As part of a continuing series of organisation insights into wealth management firms, WealthBrieifing profiles Standard Chartered Private Bank, a firm that has risen rapidly in recent years to become one of the most prominent players in the industry.

When much of the news has been filled with stories of job cuts, an institution that impressively bucks this trend by expanding its footprint is Standard Chartered Private Bank. This is a relatively young firm that has benefited greatly from its parent’s Asian heritage and footprint.

Standard Chartered Private Bank’s ascent has been meteoric. Little more than four years ago, senior executives decided that Standard Chartered, the UK-listed bank, needed to make a clear commitment to the wealth management market. Against a backdrop of then-fast rising assets of high net worth individuals, and an increasingly affluent middle class in Asia, this move made excellent sense. And through its organic development and through the acquisition of the private banking business of American Express, The Standard Chartered Private Bank is now one of the world’s most important wealth management players.

As an example of its ambition, the firm has in May committed to take on 100 more relationship managers across the globe, adding to its existing roster of about 360 RMs. Hardly a month has gone by recently when WealthBriefing has not reported on another move, hiring or product development by this firm.

The bank’s unpretentious image, wide geographical reach in the crucial markets of India and Asia and its solid balance sheet, make a potent combination. The bank’s group parent reported a slight increase in overall group pre-tax profits in the six months to 30 June last year (to £2.838 billion from £2.586 billion a year before); recent trading statements point to a solid improvement for 2010 and the next, barring unforeseen circumstances.

WealthBriefing recently visited Standard Chartered Private Bank’s elegant offices in the St James’s district of central London to discuss its progress with its group CEO, Peter Flavel, an Australian based in Singapore who spends much of his working life working in Asia. He was appointed to his current role in March 2006, with the task of launching a private bank for Standard Chartered. He joined the firm in 2003 and previously worked at National Australia Bank.

Beginnings

Back in 2006, Mr Flavel said, he and his colleagues began to plan the private bank.

“The ambitious entry strategy and five-year plan were developed by a team of just three of us in early 2006. And we remain pretty much on course to deliver to that original plan. Given the events of the past two years, we must be one of very few private banks set to deliver upon a strategy formulated in 2006,” Mr Flavel said.

With head office approval in March 2006, Mr Flavel and his team spent the rest of 2006 and early 2007 developing 14 new products.

There was no let-up in the pace. In mid-2007, the private bank launched in 11 offices in just five weeks globally.

“It was an aggressive statement of our ambitions in private banking. It made a sometimes staid private bank industry really sit up and take notice, particularly in Europe....'How could a private bank headquartered in Singapore and not Switzerland have such ambitious plans’ is what we continually heard from the market. And from others it was ‘would this bold strategy succeed?’ And there was even a head-hunter that respectfully declined to represent us. The launch was in scope, scale and speed unprecedented in global private banking history,” Mr Flavel said.

The American Express transaction happened during this time: “No sooner than we ended the successful organic launch [of the private bank] than the American Express Bank (AEB) transaction came about. We completed the transaction on 1 March 2008 and on day one announced the new combined global organisation structure.”

“In hindsight that was a better move and more important than we perhaps fully realised at the time. So from day one we've have had a settled organisation with an agreed strategy, known roles and responsibilities. It’s been a big bonus...certainly so when I look at subsequent private bank mergers or acquisitions that have taken many months and longer to finalise structures post acquisition. Our transition was very clean and focused,” he said.

Mr Flavel said the rest of 2008 was spent integrating the former American Express Bankex systems into Standard Chartered. “Since then we've spent some $50 million on further developing the systems infrastructure to bring them up to current versions and to meet our platform requirements for our RMs and clients.”

“We purchased AEB [American Express’s private bank] because it provided several capabilities we would have otherwise had to build organically. It provided a single common private bank global operating system for all booking centres, discretionary portfolio management, trust and fiduciary services, collateralised trading capabilities, a Swiss booking centre, consolidated client reporting and web capabilities. It quickly transformed our internal capabilities.”

Structure and team

Reporting to Mr Flavel are Peter Robertson, global chief operating officer; Rajesh Malkani, who is regional head of the private bank for Southeast Asia; Shiv Khazanchi, head of the Global Indian business; Stephen Richards Evans, regional head of the private bank for Northeast Asia; Marianne Hay, head of private banking, Europe, Americas and MENA; Soumya Rajan, head of the private bank in India; and Jacqui Brabazon, global head of marketing, philanthropy & key clients.

Ms Hay, for example, is a former chief executive of Citi Global Wealth Management, and she was hired by The Standard Chartered Private Bank last year. Recently, however, there was a high-level departure: Steve Seagrove, who was head of Private Banking, Europe at The Standard Chartered Private Bank, has left the firm, this publication understands.

The job titles of some of the top executives highlight how “Asian” the focus of this firm is, which is hardly surprising as this bank, which is 150 years old, traces its origins to these markets at the height of the British Empire. And by a mixture of luck and shrewd judgement, the private bank finds itself with a presence in some of the hottest wealth management growth markets in the world, a fact that its rivals must envy.

Segmentation and team culture

The private bank is organised to be a part of Standard Chartered’s consumer banking division. “We chose to be in the consumer banking segment because of the clients in that division who had $1 million of assets already. Or they have a smaller relationship with us like a mortgage but overall are a high net worth individual,” said Mr Flavel.

“So we've set ourselves up to complement the other client segments in the bank rather than potentially compete. It is a key part of the success we have had. You do see examples in other universal banks of quite unhealthy internal competition,” he said.

The Standard Chartered Private Bank has two client segments: a core HNW segment - $1 million to $10 million - and key clients - $25 million and above. Besides these segments, the private bank also has certain geographical and thematic areas, such as its Global Korean programme, catering to Koreans living around the world (of which there are about 100 million).

Other segments of note are the Global Indian programme and the  Global Sports Practice.

“It surprises most people to learn that over 25 per cent of our AuM is already in key clients. The reason is that many of our new key clients come from our very successful referral relationship with our wholesale bank,” said Mr Flavel.

“With the great client base we already have in the bank a lot of our focus is on deepening the relationships of existing clients of the bank. Additionally, throughout the crisis, we have had a good flow of new clients from outside Standard Chartered as well,” he said.

The services of the bank embrace businesses from the straightforward – but not to be dismissed – checking accounts to trusts, estate planning, fiduciary services, wealth structuring and philanthropy.

History and potential

Mr Flavel is very aware of the benefits of Standard Chartered’s geographical legacy.

“We have a private bank footprint in eight out of the nine fastest growing private banking markets in the world where we have a long standing, well- known trusted brand,” he said.

“India and China are in our genes. We are the oldest foreign bank in China and the largest foreign bank in India. We say we are more international than the local brands and more local than the international brands,” Mr Flavel continued.

The bank has a presence in markets such as Taiwan, Singapore, China, Hong Kong, India, South Korea, Indonesia, Dubai and Abu Dhabi. The bank also has a presence in London, Geneva, the Channel Islands, and Lebanon. In the Americas market, the bank operates a business in Miami and Uruguay.

“When we get asked about future aspirations, I reply ' we're very pleased with our progress so far but we also know we've not yet scratched the surface of what we can achieve. Our brand, network and heritage are purely wonderful assets for a private bank in our footprint. I refer to these internally as our  'acres of diamonds'. History has dealt us a great legacy and it’s simply a terrific position to be in,” he said.

Hirings and contacts

“Interestingly, much of the senior hiring is happening through direct contact with me or my senior reports. Good experienced RMs make direct contact with us because they understand the latent potential that remains within our integrated model,” Mr Flavel continued.

“The other interesting thing I'm continuing to notice is that many have some type of link with the bank...their first savings account was set up by their parents, a family member has been employed or loans advanced to family companies. And generally that means they know what we stand for and have a feeling for our culture,” he said.

Getting another 100 relationship managers to join The Standard Chartered Private Bank is an “ambitious target”, Mr Flavel says, but he continues: “We're quietly confident we will achieve it in part due to our commitment to grow our own people and not only hire externally.”

An issue for some banks, as major nations in the Group of 20 industrialised nations seek to pressurise offshore financial centres, is how much of a focus they should have on offshore versus onshore centres. For Mr Flavel, this is not really an issue.

“We're set up so that relationship managers are agnostic about whether client money is booked in offshore or onshore centres. And that's important to our clients whose families and businesses span different countries. We are going to see more money coming onshore as time goes on,” he said.

Bringing it back home

“The awareness of the Standard Chartered brand, which has always been strong in Asia, has in the UK, increased substantially through the last few years and with the strong way we've come through the crisis. Clients like the fact that we're a conservative, very liquid bank with more deposits than loans,” Mr Flavel said.

“Our loan-to-value ratios are in the conservative category. The world has changed and the degree of leverage people were getting from some of the banks was not right. We are in a good position.”

With that conservative point in mind, what sort of risks does this firm face, particularly as it has expanded so rapidly in a short space of time? Is there, for example, a risk that investors get carried away with the Asia boom narrative?

“We are very cautious. The rebound in markets this year has been very steep and very fast. However, I am an absolute believer in the medium and long term success of China and India. History has dealt us a very good legacy,” Mr Flavel said.

And he hinted that in Africa, Standard Chartered may be involved in more activities this year. “We see that as one region that will be a focus for 2010,” Mr Flavel said. In late December last year, Standard Chartered said it had appointed Richard Howarth, leaving the position of director and regional market leader for Africa at Barclays Wealth. This may be a sign of things to come.

And the Middle East remains an important area for the firm. The Standard Chartered Private Bank is opening offices in Qatar, Bahrain and Lebanon as part of its Middle Eastern expansion plans.

So this is a bank very much in expansion mode, although with a strong air of caution about future troubles that might lurk ahead.

Mr Flavel and his colleagues will have some work to do to keep up the impressive growth developments since they started just four years ago.