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Is Bigger Better? Why You Should Care About The Size Of Your Private Bank

Money / Personal Finance

Is Bigger Better? Why You Should Care About The Size Of Your Private Bank

Private banks are often focused on size – which they use as a marketing tool – but should this matter to you? Swiss banks UBS and Julius Baer weigh in.

Written by Xiou Ann Lim on 21 April 2017

Assets under management (AUM) is the total value of assets that a private bank manages on behalf of their clients. Every year, private banks are ranked according to their AUM and they often use this as a marketing tool to attract investors – but why should you care about the size of your private bank?

In the Asian Private Banker’s 2016 AUM League Table, the top six private banks in Asia (excluding China onshore) remain unchanged from their 2015 positions. However, this does not mean an absence of growth – total AUM of these top six private banks increased by 4.5% year on year.

TOP 10 PRIVATE BANKS BY AUM

TOP 10 PRIVATE BANKS BY AUM

*as provided by UBS / Source: Asian Private Banker

Swiss private bank UBS retains its pole position with USD293.3 billion AUM, followed by Citi (which includes AUM from both its priority and private banks) and Credit Suisse.

Bank of Singapore climbed four spots, mainly due to the completion of its acquisition of the UK’s Barclays Wealth in both Singapore and Hong Kong – which helped to significantly improve its AUM.

So, why are private banks so focused on AUM as well as size – and should these matter to you?

According to UBS, economy of scale is one way size benefits investors. In fact, it believes that this is their “clear strategic differentiator”.

Big private banks provide a wider range of services to meet your needs

“Most of our Asian wealth management clients are business owners who are often interested in corporate activities for their businesses, so – beyond having a big balance sheet to lend – they will be looking for banks with the capabilities to execute corporate transactions,” UBS reveals.

With strong footprints globally and within the region, a major bank such as UBS is able to execute large asset sales, mergers and acquisitions, IPOs as well as other capital-raising activities for clients.

“This is crucial as we are seeing the first handover of wealth in Asia – around 460 billionaires in the markets covered are expected to pass USD2.1 trillion to the next generation in the next 20 years,” UBS discloses.

Big private banks have more to spend on their clients

As clients expect more from their private banks, the ability to be agile and responsive to these changing needs is critical – “which is why innovation as well as digitisation are key strategic priorities for us to providing a client-centric experience and our scale enables us to invest heavily into those areas” – says UBS.

Size can also afford other benefits, according to UBS: “Our scale and commitment has also allowed us to build one of the largest and highest calibre multilingual wealth management teams in the region.”

Torsten Linke – Head of Private Banking Southeast Asia and Branch Manager of Singapore at Bank Julius Baer – agrees: “Investors want to make sure that the bank is committed to doing private banking business and the size is to some extent a reflection of the importance of the business as well as the ability to offer a first-class platform for clients.”

“The business has to reach a certain critical size in order to be sustainable and be able to serve clients with their specific needs,” Linke adds.

In a nutshell

While AUM provides investors with an idea of a private bank’s size – and bigger banks may be able to leverage economy of scale to offer a wider range of services to clients, it is important to bear in mind that this is not the only gauge of a private bank’s performance nor is it an indicator of a private bank’s level of service quality.

For a different perspective, read about how smaller boutique private banks can benefit investors here.

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