Banks use networks to tap newly affluent clients

By Douwe Miedema

GENEVA (Reuters) - Banks with large office networks across the globe are increasingly stepping into the wealth management business and tapping a big client base that traditional Swiss private banks miss.

Wealth managers UBS (UBSN.VX: Quote, Profile, Research, Stock Buzz) and Credit Suisse (CSGN.VX: Quote, Profile, Research, Stock Buzz) have a hard time in accessing affluent clients -- people with $100,000 or more to invest -- who are buying more private banking services from Barclays (BARC.L: Quote, Profile, Research, Stock Buzz), HSBC (HSBA.L: Quote, Profile, Research, Stock Buzz) and Citigroup (C.N: Quote, Profile, Research, Stock Buzz).

"An emerging area is people who are getting richer ... the retail space is something you have to (watch). Others might have an advantage there," Credit Suisse's Arthur Vayloyan said at the Reuters Wealth Management Summit.

Vayloyan is a member of CS's private banking management committee and heads the investment services and products unit.

UBS and Credit Suisse -- the world's biggest and third-biggest players respectively -- have no retail networks outside Switzerland. They have risen to their lofty rankings as foreign customers have parked their capital in Switzerland.

But that business is showing anemic growth, and both banks are investing heavily to build private banking networks in other countries in what is known as the on-shore business.

For banks that already have large branch networks, there is no need for heavy spending to lure clients to their wealth management services.

For example, "Citigroup will have slightly different segments to focus on -- the expat community, corporate executives who may be in Europe for four to five years and then are going back," said Marianne Hay, the head of Citigroup's wealth management unit in Europe.

The bank has the ability to deal with an increasing number of clients worth between $3 million and $10 million through its existing office network, which it is still expanding.

But banks are struggling to hire staff as the growth in wealth management, boosted by the number of affluent clients, outstrips economic growth.

"The issue for us in the UK, for example, isn't the access to the client base; it's having enough high-quality bankers to deal with the client base," said Thomas Kalaris, head of wealth management operations at Barclays.

Affluent clients are an attractive business segment, because they do not have the same power when it comes to negotiating fees that richer clients do. But the biggest change in the market in the future may be a battle for the moderately rich.

"The industry is going to become much more consumer-oriented. Senior management will recognize the premium of positioning this industry as a luxury item," said Seb Dovey at wealth management consultancy group Scorpio.