Nordic assets under management table by virtue of its strong
presence across all Scandinavian countries, coupled with a robust
Luxembourg operation. But the day of the smaller firm could be at
hand. Dan Jones reports.
The Nordic private banking industry, once the domain of a handful
of major regional players, could see an influx of smaller
institutions in the coming years. The fundamentals of the wider
Scandinavian wealth market remain strong. Datamonitor expects that
assets under management (AuM) in the Nordic wealth market, which
were €400 billion (then $516 billion) in 2006, will rise to €615
billion by 2010.
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As a result, smaller institutions believe they could forge a bigger
niche for themselves – and clients are likely to welcome them, says
Jens Lauritzen, director of Jyske Private Bank. “We’re going to see
more players – smaller players, niche players. They could be
smaller financial institutions or smaller asset management firms,
not in any way related to the existing players. We’re seeing
certain clients wanting a more independent view on their investment
needs than what is provided by their banks,” says Lauritzen.
Clients are also likely to favour a move into commodities,
particularly alternative energies, Lauritzen adds. Jyske doesn’t
disclose its AuM total.
Solid base
At Nordea, Riitta Pyhala says his bank will attempt to leverage its
pan-Nordic strengths more effectively in 2008 and improve its
cross-border processes. The head of Nordea Private Banking Finland
also suggests that Nordea’s strong retail banking activities have
given a particularly solid base to its wealth management activities
across Scandinavia.
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By GlobalDataReflecting global uncertainties, Pyhala sees the Finnish market
developing at “a tough pace” in the first half of 2008.
For DnB NOR in Oslo, the picture is very different. Frode Ekeli,
general manager at DnB NOR Private Banking, says the bank has “a
very dominant position” in the Norwegian retail market, but
acknowledges that the competitiveness of the Nordic wealth sector
has prevented DnB from making similar inroads in private banking.
“Our aim is to grow this market share to the level of the retail
bank,” he says.
Healthy HNWI growth
Despite personal taxation levels remaining high, Nordic high net
worth individual (HNWI) growth has remained healthy, according to
Market Dynamics Research and Consulting (MDRC) (see
Darling makes concessions on non-dom taxes). In Sweden, for
example, there are now 80,900 HNWIs, a rise of 7 percent on 2007,
and the strong performance of SEB and Handelsbanken, which has €17
billion in AuM in Sweden alone, can be seen to reflect this
trend.
Some of the big global players are now attempting to make inroads
in Scandinavia. This January Merrill Lynch hired three financial
advisers, including one from Nordea, as part of a drive to increase
its presence in Denmark and Finland. But Lauritzen remains
unconvinced. “I don’t see any bigger organisations coming in and
establishing themselves,” he advises.
Danske Bank, the largest financial group in Denmark, has
strengthened its wealth proposition with the acquisition of Sampo
Bank of Finland. This Finnish institution will also look to
increase its offshore offerings in conjunction with Danske. “We
have a team in Luxembourg working in the Danske Bank’s
international Private Bank taking care of Finnish customers,” says
Sampo Bank wealth management head Kimmo Laaksonen .
Received wisdom has it that moving offshore remains an enticing
prospect for Nordic clients, particularly among ultra HNWIs, with
the usual suspects – the Channel Islands, Luxembourg and
Switzerland – the most popular destinations for Scandinavian
wealth, according to MDRC.
The segment has proved extremely lucrative for Nordea, in
particular. AuM of the bank’s International Private Banking
division, based in Luxembourg, rose from €9.2 billion to €9.6
billion in 2007, representing a 17 percent slice of Nordea’s total
private banking assets.
Private banking in a cold climate
The Finnish private banking market, one of the more unheralded
areas of the European wealth sector, is shifting gears in an effort
to maintain its healthy growth rates of recent years, including
managing new entrepreneurial fortunes.
Two institutions with major private banking interests in Finland,
Nordea and Sampo, see innovation as a key tool in maintaining a
successful profile with clients in 2008.
According to research by Market Dynamics Research and Consulting
(MDRC), there are now more than 282,000 high net worth individuals
(HNWIs) in Scandinavia, a figure that has risen by 14 percent in
just two years. While growth has been strong, there are signs that
the industry will have to adapt to a number of changes this year as
private banks deal with downside risks arising from the clouded
global outlook as well as new wealth demographics within the
region.
Nordea and Sampo are both looking to fine-tune their strategies in
Finland. Sampo is set for further realignment following its sale to
Denmark’s Danske Bank for €4.05 billion (then $5.15 billion) in
November 2006. The deal meant the bank received the backing of a
major regional player in its efforts to strengthen its position in
the Finnish market. As of this March, Sampo’s wealth management
arm, Mandatum Private Bank, will be renamed Sampo Bank Private
Banking. Further branch expansion is also planned.
Nordea has 26,000 private clients in Finland, and €17 billion in
assets under management, and now plans to consolidate recent gains
and strengthen its talent base.
Kimmo Laaksonen, head of wealth management at Sampo Bank, declares
that a new breed of entrepreneurs have helped establish a market
that once lagged behind its European neighbours.
“Of course we have traditional wealthy families that have been here
for hundreds of years, but we also have new entrants in the market
– those who have sold their businesses. The wealth effect has not
been here that long yet,” Laaksonen tells PBI.
Market research suggests that this transformation is having an
effect on clients’ attitudes to private banking in the area. A 2006
study from Datamonitor gave early warning, suggesting that while
“the majority of clients” in the Nordic region have long-term
relationships with their wealth managers, 74 percent of Nordic
wealth managers believed they had seen an upsurge in client
switching between 2004 and 2006.
Nordea is now looking to improve client retention levels. Speaking
to PBI, Riitta Pyhala, head of Nordea Private Banking Finland,
reveals that the bank is to set up an internal private banking
‘academy’ in 2008 in an effort to increase its senior employees’
handling of clients.
Nordea is also innovating at employee entry level, according to
Pyhala. The bank is encountering the same difficulties faced by
most market players, big and small, in dealing with a limited
hiring pool. The trend is encouraging Nordea to look at alternative
markets for talent. “We are trying to be very innovative and trying
to find a new kind of knowledge. It might be we find people outside
of financial companies,” she says.
For Laaksonen, an upside to the worsening financial outlook is that
it mitigates this problem to some extent. “From our point of view
we are one of the major private banks in Finland; some private
bankers may see us as a more stable employer than, say, a small
boutique that is struggling because of the market situation,” he
comments, while also noting that a more muted bonus season may
provide similar opportunities.
Both banks look set to focus on process improvements. Laaksonen
alludes to a “new private banking concept” following Danske’s
acquisition of Sampo. “We understand that the family offices and
high net worth individuals still need something more than
traditional private banking,” he says.
“The Finnish tax environment for savings and investments is rather
good. There are lots of products which are much better than most
Scandinavian countries and even rivalling those in Luxembourg,”
advises Laaksonen. “In the years to come I think Finland will be
one of those places where you will be quite happy to have a private
banking operation.”
