Private Banks Can Win in Battle for New Rich

Julian Winser

Schroders Channel Islands

25 June 2007

When this year's Sunday Times Rich List was published at the end of April Michael Maslinski, director of wealth management consultancy Maslinski & Co, told WealthBriefing that the most striking aspect of the list was the diminishing proportion of wealth that can be managed by private banks. “A large proportion of the people featured in the list are still running their own businesses,” he was reported as saying at the time. He went on to say: “These are people who probably don’t need investment management services, what they need is corporate finance and investment banking services.” It was Mr Maslinski’s view that this should be good news for the large institutions with in-house investment banking capabilities. He also said these are just the organisations that could miss out. “It’s the boutique wealth managers who could take a lead in offering an integrated investment banking service for their clients. They don’t have the problems involved in passing a client from one part of a large organisation to another.” It is certainly true that there is a diminishing proportion of wealth that can be managed by private banks as a large number of the wealth creators are still running their own businesses. Mr Maslinski’s conclusion from this that the individuals "probably don't need investment management services" is, I believe, both partly right and partly wrong. While many individuals are still running their own businesses many (of those listed) have already taken some capital out and will take “investment” advice. What has changed, I believe, is the relative balance of demand between discretionary and advisory investment management, in favour of advisory or joint decision making. Mr Maslinski is right, however, in the continued growing need for corporate finance and investment banking advice. This is good for large institutions (Goldman Sachs, Credit Suisse, UBS, JP Morgan etc.) but it is also good for the ever increasing number of boutiques setting up to take advantage of the bull market in wealth creation. It’s difficult to believe that the boutiques will steal a march over the large institutions as their relative strengths (and weaknesses) remain as balanced as they ever were. And the major challenge for the boutiques will continue to be distribution. Overall, rather than seeing another “re-segmentation” of the industry coming up as Mr Maslinski predicts, I suspect we shall continue to see winners and losers - as in the past - based principally on the success of incumbent management to capitalise on the changing needs of the market.