‘This is a fabulous time to be wealthy’
As wealth concentrates globally in ever fewer hands, private banking is exploding, serving clients with liquid assets exceeding $1 billion. Peter Charrington, the managing director for the UK and Greece at the Citigroup Private Bank, told Kathimerini how these people’s banking needs are served and how this niche is taking shape in Greece. «The global growth of the private banking industry has very much been created by the increase in high-net-worth individuals over the course of the last 10 years. There’s been an enormous creation of wealth,» Charrington suggested, adding that «some of that wealth did suffer from 2000 to 2004, but, equally during that time, there was a steady influx of new wealth in other areas, such as shipping or the oil business.» «So I think that the amount of wealth created globally has been very significant, and, especially in Greece by the shipowners through the massive demand from China and India, has been very considerable,« he explained. «The private banking industry has actually never been stronger,» Charrington believes, asserting that «this is a fabulous time to be a wealthy individual,» as one can now have access to products and services that did not exist before. There are three major changes to private banking’s clientele. The rich clients’ fortunes grew; they increased in numbers and banks have turned their attention to offering private banking also to those with lower liquid amounts. «A lot of banks have gone toward what I would describe as mass affluent people, meaning those with a net worth of $100,000-200,000,» Charrington said. Citigroup, however, opts for the big clients instead, with net fortunes over $10 million. And what do these clients want? «Their first requirement is to preserve their wealth. Then, we’ll talk about how to make some more, but they want to make certain they don’t lose what they’ve got. And that you find across the board – Greek customers, UK clients, Monaco clients,» he noted. Sophisticated clients So what do Greek shipowners do with their earnings? «Shipping is a cyclical business. There’s certainly been some profit-taking and I would expect that to carry on,» answered Charrington. «Greek clients are very sophisticated and very shrewd investors. They know when to put money on the table and they know when to take money off the table. And when you think about what is going on in the commodities world today and the amount of shipping created by the Chinese, it may be sensible to take some of that money off the table, put it in the bank and then wonder: ‘OK, what do I do with that money?’» he said. «There are plenty of opportunities to deploy that money in different ways and our clients are looking at various options to diversify away from their core businesses, while recognizing that their best chance of creating wealth for some time to come remains in the shipping sector,» he observed. «Today, clients are not content to simply park excess money in cash deposits; they want to adopt a well-thought-out globally diversified investment strategy, which can mean holding bonds and equities in developed as well as emerging economies, but also hedge funds of various strategies and private equity,« Charrington argued, commenting that «many Greek clients feel very comfortable with private equity as an asset class.» One option is private equity, investing in non-listed firms in the development stage until they are listed on some stock market. This carries greater risk but could fetch returns of more than 20-25 percent annually. «It classically is a 10-year type of investment,» he said. Co-investment Citigroup Private Bank also proposes «co-investment,» the joint placement of capital by the bank and its clients. «The principle is that we invite the client to invest with us in a particular opportunity, for example, private equity, meaning that Citigroup and the client will participate on an equal footing in the investment. If the value of the investment increases, we all make money; if it goes down, we’re all in the same position. In principle, this is a very attractive proposition for clients,» Charrington said. Could this become a major trend, when banks would rather charge commissions than take credit risks? «I think that certainly the big banks are looking at that. You have to have a very well-capitalized bank and there are probably eight or nine banks in the world that can play like that. But I think you will see banks moving toward that.» Along with private bankings’ services and products, there is also the proliferation of imposed regulations. Banks, for instance, have to report transactions classified as suspicious. «I think that’s perfectly fine and it can absolutely sit alongside confidentially,» assured Charrington. He also stressed that «our clients’ confidentially is very important to us. It is non-negotiable,» and added that «the Greek client base tends to be very confidential for obvious reasons in history and reasonably so. The English, for example, are a little bit more easy.» «I am very comfortable with who our clients are,» he said explaining that «over the last two to three years, we have turned away several billion dollars’ worth of new business. There is money out there that Citigroup will not bank. If it finds a home somewhere else, I have no idea, but not with us. If you are a serious bank you have to say ‘no,’» Charrington concluded categorically.