THE shock waves from the tsunami that has ripped through the financial system are hitting the discreet world of wealth management. This week, Swiss bank UBS, which has suffered particularly badly from losses in investment banking, showed how the damage to its reputation had a knock-on effect on its separate wealth management business. There was a surge of [pounds]24.4 billion in assets withdrawn by high net worth individuals in the third quarter.
Other banks to be hit include Merrill Lynch, saved from collapse by Bank of America, which admitted to a net outflow of [pounds]1.8 billion from its wealth management division in the same period. Virtually no one has been immune from the turmoil, from billionaires Roman Abramovich and Lakshmi Mittal downwards. So it's no wonder that high net worth individuals, defined roughly as someone with [pounds]500,000 or more in liquid assets, are being more picky about where they keep their money.
We have seen with the abrupt collapse of Northern Rock and the Icelandic banks just how fast problems can snowball.
Stories abounded a month ago that even customers of august private bank Coutts everyone from Notting Hill property developers to fashion TV presenter Gok Wan were considering whether to withdraw their money because of the parlous state of its parent company Royal Bank of Scotland. Customers' nerves were only assuaged when Gordon Brown announced his recapitalisation plan for RBS and other ailing banks.
Cath Tillotson, a partner at wealth management advisers Scorpio Partnership, says: "Some clients are undoubtedly moving their money. There is a 'f light to quality' in times of crisis, usually to a large bank. But what has changed in this crisis is that it is some of the large banks that have been suffering.
So this is redefining what 'flight to quality' means." Risk- averse investors, many of whom had already deserted property and the stock market, have been keen to put some of their cash on deposit. Beneficiaries include Santander, the Spanish owner of Abbey, and HSBC, with a big international customer deposit base.
Also doing well are some of the smaller banks and boutique houses.
The venerable C Hoare & Co, the private bank headquartered on Fleet Street, is said to have been inundated with unprecedented levels of cash in recent months. Hoare is interesting because it is an independent partnership the partners who run the bank are personally liable for the money on deposit.
While Hoare is rare in the UK, Switzerland has more than a dozen private banks such as Pictet, Lombard Odier …