Private banks reach out to the less wealthy

08 October 2009

According to Switzerland's largest dedicated wealth manager, a key reason why private banks are softening their stance and reaching out to the less wealthy, is, that many have lost money in the past year.

Private banks are starting to target the not-so-wealthy as they look to win market share after the financial crisis, financiers told the Reuters Wealth Management Summit.

Julius Baer Group AG, Switzerland's largest dedicated wealth manager, which has long prided itself on targeting those with millions to invest, is recalibrating its definition of rich.
"We would also take people with 800,000 (Swiss francs)," said Boris Collardi, the company's chief executive, referring to the amount potential clients could invest.
While rivals Credit Suisse and UBS have sizeable mass-market retail banking operations in Switzerland and service clients starting with 250,000 francs to invest, Julius Baer had focused operations on clients with more than 1 million.
A key reason why private banks are softening their stance is the fact that many have lost money in the past year.
At the end of 2008 the global population of people with more than $1 million to invest shrank by 14.9 per cent from the year before, while their wealth dropped 19.5 per cent, according to the World Wealth Report by Capgemini and Merrill Lynch.
Ultra-high net worth individuals -- with investable assets of $30 million or more -- suffered more extensive losses as their wealth dropped by 24 per cent on average, the report said.
Aiming at the lower segment of customers is also more lucrative, Marazuela said. Customers with between 100,000 euros and 300,000 to invest were "much more profitable" and generated business with gross margins above 1 per cent of assets under management.
For customers with more than 2 million euros to invest, the gross profit margin was "below 1 per cent", he said.
Christian Raubach, managing partner at St. Gallen-based private bank Wegelin & Co, said the bank had never had a limit for potential clients because many may not become wealthy until they inherit or until later in their careers.
 
Press release

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