Wealth leaders are on the move
Comment: Constraints on cost could lead to a wave of consolidation
UBS chief executive Oswald Grübel’s eminently sensible decision to put Robert McCann in charge of his US wealth division marks the latest of a series of leadership shuffles in wealth management, as people get back to basics.
Grübel reckons the crucial aspect of his appointment is that McCann knows the importance of boosting the bottom line. His plan to boost margins from the 8% immediately in prospect to 15% is suitably realistic, compared with the 20% he delivered at Merrill Lynch. No acquisitions are planned.
Right across the wealth sector, the bean counters are taking charge. The trend, funnily enough, was started at Merrill Lynch by James Gorman, before McCann eased him out in 2006.
Amid a war for talent, Gorman was concerned that some of his advisers were not earning their keep. He risked unpopularity by carrying out a cull and repeated the exercise when he moved to Morgan Stanley, where he was appointed chief executive. At Barclays Wealth, incorporated in 2006, chief executive Tom Kalaris has employed strict financial discipline to boost profits and justify new hires.
Sallie Krawcheck, newly installed as head of wealth at Bank of America Merrill Lynch, takes a pretty meticulous approach to life, as does Jane Fraser, head of Citigroup’s global private banking division. Both cut their teeth elsewhere in banking.
Boris Collardi, the new chief executive of Julius Baer, is getting a grip on costs. Following an influx of business, private bank C Hoare & Co has recruited Jeremy Marshall, previously head of Credit Suisse in the UK, to develop an operational template.
The sector is also experiencing a few takeovers, with financial products group Generali and Bank of China buying, and developing, Swiss private banks. Last week, Deutsche Bank tied up the €1.3bn purchase of Sal Oppenheim, a wealth business with an investment bank attached.
Family scion Christopher Freiherr von Oppenheim will stay in position to reassure his clients that nothing has changed. But it is clear his family’s stewardship skills were not equal to the credit crisis and Deutsche will be in operational control from now on.
As von Oppenheim’s continuing role suggests, however, there is much more to wealth management than securing the bottom line.
A good private banker guards the interests of his clients with passion. Of late, they have also been dealing with a great deal of grief following losses incurred by clients on the stock market, as well as imploding structured money market and Madoff funds. Long-standing private banking relationships are being severed.
Some clients have developed more faith in technology than human advisers. According to Bank of America Merrill Lynch and information supplier Cap Gemini, 66% of clients see online services as important, compared with 32% of advisers.
Good chief executives know the importance of cheering up their advisers. Apart from being pummelled by clients, they are fretting over redundancies. Steven Crosby, senior managing director at accountant PricewaterhouseCoopers, said: “There is a surplus of talent. We are expecting a substantial wave of consolidation.”
When he worked at Merrill, McCann’s track record for cheering up the troops was better than Gorman’s. Which is good news for his new team of 8,000 advisers, sandbagged by a loss of client business and problems relating to alleged US tax evasion at their bank’s international division.
Rather than being encouraged by remorseless Swiss executives to work smarter and switch to advisory fees, they can expect to hang onto their beloved commissions. They can also expect McCann to make some sensible hires.
The folk at private bank Kleinwort Benson are also feeling happier following the painful experience of being employed by Commerzbank, which attempted to claw back their bonuses early this year. Commerz has sold the private bank for £225m to Leonhard Fischer’s holding company RHJ International, which insiders hope will take a more reasonable line while building a diverse bank.
Elsewhere, Coutts has replaced Sarah Deaves, its former chief executive, with Michael Morley who used to work at Barclays Wealth and Singer & Friedlander.
Deaves was a great networker, but Morley’s experience in dealing with clients comes at a premium, particularly when the going gets tough.
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