All four major banks have accelerated their activities in private banking in recent times, yet they consider this area still to be in its infancy in Australia.
All four major banks have accelerated their activities in private banking in recent times, yet they consider this area still to be in its infancy in Australia. Zilla Efrat examines what they are doing in the scramble to win the hearts and wallets of lucrative high net worth customers.
Private banking has been part of the European financial services landscape for years. It is fairly new in Australia, but it is, it seems, fast becoming a force to be reckoned with.
Players include the likes of Macquarie Bank, Colonial, St George, some foreign banking groups, large stockbrokers and, of course, the big four banks.
When moving into this market, the Big Four have had some natural ad-vantages: vast client bases through which they could sift for wealthy customers and extensive in-house support, from stockbroking or trus-tee arms, helping them extend their offerings.
They also have wide geographical reach and some boast an array of offshore banking subsidiaries and products.
John Henderson, head of Westpac Private Bank in NSW, explains: “We have been trying to serve our good customers better than our retail network is able to.”
But just who these good customers are appears to differ slightly from bank to bank.
Both National Australia Bank (NAB) Private Bank and ANZ Private Banking say their clients are the top 1 per cent of their retail bank’s customer base.
NAB generally invites customers with a net worth of $1 million-plus to join its private bank while Westpac’s customers should have $1 million or more to invest, or borrow from it.
Both ANZ and Commonwealth Bank’s Executive Banking do not disclose their eligibility criteria.
Nonetheless, the Commonwealth’s Executive Banking head Ed Condran says many of his bank’s customers are senior executives coming from Commonwealth’s corporate clients. Some have high incomes, others have high net worth and all were able to join by invitation only.
The services offered by the private banks are generally aimed at those who do not have enough time to look after their own affairs. And, they differ widely.
In addition to a wide array of banking services, the mix on offer can include everything from financial planning, estate planning, tax planning and wealth creation services to income collection, bills payment and taking care of overseas properties.
While all the banks have special “one stop” teams in place, most also summon up support from other divisions in their retail networks.
The private banks generally have offices in all major centres, but, it seems, their wealthy clients will never stand in long queues at these again.
Indeed, the difference between private banking and retail banking is being likened to that between flying first class and economy class.
Private banking consultants are generally on call 24 hours a day, seven days a week and will meet with customers at their offices, homes or wherever the customer chooses. Most of the contact, however, appears to be over the phone.
“We only look after only 1,000 clients for now because of the level of personalised service we are determined to give them,” Condran says.
The emphasis is on building up intimate relationships and training staff to deal with intelligent and demanding clients.
“The real issue is that there must be quality people at the front of the bank. We have very sophisticated clients and we need very sophis-ticated people to look after them,” says NAB Private Bank general manager David Jones.
Westpac Private Bank, like the other players, places much effort on the hospitality side of its business, including taking clients to, say, the theatre or playing golf with them in order to get to know them better.
“It takes a long time to understand customer needs and we listen closely,” Henderson says.
The private banks are also fast dispelling the notion that the banks do not provide independent advice and will always try to push their own products.
Phil Joiner, head of marketing and operations at ANZ Private Bank, says: “We will offer advice but this must be seen as independent ad-vice. We are prepared to not sell ANZ products if there is a better product out there.”
So it is with the other three who say they may go outside their groups, depending on their clients’ risk profiles and needs.
Typically, private bank customers will deal with one or two key peo-ple, who are supported by a multi-skilled team, which usually in-cludes financial planners, and who are able to call in outside spe-cialists when needed.
“Every client at our bank will have a relationship manager and a pri-vate client adviser working closely with his or her portfolio,” Con-dran says.
“These two are supported by a financial planner and they may also work in conjunction with a tax adviser, accountant, solicitor or who ever else the client needs.
“Our clients say that what they like about us is that they know who their private client adviser and relationship manager are. They can pick up the phone and get through to someone who will really fix any problems and who they feel comfortable getting advice from.”
Most of the private banks do not see themselves as the sole supplier of personal finance services to their clients. Roughly half of West-pac’s private customers, for example, have their own financial plan-ners.
Condran says: “We work very closely with other professional people who have a relationship with our clients like their tax advisers, ac-countants and lawyers.”
Joiner says: “Many customers might not be willing to set down 100 per cent of their financial affairs. Some already have financial planners in place and a lot are happy to get limited advice.
“Research has shown that clients tend to have more than one financial relationship. Some have long entrenched relationships elsewhere.”
However, far from viewing themselves as competition to financial planners, the private banks see themselves as different segment of the market servicing different customers.
Henderson believes that the private banks are there to serve the more wealthy – those with more than $500,000 – leaving a place in the market for financial planners to tackle customers with $200,000-plus to invest.
For Jones, financial planners generally meet the needs of those who have accumulated wealth under superannuation rules while private banks attend to dynasties, family groups and really high-income earn-ers.
“We’re talking different levels,” he says, noting that NAB Private Bank’s clients travel the world and are constantly exposed to differ-ent markets and inputs.
Their needs are far greater than the services offered by most finan-cial planners and they need NAB to be there for them wherever in the world they are.
“Private banking is the next step for financial planners,” says Jones, adding that most private banks offer a far wider array of products than most financial planners would offer in their practices.
He estimates that financial planning accounts for about one sixteenth to one eighteenth of the product groups offered by private banks around the world.
According to Henderson, Australia’s private banking industry is still fairly new and fragmented, offering plenty of room for growth.
The challenge, it seems, will be to draw in the many high net worth individuals who still bank on the retail side as well as those who still rely on their accountants or stockbrokers for advice.
