘Onshore private banking will develop and international private banking remains extremely attractive. We’re in a period of much regulatory pressure and yet we’re seeing private banks reporting positive net new money where everyone would expect to see them losing assets.’