Banks and the family office

If a family office is looking for a relationship with a wealth manager there is no shortage of options. Indeed, in the last year or so most of the big global banks have redoubled their efforts to embrace family offices, launching new units to service them and marketing initiatives to tout their services.

Smaller banks are also getting in on the act. Corinna Traumueller, chief executive of the London-based Family Office Management Consulting, reckons the boom in services being offered by banks is a lot to do with the increasing amount of wealth being held by family offices. “They control more wealth than ever and continue to see growth in that wealth faster than many institutions,” she says. “That makes them very popular with banks.”

In western Europe alone, experts say family offices are likely to control as much as a half a trillion euros worth of assets, if not a lot more. They further estimate that around a quarter of the 1,000-plus family offices in Europe were started since 2000. This means that relationships with outside providers of services such as banks are probably going to be in their infancy for many family offices, allowing considerable opportunities for financial institutions to establish new connections with these very powerful investment offices.

Few banks will admit it, but another big reason they are piling into the family office space is because of struggling investment bank divisions. After some revival in the immediate aftermath of the 2008/2009 financial crisis, most of the big investment banks are now being hit by a tougher regulatory environment, and falling fee and commission income. Many including UBS, Credit Suisse, Goldman Sachs and HSBC are laying off staff. “As times get tougher in other areas, banks are turning their attention to family offices,” says Traumueller.

Typically, the big banks are covering all bases when it comes to targeting family offices. They are offering multi family offices-like expertise for ultra-high net worth individuals and families, and also providing products and services to very rich families so they don’t have to use a family office structure themselves. Many of the smaller banks are just trying to do the latter, reckoning this is where they can make more money.

The Swiss banks are leading the charge. For example, Credit Suisse offers both services, but has given special consideration towards developing its links with single family offices. Last September, the Zurich-based bank hired Bernie Armstrong from a Swiss family office to launch a dedicated family office team. The unit has since hired six others and has met with many of the leading family offices in Europe in the last half year.

Blake Shorthouse, who is head of Credit Suisse’s ultra-high net worth business in Europe and works with Armstrong, says that the “one bank” concept at the bank helps to provide family offices with the services they need. “Through our integrated approach, we can deliver real institutional expertise to family offices,” he says.

One of Credit Suisse’s strength with family offices, says Shorthouse, is its lending book. “Our ability to act as an important lender – thanks to the strength of our balance sheet – has been highly beneficial to clients in this segment.” But Credit Suisse says this is just part of a whole range of products and services they can offer family offices. “Our high-quality advice and expertise, comprehensive solutions and global presence have proved very attractive,” adds Shorthouse.

Credit Suisse’s main rival, UBS, has also been upping its efforts in the family office sector. The Swiss bank launched a family office group late last year, hiring Joe Stadler, head of the bank’s ultra-high net worth unit, and Jerry Wattenberg, who founded JTW International - a boutique investment firm for the super rich, to head the unit.

At the time, an internal memo from senior managers at the bank said: “We have set up a GFO to focus primarily on up to 250 largest institutional-like or professional family office prospects and clients, who represent around 2% of our total UHNW client base around the world.”

American competitor Citigroup launched its family office initiative at the same time as its two big rivals in Europe, but is concentrating more on driving accounts to its high-end wealth management unit. James Holder, head of global family office group at Citigroup in Europe, says that the bank’s effort to embrace the top end of the wealth food chain is yielding results, with the business growing strongly since the initiative was launched.

“We can offer our top-end clients a truly global perspective with the products and services we offer,” he says. Citigroup, in recognition of the role Europe plays in family office-type money, has based its global head of family office group, Catherine Weir, in Geneva. “This seemed to make sense given the amount of money linked to family offices and the ultra-high net worth in Switzerland,” says Holder.

But it’s not just the big global wealth managers targeting family offices in Europe. Many of the smaller, more country-based wealth managers and private banks are building their family business platforms. Swiss private bank Wegelin & Co is one of the few smaller banks to be providing services to family offices. In 2009, the St Gallen-based bank launched its family office services and advisory group, which offers asset management and advisory services to single and non-commercial multi family offices in Switzerland and abroad.

Other smaller banks operating successfully in the family office sector include Berenberg Bank in Germany and the Geneva-based Pictet & Cie.

But, despite all this activity, few if any banks are willing to disclose performance details on how lucrative this has been for them. “No doubt there is a lot of family office interest in the services banks can offer,” says a family office expert. “But, because they remain reticent of disclosing performance data, there must be some doubt about the level of engagement.”

Also, Traumueller doubts whether banks have completely gauged what family offices want. “The offerings from banks are extensive, but sometimes there is discontent about what a bank can offer and what a client actually wants,” she says. “Despite what banks think, many family offices are not willing to pay for advisory services.”

Nevertheless, Traumueller says when banks get the model right, the rewards are likely to be well worth it. “Family offices typically chose strategic partners and they are selected for the long run,” she says.

CampdenFO looks at the top 10 wealth managers for family offices (in alphabetical order):

Berenberg

The Hamburg-based bank works with many of Germany’s family- owned companies, which has helped it to build up a sizeable multi family office business. It runs its multi family office through a separate unit called Consilisto, which has a dedicated team of 14 staff and offers asset management as well as advisory expertise in areas such as succession planning. Jörg Liesner, managing director of the unit, says the business has been very successful at attracting clients since 2009, with assets under management at Consilisto growing to €3 billion in the last three years. As a result of its success in Germany, Consilisto now also operates in the UK.

Citigroup

Like many of its big rivals, Citigroup launched a dedicated family office unit last year. It has added additional staff and says that accounts have grown steadily since launch. The US bank, in recognition of the role Europe plays in family office-type money, has based its global head of family office group, Catherine Weir, in Geneva. Citi plays on its extensive international network and universal bank status as part of its appeal to family office clients. Citi’s family office art advisory service offers a comprehensive fine art consulting service within the private bank, instead of through a third party, which most of its competitors offer.

Credit Suisse

Credit Suisse set up a dedicated family office group last year and hired a senior family office professional to head it up. The Zurich-based bank has been very successful at attracting the money of the ultra-high net worth since it launched a dedicated effort in 2009 – and getting family offices to work with the bank has been a big part of this success. Although offering multi family office expertise to Credit Suisse’s richest clients is central to what the bank does, a special emphasis on working with family offices has been given priority at the bank in the last year. Credit Suisse can offer probably the most comprehensive list of services and products for family offices, anything from basic custody services to prime brokerage and co- investing expertise.

HSBC

HSBC launched its service for families and their family offices, Family Office Partners, last year which complements its Private Wealth solutions group that oversees $102 billion for families. The new unit services its clients through its private bank in partnership with its global banking and markets unit. Last year HSBC drew up an initial target list of around 50 family clients, which it says it has made good progress at achieving. The bank offers extensive services for family office clients including advisory and philanthropic expertise. To complement these services, HSBC has also recently launched a multi family office initiative to attract ultra- high net worth clients.

JP Morgan

Established more than 160 years ago to manage the money of the family of JP Morgan, as might be expected, the New York-based financial institution has in-depth knowledge when it comes to managing family office money and offering expertise to family offices. JP Morgan has a big presence in Europe, operating from its regional headquarters in London, and has established relations with many of the leading family businesses throughout the continent. Apart from the usual array of services a bank of JP Morgan’s size and reputation can offer family offices and the ultra- high net worth, the bank also provides extensive research into family business sectors and some of the unique investment opportunities and risks these families face.

Northern Trust

Northern Trust is one of the top providers of family office services in the US – it offers services to more than 20% of the Forbes 400 wealthiest Americans and the family offices who serve them – but it has also built a strong presence in Europe in recent years, servicing an increasing number of top family offices. Through its so- called “wealth passport” technology platform, Northern Trust is able to provide a sophisticated information-gathering package for family offices. The US group also offers many consultancy, fiduciary and private finance options for family offices. Also known for its banking services for family offices, providing anything from a current account to financing a purchase of a company.

Pictet

One of the most venerable names in the ultra-high net worth sector, Pictet has built up a sizable family office business, managing the assets of at least 30 families, with a value of around $15 billion (€10.4 billion), according to sources close to the bank. Like the other smaller banks in this list, Pictet has benefitted from the post-financial crisis disillusionment family offices have felt towards many of the big banks – and has vacuumed up assets and relationships as a result. The bank’s average account size for its family office business is between $300 million and $400 million and most of its clients are based in Europe.

Societe Generale

The French bank laid down its family office intentions when it bought a 37% stake in the US multi family office Rockefeller back in 2008. SocGen said at the time that the move was designed to cement its efforts in the ultra-high net worth market. Despite some doubts over the usefulness of the acquisition for the bank, SocGen has extensive relations with family businesses and their advisory services in France. Like its big competitors, SocGen offers an array of services for family office clients, including portfolio construction and private finance options.

UBS

The Swiss bank redoubled its efforts to work with family offices recently, establishing a dedicated unit to service them last year, and has since added considerable manpower and resources to the business. The bank’s so-called global family office group joins the top end of UBS’s wealth management unit with its investment bank. It will focus on its 250 largest institutional- like or professional family office clients and potential clients, according to the bank. Many of those will be in Europe, where the bank works with many of the richest families.

Wegelin

The St Gallen, Switzerland-based bank launched its family office service and advisory group back in 2009 and has been steadily gaining clients since. It offers asset management and advisory services to single and non- commercial multi family offices in Switzerland and abroad. Wegelin has been successful at gaining clients from many of the bigger banks during and after the financial crisis, as many family offices trusted the smaller and unlimited liability partnership structure of the bank. Part of Wegelin’s strength, say clients, is its portfolio structuring expertise.