Australia’s big banks are
honing their high net worth offerings to Australia’s increasingly
sophisticated private clients. Will Cain speaks to the head of
Commonwealth Bank of Australia’s new Private Office, Ralf Haase,
about the country’s growing appetite for advisory
services.
Go deeper with GlobalData
Australia’s big banks are jostling
to plug the gaps in their high-end advisory offerings with the
Commonwealth Bank of Australia (CBA) becoming the latest to set up
a high net worth (HNW) unit. Ralf Haase, a former Macquarie and
Goldman Sachs private banker with previous experience in London and
Germany, is spearheading CBA’s newly formed Commonwealth Private
Office (CPO).
Haase says the HNW unit has got off
to a “positive start” as it hones in on Australians with more than
A$10m ($10m) in investible assets.
The big four Australian retail
banks – ANZ, Westpac, CBA and National Australia Bank (NAB) – have
traditionally provided a ‘red carpet retail’ type of approach to
affluent and HNW clients.
A number of factors are behind this
new push into a more affluent wealth bracket, including the rise of
more sophisticated investors, increasing numbers of wealthy
individuals and the retrenchment of international players.
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By GlobalDataAustralian clients tend to be more
actively involved in the management of their wealth and this means
advisers hired to service them need to be on top of their game. As
a result, banks in the country are in the process of building their
advisory capacity through the hiring of more and better able
advisers supported by improved platforms.
Haase says the bank has invested
“significantly” in both staff and technology during the three-year
project to set up the private office, though declined to give exact
figures.
Australia’s ‘phenomenal’
growth
“The last decade in Australia has
seen a phenomenal growth of wealth,” says Haase. “A lot of this has
been the transfer of wealth from one generation to another, but we
have seen an enormous amount of wealth generated as a result. At
Commonwealth Private, we are still mainly talking to first
generation individuals and your skill set needs to be significantly
sharper.
“Often, as a private banker, you
are speaking to the individual who has made the money you are
managing, so they are incredibly switched on to the investment
process and the management of their wealth.”
While saying CPO caters to a wide
range of clients, Haase says its typical client profile would be an
Australian tax resident who has generated wealth through the sale
of their business and needs an adviser capable of guiding them
through their new circumstances. Servicing these types of clients,
he says, is very different from the typical European private
banking client, who is likely to be second, third or even fourth
generation.
Haase sees the CPO as having a
central role in client relationships, bringing together the
in-house and external skills required to service the very wealthy,
whether that is investment bankers, accountants, lawyers or estate
planners.
Ultra-wealthy individuals also
require more diverse investment solutions, Haase says, as well as
institutional style reporting across different organisations. It
also marks an important shift in Australian private banking from a
primarily lending-led approach to a more holistic advisory
approach.
It is estimated there are between
3,000 and 4,000 families in Australia with wealth in the
A$10m-or-above bracket. The launch of CPO is a reaction to the
increasing number of these super-wealthy individuals in Australia
and an attempt to tap into the estimated A$120bn to A$150bn of
assets.
It follows a similar move by NAB,
who set up a Wealth Services division in 2009 to cater for its
ultra high net worth (UHNW) clients. Like CBA, NAB defines UHNW as
those with wealth over A$10m, lower than the A$30m threshold used
by the Merrill/Capgemini World Wealth Report and A$50m used by
PricewaterhouseCoopers in their benchmark wealth report.
Boom in Australian
wealth
The boom in wealth and liquidity
creation by a wealthy generation of Australian entrepreneurs who
are starting to sell their businesses is one reason for CPO’s
launch. The increased focus on this segment is also a result of
international banks hamstrung by loss-making or capital-constrained
parent companies.
One of the most high profile
examples of this was the withdrawal from Australia of Citi Private
Bank in 2009. It withdrew the handful of private banking staff it
had located in Australia and moved them to its Singapore hub to
service the Asia-Pacific region more generally.
“International private banks have
been in and out of the Australian market for years,” says Haase.
“There is sometimes the tendency to apply offshore business
strategies, which have worked in other markets, but that hasn’t
generally worked here.
“Australia is very much an onshore
market – offshore makes up very little of the overall assets under
management here. For Commonwealth Private, our local presence is a
real advantage – our clients can have the confidence that we will
finish what we start and deliver on our commitment to them.”
There are some domestic providers
of UHNW services, including multi-family offices, which operate in
the same space as the new entrants CBA and NAB. Haase remains
encouraged by his first six months running the Private Office
business.
Leveraging wholesale
expertise
In particular, he says integrating
private banking more closely with other parts of the bank has
helped advisers gain introductions to clients of other departments.
It is a strategy successfully pursued by Standard Chartered, which
is now one of the fastest growing in Asia-Pacific – primarily by
referring clients between its wholesale division and private
bank.
Banks with sizeable corporate
banking businesses are considered well positioned to leverage the
wealthy clients in these divisions and also provide wealth
management services to them.
“It has been positive so far,” says Haase. “We cannot disclose
names, clients and assets. But what we benefit from, and where this
proves to be successful, is having the entire bank working with us
to promote the right introductions to individuals who have wealth
management requirements.”
