All articles by PBI Editorial
PBI Editorial
UBS heading for swingeing US fine
But the beleaguered Swiss bank isnt out of the woods yet, after a suit was filed by various state regulators over its role in the moribund US auction rate securities market. UBS, pilloried at Washington standing room-only hearings over its role in systematic tax evasion by US nationals, appears to be heading for a large fine for its apparent transgressions rather than the blow of losing its US banking licence.
IFAs becoming EU wealth targets
Independent financial advisers, who control about 10 percent of assets under management in the European Union, should increasingly become targets for acquisitions as large players seek to build their penetration of local client segments
JPMorgan wins $700m compensation case
JPMorgan Chase has won a $700 million UK court case which has potentially significant implications for the banking industry in cases of investors claiming compensation for being mis-sold exotic investments. While the affair involves investments sold 10 years ago, lawyers have been awaiting the outcome because the issues involved are similar to those expected to arise in litigation stemming from the current credit crisis. In the Morgan suit, the High Court in London dismissed a claim by one of Greeces wealthiest shipping dynasties, the Polemis family, which had sued the bank in an effort to recoup losses suffered in the Russian debt crisis of 1998. The family claimed it had lost almost half of its $700 million portfolio in emerging markets securities after it hired JPMorgan on an advisory basis and only bought investments on the direct recommendations of its bankers. The family alleged this advice was negligent because JPMorgan recommended high-risk securities despite knowing the family had requested a low-risk approach. JPMorgan declared it did not have an advisory relationship with the Polemis family, which it said were experienced investors who chose their own trades in full knowledge of the risks involved. Mrs Justice Gloster found for JPMorgan, saying the bank was not liable to compensate the family for its losses. Lawyers say the outcome represents a victory for investment and private banks which have been concerned they could face mis-selling cases where investors claimed they did not understand what was being placed in their portfolios. None the less, some banks are having to pick up client losses from soured investments
Darling makes concessions on non-dom taxes
UK Chancellor Alistair Darling is to press ahead with plans to charge non-domiciled nationals new taxes despite broad pressure from business and banking industry leaders to change course, but he has made some significant concessions.In his budget, the chancellor confirmed that non-doms who have lived in the UK for seven of the past ten years will have to pay £30,000 ($59,000) a year to keep their privileged status.The concessions are being made after warnings that there would be an exodus of these wealthy foreign nationals, badly damaging the UK economy and favouring lightly taxed jurisdictions like Switzerland and Monaco.In the concessions, offshore income and capital gains in offshore trusts will be taxed only when non-domiciliaries remit them to the UK Regarded as a significant change, it means non-doms will be able continue to invest in UK assets through offshore trusts.Darling also disclosed that non-domiciles should be able to offset the annual £30,000 charge against tax in other countries, notably in the US whose citizens are taxed on a worldwide basis.The exemption for non-doms is being doubled so that those individuals with offshore income and gains of £2,000 will not pay the annual £30,000 charge.The government has also watered down its proposed changes to the residence rules
HSBC could divest French business
HSBC is mulling over a sale of its French banking business and other underperforming operations as part of its new plans to derive 60 percent of its earnings from emerging markets, according to analysts.HSBC has raised its targets for emerging markets growth in a strategy update that follows pressure from Knight Vinke, the activist investor that has accused the bank of a lack of focus and neglecting its traditional strengths in high-growth emerging economies in Asia and elsewhere Knight Vinke has been particularly critical of HSBCs acquisition in 2003 of Household, a US subprime lender whose bad debts have soared as borrowers defaulted on mortgages.HSBC also signalled that any business delivering returns on capital below the group average of 16 percent would be placed under review, although it has not formally confirmed this strategy change.The personal financial services and small business banking operations in France, estimated to be worth about £2 billion ($4.2 billion) and based around the acquisition several years ago of Crdit Commercial de France (CCF), are thought to be vulnerable to a divestment move.It is not clear whether the HSBC private banking business in France will be able to keep critical mass without the CCF-based operation.Analysts also suggest that HSBCs businesses in Malta, Canada, Australia and Bermuda and its regional banking operations in the US could also be put up for sale
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The big get bigger, the small will survive
Private bankers gathering in Singapore for Private Banker Internationals Wealth Summit this month rejected suggestions that an emerging super league of wealth management giants will significantly limit the number of other competitors.More than 50 percent of conference delegates doubt that wealth management giants such as UBS, Merrill Lynch and Citigroup, all with more than $1 trillion of assets under management, will make it increasingly difficult for other players to build significant market share.But 40 percent of these questioned in the industry poll still think this gravitation towards the giants is a real danger, particularly as the current uncertain investment environment triggered by the subprime crisis will force clients to look closely at their investments risk profiles.In fact, the 200 conference delegates, responding to a PBI poll on current major wealth issues, overwhelming agreed with the proposition that private banking will need rapidly to update the quality of its overall advisory services This is required to meet the growing sophistication of clients in all geographies as well as produce above-average returns at a time of less buoyant markets.These trends promise to create further competitive pressures on the wealth management industry, disadvantaging those players unable to meet the challenge of upgrading their advisory and discretionary services.Most private bankers questioned also believed the crisis of confidence caused by the subprime debacle is going to make it important to persuade clients to expect lower returns in future.Most think the average total return expectation should be lowered to between 10 percent to 8 percent, far below some of the handsome returns on portfolios of recent years, particularly in high-growth Asia.But where delegates overwhelmingly reached consensus was on the on the issue of wealth industry consolidation
Brokerages will be able to offer private client services
Potentially empowering them to jump ahead of Chinas banks, the countrys brokerage firms are to be allowed to manage assets for individual clients for the first time, according to proposals by the China Securities Regulatory Commission.The agency said that it is seeking public opinion on the proposals that would allow domestic brokerages to provide private wealth management services Under the rules, brokerages would be allowed to invest in stocks, bonds, commercial paper and derivatives on behalf of their clients, the regulator said in a statement on its website.It didnt provide a timeframe for introducing the new rules or the minimum amount clients would need to place with brokerages for such investments
AIG Private Bank on the auction block
Among the first high-profile private banking casualties of the crisis is AIG Private Bank, now being divested by its wounded parent in a huge global programme of asset sales UBS has been appointed to run the sale. American International Group, on the verge of bankruptcy last month before the Federal Reserve stepped in with an emergency $85 billion capital injection, will sell this private banking arm in Switzerland as part of disposal of its asset management division.
UBS’s Weil quits to clear his name after charge involving US clients
The involvement of UBS in schemes to help US investors allegedly circumvent taxes is providing regulators with ammunition to attack Swiss banking secrecy and effectively get disclosure of the identities of thousands of customers. In the latest twist to the story, a grand jury in Florida has charged Raoul Weil, head of the UBS Wealth Management Division, with helping 17,000 Americans avoid tax by safeguarding their money in secret Swiss bank accounts.
Chicago adviser heads boutique
S4 Capital, a Chicago-based wealth adviser set up by a former executive at Goldman Sachs, ranks as the best specialist wealth advisory boutique in the US, according to a new compilation.S4 manages an average of $121.8 million per client, the highest figure among more than 400 advisers tracked in a new survey by Wealth Manager, a US industry magazine.Wealth Managers rankings measure firms that cater for the truly wealthy client and tracks advisers who manage the highest assets per client