New money is flooding private banks although it is not necessarily from millionaires. The catchphrase is potential. Last year was a record one for Swiss private banking, as one institute after another reported a historic high. There is a key metric that sticks out, and one that the sector had difficulty with until recently.
Invested assets, or assets under management, are clearly growing again as 2021’s buoyant equity markets drove double-digit gains at UBS, Julius Baer and Geneva-based private bank Pictet.
It should be a triumph for the sector, the mainstay of Swiss finance. But looking more closely, one thing does stand out – private bankers have become far less choosy.
The unwritten $1 million US dollar barrier to entry no longer seems to apply when it comes to so-called net new money, net new assets, or even UBS’s mouthful for the term, net new fee-generating assets – all of which can be generalized as expressions of new client investment mandates and assets isolated of exchange rate and market movements.
Swiss private banks have become more flexible that way, confirms Andreas Arni in an interview with finews.com. We are not a retail bank. In that way, there is an entry threshold. But we don’t have a strict minimum. We look at the potential of the client. You can say that, generally, we welcome younger people who have established their own company.
Julius Baer, which is seeing new momentum in its Swiss business, has also been swayed by modest fortunes. A spokesperson confirmed that there is no fixed minimum for the bank in its home market. We can lend our hand even with a relatively moderate level of assets for clients who have a long-term perspective related to the growth of their wealth.
The million seems to have been replaced by the promise of future millions. Although it is by no means a safe bet, it is a trend that digitalization has made possible.
The trend towards internet-based advisory models has been propelled forward by the pandemic, turning numerous young entrepreneurs into millionaires. And the spread of crypto-investments, and their fluctuating prices, has made some of them very wealthy practically overnight.
Traditional private banking is a geriatric business. In Switzerland, wealth is concentrated in the hands of retirees. More than out of five households where the male spouse is more than 65 years old has taxable assets of more than $1 million, Zurich statisticians have calculated.
But private banks can now use digital channels to efficiently serve smaller piles of client assets. A clear example of that is market leader UBS, which bought robo-advisor Wealthfront in the U.S. for $1.4 billion. It did that in the hope of acquiring a more youthful clientele while in the domestic market, Vontobel offers up its Volt app, which gives users active asset management advice. The minimum assets required – about $10,000.
Practice shows, however, that it is best to invest a medium-sized six digit figure if a client wants to fully benefit from Vontobel’s investment expertise, a company spokesperson maintained.
And there are, of course, exceptions that only serve to confirm the rule. Pictet says it welcomes clients if they have about $2 million to invest although they do not officially confirm the figure. Although the sector may not be showing as much restraint as before, it still seems to adhere to another well-practiced characteristic. Silence.
