The Modern Pressures on Private Banking

Having joined the ultra high net worth advisory industry in 2008, I always took pride in understanding private banking and private banking relationships really well.

At the peak of the financial crisis in 2008, many private banks reconsidered their client banking relationships and the strict criteria for the ideal clients they wished to keep.

This was not only the banking business as usual and whether the clients honoured their initial pledges of dedicated investment only funds.

It was also when extensive anti-money laundering legislation started showing its teeth. Private bankers use the word “compliance”. 

The message is that the investments put forward and the client was expected to be disciplined enough to outweigh the substantial compliance costs.

The compliance costs are training and updating staff, introducing the necessary systems and the working mode of being on alert. This is also many hours of many people working together and clearing compliance requirements.

Current Swiss Banks in a Spotlight: Any Lessons learned from the Past?

As world newspapers hit headlines with the banking crisis in Silicon Valley Bank in the USA and Swiss giant Credit Suisse, I was meeting my clients and the discussions led to ascertain the ambiguity and how many millions invested are to be returned to these clients.

Having worked closely for years with Credit Suisse and UBS and other Swiss banks based in Switzerland and outside there may have been insights how generally these banks operate and where issues may lie.

Some of my insights:

1. In a Bid to Save Costs Credit Suisse closed its “smaller” country desks

As a cost saving measure and increasing compliance costs, Credit Suisse swiftly closed their smaller desks. For instance, for the clients originating from the Baltic States: Lithuania, Latvia, Estonia.

Perhaps, it was a correct step to take back in 2008. As these clients were generally on a smaller scale compared to regular giants.

Having monitored this jurisdiction closely, I am pleased to see how a mixture of different businesses developed themselves and created a specimen of clients that would be viewed as low risk and clearly desirable.

This cutting cost exercise perhaps was justified in the face of the financial crisis. However, the nurturing power was lost. I am always in favour of expanding and nurturing my client base.

It is ok to focus on truly giant clients. However, the risk is not spread out enough as these giant clients may outweigh the bargaining power of individual banks and inadvertently put them in trouble to face the consequences and music on their own. Such is the case of Credit Suisse.

2. The USA Client Crisis

In 2008, Credit Suisse was also hit with the USA client compliance crisis. This was a very sad development to watch.

In the view of this, we were taking our clients from Credit Suisse and finding solutions together with the great specialist teams at UBS.

The UBS policy at the time was to refuse any USA clients full stop.

A number of USA clients found solutions at smaller Swiss banks. However, this does not mean that the new solution was successful and they were spared possible scrutiny and attack.

3. Sacking Client Relationship Staff

Credit Suisse was an amazing institution, especially with its highly trained client relationship staff who are directly responsible for onboarding clients.

I met many wonderful dedicated and devoted people in key management positions. It was beautiful to watch them work and do an amazing job.

However, the days for these brilliant individuals at Credit Suisse were counted and they were let go.

Somebody who is constantly introducing and matching perfect clients with perfect banks, there was nobody left to talk to at Credit Suisse.

4. Client Onboarding Processes

Client onboarding processes are not unique to Swiss banks alone. I see a lot of different issues across the board in Switzerland, the UK and elsewhere.

I have always admired the private bankers who have mastered the client onboarding process, which appears seamless and an absolutely pleasant experience for the participating client.

In the best of service tradition, I am always strongly in favour of reviewing client records, ironing out any compliance misconceptions behind the closed doors, not necessarily the client being present.

The next step is the meet and greet and celebrating the perfect match between the client and the bank.

Instead, I saw potentially perfect clients going through a gruelling process and uncomfortable process of being treated as a potential criminal just because their friends who are already bank’s clients referred them to the bank.

In these circumstances, I am more than happy to take my clients out of this misery and take them where they are clearly welcome. The necessary compliance requirements met and checks made, but nothing done to upset the client or make the process unreasonably uncomfortable.

5. The Board of Directors: Corporate Governance

As I speak to my favourite bankers, they highlight to me that they may need to change their employer as the Board of Directors is too aloof and does not support their efforts of expanding the bank’s client base.

Corporate governance became a fashionable concept. A lot of people from different walks of life were invited to join the Board of Directors. Although they bring the necessary flair and diversity, they do not necessarily understand what it takes to identify suitable clients for the bank, onboard them and move the needle in the bank’s business.

I see a lot of great bankers leaving the banks and banking industry for this reason alone.

I also see a lot of Arab investors making investments in premier private banks across Europe. These are dignified and time-honoured institutions. 

However, their inherent structure is faulty as the client base is not regularly refreshed and it is almost impossible to onboard new clients as the structures and processes are clearly stale and it is not a good thing for banking and growing business. It is dying a slow, but certain death. 

Some of my Favourite Features of Swiss Banks

Working with Swiss banks is a great privilege and it is great to be treated as one of their own in the process of working together.

Sometimes I rank my favourite banks by the best views through the boardroom window, sampling the best made coffee or the best piece of chocolate to compliment my coffee.

The greetings at the door as you enter, catching up with some of your favourite experienced Swiss bankers.

Delving into an individual bank’s family history, meeting the family members who still run the bank as part of their family heritage.

Going through the quirks and extensive plans how clients’ assets are to be protected in some likely and unlikely events. Preparation and risk-awareness is key to success.

Book a call with me to discuss your UK, Swiss and offshore banking needs.

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Saule Voluckyte, M.A.E.S, LL.B, FAIA

I have been working exclusively with UHNWI in Mayfair, London since January 2008. I built specialist knowledge and expertise required to serve ultra high net worth individuals investing, operating and relocating to the UK or Switzerland.

Within the industry, I am the single adviser who is able to traverse the different areas of expertise and bring a comprehensive approach across: global structuring, UK immigration, international taxation and FOREX to develop their global wealth strategy, while they build, grow and expand their wealth worldwide.

Previous experience as one of the senior advisors for the government, made me a go-to person when delicate and uncomfortable scenarios involving heads of state need to be handled with care and preserve privacy.