Private banking has been tested by nearly two years of the Covid-19 pandemic. The industry passed with flying colors—and with considerable help from buoyant financial markets.
The global rich stuck by their bankers, even as the profession’s traditional lifeblood—cozy personal interaction—abruptly stopped flowing. Assets under management at the top 25 global private banks swelled by 14% to $29 trillion in the year to June 30, 2021, according to consultant Aite-Novarica Group. “The biggest banks and wealth managers proved themselves quite resilient and robust,” says Meghna Mukerjee, the firm’s London-based senior analyst. “They have remained close to current clients and managed to bring in new clients.”
Indeed, high-net-worth individuals seemed to become more attached to private bankers as pandemic-related turmoil swept through their businesses, families and portfolios. DIY financial management went out of fashion; the family confidante came back in. “Our surveys show more than 80% of clients are satisfied or very satisfied with their banks,” says Nalika Nanayakkara, who leads EY’s wealth and asset management practice in New York. “Advisers are stepping up to be trusted advisers.”
A massive shift to online communication may prove a blessing for banks as a cost-cutting tool. “Productivity has gone up for many professional services,” says Jill Zucker, a senior partner at McKinsey & Company in New York. “There’s no travel time, and much less time lost running from meeting to meeting.” If the Zoom era lasts post-pandemic, which seems likely, banks may also save on compensation by shifting advisers out of the highest-cost financial capitals, she adds.
More good news: The pandemic, and the surprising bull market that accompanied it, ignited a worldwide investment fever among not-yet-rich individuals. US citizens alone opened 29 million new brokerage accounts, enthusiasm not seen since the 1990s, Zucker says.
That widens the feeder pool for private banks, and this year the best of them mastered new methods to fish in it. “The funnel has opened up,” Mukerjee says. “Through social media platforms, advisers can reach a whole new set of clients they weren’t looking for before.”
Nevertheless, this is no moment to rest on laurels. Potential new private banking customers may be swarming into view, but netting them requires something of a strategic U-turn for an industry that spent the 2010s heading upmarket. The super-rich, $25 million-plus elite that have been private bankers’ holy grail may be getting super-richer. But their ranks increase slowly, and their loyalties are strong. “It’s getting harder and harder to switch big-ticket clients,” Mukerjee says.
Up for grabs, by contrast, are very large numbers of “mass affluent,” loosely defined as those with $250,000 to $1 million in liquid assets. “With limited success generating organic growth, private bank executives are rethinking strategy toward affluent segments, where we observe overliquidity,” says Eliza Zisopulu, an Amsterdam-based director at Strategy&, the consulting arm of Pricewaterhouse Coopers.
This rethink has spurred some expensive downmarket acquisitions. Morgan Stanley, already the world’s No. 2 global wealth manager, paid $13 billion for US-based digital brokerage E-Trade in late 2020. No. 4 JPMorgan countered last summer with an announced acquisition of UK-based “robo-advice” pioneer Nutmeg. The estimated price tag was $1 billion.
Still, the private banking giants face stiff competition from the “mom-and-pop” financial shops that are known as registered investment advisors (RIA) in North America or external asset managers in Europe. The same technology enabling private banks to reach the mass affluent allows these retail operators to service ever-bigger fortunes. “RIAs have a scale and momentum now that we haven’t seen before,” McKinsey’s Zucker says.
Wealth Beyond Borders
Private banks cramped for growth in their home markets have long looked to China, where demand seemed infinite. Personal wealth in the People’s Republic increased 17-fold from 2000-2020 to $120 trillion, overtaking the US, McKinsey research found. Yet global banks’ access to this gold mine seems increasingly constrained.
China’s wealth engine itself may be sputtering as macroeconomic growth slows and Beijing tries to rein in property prices, the core of net worth for the rising classes. Domestic competitors like China Merchants Bank have meanwhile developed dominant onshore franchises. “There’s an awareness that China is a notoriously difficult market, and the domestic banks are very strong,” Aite-Novarica’s Mukerjee says. Even the less-crowded pastures that beckon from across fast-growing Southeast Asia—economies like Indonesia and the Philippines—require fresh commitments of staff and cultural focus.
To compete in the post-pandemic new normal, private banks may need to move in opposite directions along the wealth scale simultaneously. For the seriously rich, successful banks are enhancing their holistic offerings by synthesizing a melange of services—tax, legal and real estate as well as investment—that RIAs and wirehouses can’t match, and doing it without question across borders. “It’s become the private banker’s job to make a range of services seamless and affordable for the client,” EY’s Nanayakkara says.
In the other direction, banks are working to extend some credible semblance of this white-glove treatment to a broader, merely affluent audience, largely by leveraging whiz-bang technology. “The goal is personalization at scale,” Nanayakkara says. “Clients are willing to pay more for financial services if you give them that.”
Personalization, one might add, that cuts across cohorts that vary widely by geography. The average North American or European private banking client is in their 60s, while living into the 90s becomes commonplace. The next big wave in these traditional markets will be elderly widows inheriting from more elderly husbands, Jill Zucker says. Millennials are a more distant concern for now.
The typical Asian customer, on the other hand, is a few decades younger, still actively involved in making their fortune and wondering why they should put capital into markets rather than plowing it back into their business.
If personalization at scale sounds expensive, it is—demanding big, ongoing investments in software and adviser training. Which means life will only get tougher for the smaller, “Swiss-style” private banking boutiques, caught between the rising independent advisers and the democratizing giants. “Markets continue to consolidate, particularly affecting midsize players lacking a specific sharp profile,” says Andreas Pratz, a partner at Strategy& in Munich.
One pandemic effect does seem universal, if indefinite: Enforced isolation and breaks from routine set loose a drive to live more meaningfully. Those who can reconsider direction and priorities are doing so. Experts disagree, however, on how much that will translate into more meaningful financial lives via impact investing, ESG, and so on.
Strategy&’s European consultants see a tectonic shift rumbling under unprepared private banks. “The biggest challenge will be adapting to clients’ changing expectations, including on ESG,” Pratz says.
Across the Atlantic, in the US, investing with conscience seems more talk than walk. “There’s a lot of discussion around ESG, but it’s hard to say there’s growing demand,” Jill Zucker says. “You need to have more standards around it for it to become a requirement.”
Looking forward, hopefully, to a post-pandemic era, private bankers deserve a pat on the back for the challenges they have faced—followed by a stern lecture on the ones still ahead.
Methodology: Behind the Rankings
Global Finance staff select winners for these awards based on entries submitted by banks, company documents and public filings. No proprietary information was sought or shared in the awards process. We consider local market knowledge, global footprint and investment breadth and sophistication. Because metrics are rarely public in this sensitive corner of finance, we incorporate perspective from analysts and consultants. Performance data are also drawn from industry sources including Scorpio Partnership’s annual Global Private Banking Benchmark and Asian Private Banker magazine’s regional league tables. Size and growth are a factor, but Global Finance also considered creativity, uniqueness of offering and dedication to private banking as a core business either globally or regionally.
BEST PRIVATE BANK IN THE WORLD
J.P. Morgan Private Bank
One might add “transparent” to adjectives associated with J.P. Morgan Private Bank. One of the few global banks to have made private banking a reportable segment, it publishes financials quarterly for all to see. And those financials are impressive.
Private Bank global revenue was $3.76 billion in the first half of 2021, up 14% year over year (YOY). Assets under management (AUM) in the private banking client segment reached $752 billion as of June 30, 2021, up 19% YOY. The bank’s total AUM, including global institutional and global funds client segments, were $3 trillion, so private banking composed about a quarter of the institution’s total AUM.
The bank won private banking accolades in diverse geographies and client segments—in the US and beyond. This year, the firm takes home Global Finance’s Best Private Bank in the World—an award it also won for 2021 and 2020. The bank recognizes that many high-net- worth (HNW) clients now have environmental, social and governance (ESG)–related investing goals. As a result, it agreed in June to purchase OpenInvest, a values-based investing platform headquartered in San Francisco, which will allow the private bank to create more bespoke portfolios for its HNW clients.
“Clients are increasingly focused on understanding the environmental, social and governance impact of their portfolios and using that information to make investment decisions that better align with their goals,” said Mary Callahan Erdoes, CEO of J.P. Morgan Chase’s Asset And Wealth Management division, in a statement commenting on the acquisition.
BEST PRIVATE BANK FOR SUSTAINABLE INVESTING
Switzerland’s great private banking firms weren’t the first to jump on the sustainable investing bandwagon, but many are on board now and traveling fast.
UBS, one of the world’s largest bankers to the rich, took a significant step last year when UBS announced that it would make sustainable investments its “preferred solution” for wealth management clients investing globally. According to UBS, the move made it “the first major global financial institution to recommend sustainable over traditional solutions” for its wealth clients, who have $1.2 trillion in invested assets. By the end of 2020, sustainable investments composed 18.9% of UBS’ advised investments, up from only 13.5% in 2019.
Sustainable investments have even soared among UBS’ Asia-Pacific region wealth clients recently, having risen to $4.5 billion by the end of June 2021, from $1 billion in January 2020.
The bank is offering clients more investing options, too. In July, UBS announced that its wealth management clients could start tailoring the advice they receive along six sustainable investing lines: Climate change; water; pollution and waste; people; products and services; and governance—areas that the bank identified as “most important to drive businesses and industries to a sustainable future.”
Incorporating ESG-based offerings hasn’t hurt profitability, either. UBS’ Global Wealth Management division, its largest segment, reported $4.2 billion in pretax profit for the first nine months of 2021, a 34% increase YOY.
EXCELLENCE IN CRISIS: CLIENT SERVICE
BEST TECHNOLOGY SOLUTION FOR PRIVATE BANKS
South Korea’s Hana Bank uses emerging technologies to support its cradle-to-grave private banking services—and isn’t afraid to be entertaining while doing it.
In a bank-produced video, a local celebrity explains how to accumulate and manage wealth using Hana Bank’s private banking services. The video has generated more than 100,000 hits on YouTube. Other videos use the bank’s in-house tax, legal, real estate and trust experts to suggest solutions to thorny financial problems.
The bank states its belief that “Clients want to be offered differentiated experiences across their whole lifestyle as well as financial services.” And this isn’t restricted to HNW clients alone. “HB has developed innovative digital private banking services for mass customers as well as VIP customers,” according to bank officials.
In the HNW sphere, the bank offers customized services for the entire family—not just the leader or patriarch. These might include kids’ programs for the grandchildren and “match-making” help for the adult children, as well as wedding and funeral support services. Hana Bank has also launched a new digital service that combines finance with digital games to target up-and-coming millennials. It used popular Korean online-game publisher Netmarble to develop the games.
The bank used technology to connect with clients during the Covid-19 crisis, launching life-care services through mobile social network services like YouTube and the Kakao talk channel.
Hana Bank’s 731-person private banking division serves 36,373 clients and grew its AUM to $58.3 billion in 2020, up from $56.6 billion in the previous year.
BEST BOUTIQUE PRIVATE BANK IN THE WORLD
US-based Fieldpoint Private is one of the world’s fastest-growing wealth advisory and private banking boutiques. In 13 years, it has expanded from its Connecticut roots into New York City, Georgia and Florida—recently surpassing $5 billion in wealth AUM and $1 billion in bank balance-sheet assets.
“Catering to highly successful individuals, families, businesses and institutions,” Fieldpoint Private offers wealth transfer advice, tax planning, aggregation and performance reporting, risk management, goals-based investment strategies, investment selection, personalized banking, customized credit offerings, bespoke custody and trust offerings, as well as concierge services.
Russell Holland, president and CEO of the firm’s banking unit, has emphasized the symbiotic nature of the firm’s banking and wealth advisory offerings: i.e., providing commercial and personal banking along with investment advice and wealth management. “By understanding the big picture for our clients, we’re able to take care of all the small details[, allowing] our clients to focus less on the mechanics of their finances and wealth and more on running their businesses and enjoying their lives,” he said in an August press release.
MOST INNOVATIVE PRIVATE BANK IN THE WORLD
BEST PRIVATE BANK FOR DIGITAL SOLUTIONS
BEST PRIVATE BANK USE OF TECHNOLOGY
DBS Private Bank
DBS was a pioneer in digital client offerings years before the Covid-19 pandemic. It won digital transformation awards during the crisis; and as the pandemic abates, it continues to innovate.
Early in the crisis, the Singaporean bank launched TeleAdvisory, which allows clients to consult their wealth planning managers via videoconferencing platforms. DBS also established a paperless credit submission process and increased active engagement and monitoring of credit portfolios with portfolio stress-testing designed to better anticipate pandemic challenges.
In 2021, the bank added more features to its DBS digibank (née iWealth app)—which lets wealthy clients perform daily banking transactions, manage their wealth and invest anywhere around the clock via their smartphones—including artificial intelligence (AI)-driven smart triggers that alert users regarding key equity and foreign exchange (FX) price movements, as well as offer stock suggestions based on their individual investments and preferences.
Today, 90% of private bank clients have access to digital services, and more than 90% of equity purchases and 40% of fund and FX purchases are conducted digitally.
On the innovation front, the bank launched the DBS Digital Exchange, which it announced in December 2020 and took live the following month, a full-service members-only digital exchange for trading and holding digital assets, including cryptocurrencies. DBS expects to have 1,000 users by year end and estimates 20% to 30% annual growth for the next three years.
Looking ahead, the bank anticipates more use of emerging technologies like AI and machine learning to “hyper-personalize” client engagement through its DBS digibank platform for self-directed online execution and Client Connect, a platform for smart-touch advisory. As a result, DBS’ global private banking client assets grew by 264 billion Singapore dollars (about $195 billion) in 2020, up 7% YOY, while fee income in its wealth business increased 11%.
BEST PRIVATE BANK FOR SOCIAL RESPONSIBILITY
Social responsibility is nothing new for Spain’s BBVA. It introduced its first socially responsible investing vehicle, the BBVA Solidaridad fund, in 1999; and it’s still finding ways to combine doing well with doing good. Recently, the bank introduced a socially responsible investment fund that donates part of its management fee each year to sustainable projects.
BBVA is now extending its sustainability and impact investment options to its private banking customers. BBVA’s private banks collectively have more than 84,000 customers in Spain, Mexico, Portugal, Argentina, Peru, Switzerland, Turkey, Colombia, Uruguay and Venezuela; so this is not an insignificant cohort. The private banks manage €96 billion (about $109 billion) globally.
Through the years, BBVA has won numerous awards for ESG, including Global Finance’s Financial Leadership in Sustaining Communities global award earlier this year. In 2018, BBVA issued the eurozone’s largest-ever senior green bond.
BEST PRIVATE BANK FOR PHILANTHROPIC SERVICES
Bank of America
Bank of America’s (BofA’s) philanthropic roots run deep. The US bank has been an investment adviser to endowments and foundations for 160 years. It also has 200 dedicated philanthropic specialists, many with 10 years’ experience or more, who provide a broad palette of services, including investment outsourcing, consulting and advisory, administrative services and specialty asset management.
The philanthropic group has also been generous with its time and services internally, sharing its expertise with bank clients of other BofA divisions. The group recently partnered with the healthcare, education and nonprofit group within BofA’s Global Commercial Bank.
In the first half of 2021, the group brought in record new philanthropic AUM mandates of $4.7 billion, a solid contribution to the $50 billion in AUM that the private bank currently manages for nonprofits, foundations and endowments. Over the past five years, the Philanthropic Solutions group has notched 40% growth in sales and 65% growth in AUM.
BEST PRIVATE BANK FOR INTERGENERATIONAL WEALTH MANAGEMENT
BEST PRIVATE BANK OR WEALTH MANAGER FOR NET WORTH UNDER $1 MILLION
Banco Santander’s global private banking arm serves 217,600 clients in 11 countries. It is part of the Spanish bank’s Wealth Management and Insurance division, which has prospered since being consolidated under Victor Matarranz, its global head, four years ago.
As of the third quarter this year, the division’s AUM were up 12% compared with a year earlier, while its total contribution to group earnings was 16% higher.
Matarranz has been globalizing the division’s offerings and expanding the private bank segment, which serves ultrahigh-net-worth (UHNW) clients with more than €20 million in assets. Santander now has some 2,000 UHNW families globally; and on some of its offshore platforms, such as in the US, Switzerland and the Bahamas, half of the assets belong to UHNW clients.
Intergenerational wealth has been a big focus at the private bank, which aspires to service its UHNW client families before, during and after generational wealth transfer occurs. A critical moment in this process is the first time a person of a new generation attends a family office meeting, according to Matarranz says. That person often asks questions, which can be disconcerting to a family patriarch who has long managed a family’s wealth unchallenged. Still, it can become a learning process for all involved.
One key to the private bank’s success is its geographic breadth, enabling it to provide clients the same service outside their countries of origin and in all other markets. For example, its popular investment fund, Santander Future Wealth, was developed by the group’s fund manager, Santander Asset Management Luxembourg, but was subsequently marketed in the group’s other markets, including Chile, Germany, Poland, Portugal, Spain, Switzerland, the UK and the US.
BEST PRIVATE BANK FOR BUSINESS OWNERS
BTG Pactual Wealth Management
In regular times, BTG Pactual is one of Latin America’s most prolific business lenders; but 2020, roiled by the Covid-19 pandemic, wasn’t a typical year. Businesses suffered from mandated lockdowns, frightened customers and hamstrung suppliers.
Fortunately for many businesses in Brazil, Chile, Colombia and other Latin American countries, BTG Pactual Wealth Management stood by its clients, providing high-quality information, advice and liquidity to support them.
The bank maintained exceptionally high levels of liquidity during the year, with record cash flows and one of the highest Basel ratios in its peer group. This financial position let the institution increase its credit offerings when businesses needed them most. BTG Pactual’s lending portfolio grew by 68% through the year, primarily consisting of loans to highly profitable counterparties.
Its wealthier customers appreciated the effort, so that wealth management AUM and custody stood at 153.9 billion Brazilian reais (approximately $27.8 billion) at the end of 2020, a 33% YOY increase under trying circumstances. Its wealth unit also added 30 new team members, expanding the staff by 20%.
BEST PRIVATE BANK FOR FAMILY OFFICE SERVICES
BEST PRIVATE BANK FOR NET WORTH OF $25 MILLION OR MORE
Citi Private Bank
With some 500 private bankers and more than 700 investment specialists, Citi Private Bank (CPB) delivers tailored financial services to approximately 13,000 clients, including 1,400 family offices and a quarter of the world’s billionaires.
CPB revenues were $2.02 billion in the first half of 2021, up 6% from the same period in 2020. The bank also increased its average UHNW new client net worth to more than $500 million, or 30% greater than the prior year.
That said, CPB hasn’t made a name serving the UHNW segment—working exclusively with clients whose net worth is $25 million or more—without bringing some imagination to bear, especially in 2020 when remote working became the norm.
In the absence of in-person client events, CPB “reimagined our client events for the virtual world, hosting hundreds of virtual events in 2020,” according to bank officials. These included small-scale events like wealth planning discussions and ESG investing panels as well as large-audience virtual conferences. By expanding its virtual environment, CPB reached a record number of clients.
The private bank offers several specialties that differentiate it from other family offices and private banks, including art advisory, sports finance and advisory, and aircraft finance.
The success of its private bank notwithstanding, Citi has loosened up a bit on the wealth management front lately, paying more attention to the mass affluent customer segment and creating a unified wealth management segment since January 2021. It’s a recognition that today’s mass affluent customers can become tomorrow’s HNW clients, or sometimes even UHNWs.
BEST PRIVATE BANK FOR ENTREPRENEURS
One of India’s oldest private bankers, Kotak Mahindra reportedly manages wealth for 51% of that nation’s 100 wealthiest families.
However, the Mumbai-based bank has also been outspoken regarding the need to nurture India’s up-and-coming business class. To this end, Kotak Wealth Management has developed specific programs for millennial and female entrepreneurs. For instance, the bank invites these younger groups to attend meetings with successful entrepreneurs and professionals who share their insights, encouraging networking.
“Kotak Wealth believes that only when women begin to achieve their true economic potential will India achieve its full growth potential,” according to bank officials. To help with its mission, the bank has published a series of reports on that topic, including one featuring India’s top 100 active women entrepreneurs, that seek to “analyze and understand the evolution of key wealth creation trends among women,” and to highlight their success stories and their contribution at large.
BEST PRIVATE BANK IN EMERGING MARKETS
J. Safra Sarasin
In early May, the Swiss-Brazilian private bank J. Safra Sarasin announced the completion of its deal to acquire the private banking business in Hong Kong and Singapore of the Bank of Montreal (BMO). The consensus was that BMO’s diversified client base of UHNW clients would be a good match for J. Safra Sarasin, which was looking to expand its footprint in Asia.
The Basel-based bank group reported 192.4 billion Swiss francs (approximately $208 billion) in AUM at the end of 2020, up from 185.8 billion francs in 2019. Most of that was in Switzerland (100.1 billion francs), followed by Europe (exclusive of Switzerland, 54.5 billion francs) and Asia (18.1 billion francs). That last component will surely grow.
BMO’s Asian business lines probably are not J. Safra Sarasin’s last acquisition. Its international growth strategy is well documented. In just about every annual report since 2014, the bank has declared it is “hungry for deals” and has surpassed all of its Swiss peers, except for Julius Baer.
The bank’s targeting of the Singaporean market comes as no surprise to Andreas Pratz, a partner in PwC’s global strategy consulting business. “Europe and North America continue to be relevant private banking markets; yet Singapore, in particular, has firmly established itself as a hub.”
BEST PRIVATE BANK FOR NEW CUSTOMER SEGMENTS
PNC Private Bank
Many expect PNC Financial’s purchase of BBVA USA Bancshares to catapult PNC Bank into a higher echelon of private banking firms, expanding its customer segments and turbocharging PNC’s family office services for the ultrawealthy.
Its June acquisition made Pittsburgh’s PNC the fifth-largest commercial bank in the US, with $560 billion in balance-sheet assets and a coast-to-coast national franchise. It also brought with it BBVA’s US wealth management business—and a perennial Global Finance private bank winner in the US Southwest region, winning the title for the past four years. In addition, PNC rebranded its wealth management business and BBVA USA to PNC Private Bank.
Don Heberle, who heads PNC Private Bank, says that PNC has been expanding its private banking reach in two primary ways: Geographically, as it did with its recent purchase of BBVA USA, “which allows us to have a coast-to-coast franchise, given their presence in the US Southwest and West”; and also by adding new customer segments and staff all along the wealth spectrum, including “individuals who are just beginning their wealth accumulation journeys, such as corporate executives, doctors, lawyers and others, through to larger families and family offices.”
BEST PRIVATE BANK FOR NET WORTH BETWEEN $1 MILLION AND $24.9 MILLION
Scotia Wealth Management
Scotiabank is Canada’s third-largest bank, with more than 90,000 employees and balance sheet assets of some $1.2 trillion. Its Global Wealth Management division serves more than 1.5 million investment fund and advisory clients across 13 countries, many of them in Latin America and the Caribbean.
Scotia Wealth Management, the private banking segment, had $344 billion in AUM as of the third quarter of this year, a 17% YOY gain; and a net income of $397 million, a 20% YOY advance.
The division offers a broad range of services, including investment management, private banking, estate and trust, as well as several more-specialized services like insurance planning. The bank serves the UHNW segment through its Global Family Office Group.
Scotia also has an unusual but thriving physician-focused wealth management unit—MD Financial Management—that it acquired in 2018 as “the only national financial services firm dedicated exclusively to the financial well-being of Canada’s physicians and their families,” according to the bank. The specialized wealth manager reported more than $59 billion in AUM as of July 29, 2021.
Recently, Scotia announced that it is looking for acquisitions in the US to expand its wealth management business. Canadian banks continue to struggle against weak loan growth and tight profit margins due to historic low interest rates.