Private banks reach out to the less wealthy

GENEVA Tue Oct 6, 2009 11:56am EDT

Wegelin & Co Managing Partner Christian Raubach gestures during the Reuters Global Wealth Management Summit in Geneva October 6, 2009. REUTERS/Denis Balibouse

Wegelin & Co Managing Partner Christian Raubach gestures during the Reuters Global Wealth Management Summit in Geneva October 6, 2009.

Credit: Reuters/Denis Balibouse

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GENEVA (Reuters) - 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 BAER1.VX, 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 (CSGN.VX) and UBS (UBSN.VX) 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.

At the Reuters Summit in Geneva, Collardi struck a different tone, saying people who think they cannot afford Julius Baer should think twice.

"It's a bit like the nice chic restaurant on Rue du Rhone you walk by 10 times and you think: 'I am not so sure I can go in there, it might be a bit sophisticated,'" Collardi said, referring to an upmarket street in Geneva. "And then you end up going in there and you have a wonderful meal."

Enrique Marazuela, chief investment officer at the fund management arm of Spain's BBVA (BBVA.MC), said that although the ideal target customer for the BBVA's private banking service is someone with at least 2 million euros to invest, the bank would also look at people below that level, such as those with about 1.5 million euros.

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 percent from the year before, while their wealth dropped 19.5 percent, 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 percent 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 percent of assets under management.

For customers with more than 2 million euros to invest, the gross profit margin was "below 1 percent", 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.

By not having minimum wealth limits and by not focusing on short-term returns, Raubach said, "you can seed something that is 10 years out". (Editing by David Holmes) (For summit blog: blogs.reuters.com/summits/)

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