JP Morgan's private bank emphatically does not believe that UHNW clients are "more trouble than they are worth", regarding them as a valuable customer base.

In the autumn of last year, a furious industry debate was sparked over the question of whether – when all is said and done – ultra high net worth clients are “more trouble than they are worth”. The answer, according to Pablo Garnica, head of JP Morgan’s EMEA private banking business, is a resounding no.

Speaking in an exclusive interview, Garnica told WealthBriefing that far from being an unprofitable drain on resources, as some have suggested, UHNW remains an attractive client segment – for those who really know how to serve the super-wealthy.

Watchers of the industry will of course remember the controversy sparked by comments reportedly made by Gerard Aquilina, Barclays Wealth’s then vice-chairman, at a banking conference in Switzerland. Aquilina, now chairman of UBS Wealth Management’s global emerging markets business, reportedly said wealth managers should beware “the complexities of dealing with ultra high net worths”, warning that the super rich can place “impossible demands on an organisation.”

Although it was said that Aquilina’s comments had been taken somewhat out of context, any possible misrepresentation aside, the question of whether the UHNW segment really represents a “sweet spot” for wealth managers is arguably a valid one.

A sophisticated segment

Speaking at JP Morgan Private Bank’s new UK headquarters, situated in 1 Knightsbridge, Garnica conceded that while the UHNW can be demanding, one could hardly expect the case to be otherwise. “UHNW clients are sophisticated, complex and highly demanding, and so your offering needs to be sophisticated, specialised and of the highest quality,” he said.

JP Morgan Private Bank’s UHNW unit caters for those with a liquid net worth in the region of $25 million, and uses a team banking approach which is also favoured by the likes of Coutts. This methodology, which of course mitigates “lone banker” risk, sees a team of professionals allocated to the client – all of whom deal directly with them. This team includes: a banker or relationship manager, an “investor” who makes investment calls, a capital advisor for cash management, a client service specialist to deal with transactional work like transfers, and a wealth advisor to focus on wealth structuring. Of course, the fact that a large chunk of UHNW clients come from a family business background - which may be global - means that succession planning, wealth transfer and multi-jurisdictional tax mitigation are even more of a focus than with those further down the wealth scale. As such, JP Morgan’s UHNW banking teams will work very closely with a client’s tax and legal advisors.

 A global platform

To Garnica’s mind, the multi-jurisdictional nature of UHNW clients’ affairs means that global banking groups really come into their own when serving the super-rich. “The UHNW are families with complex needs in different jurisdictions so an international platform is essential,” he said. One of the primary advantages of this, he continued, is that it allows the bank to “leverage experiences with other clients in different places.”

According to Garnica, the strength of JP Morgan’s UHNW offering is that while the business operates as part of a global platform, it is delivered locally. That way “our employees can bring a local flavour to the client,” he said. The importance of this “local flavour” of service delivery is essential in delivering a top-notch UHNW offering across EMEA, according to Garnica, who notes that the EMEA region “is one of the most complex regions, not just in terms of the diversity of countries, but in terms of regulatory diversity, too.”

The bank’s EMEA private banking clients are served from offices in London, Paris, Milan, Dubai, Geneva, Zurich, Madrid, Bahrain and Frankfurt - the most recent addition to the network. Of these, the UK and French offices are the oldest, however the firm has been present in Spain for over 30 years. In fact, the bank has been dealing with the UHNW segment for over 160 years, and JP Morgan views this as one of its primary attractions to clients, said Garnica.

And JP Morgan is certainly still on the lookout for new UHNW clients in EMEA, as it sees significant expansionary potential in several markets, one of which is clients from the Nordics, a market with both healthy industry and a lot of family ownership, Garnica points out. With this in mind, the bank has been actively building up its London-based Nordics desk in recent months. However, JP Morgan Private Bank is also eyeing growth in the UK, Russia and the Middle East in particular as part of a broader “organic” growth strategy.

No one firm is dominant

Attracting new super -wealthy clients is, of course, not just a priority for JP Morgan – despite the supposed “impossible demands” these clients can place on providers, they remain a prestigious client segment much courted by both global and boutique firms. The attractiveness of EMEA’s super-wealthy client base remains and “given the lack of dominance in the UHNW space,”  wealth managers “are well-positioned for growth,” said Garnica.

The head of JP Morgan’s EMEA private banking operations is well aware of the “pull” each type of institution has. He concedes that local players “stand out of course”, but he argues that his bank can draw on the historical commitment it has demonstrated to its various markets – of course, firms which enter a market only to pull out again soon after suffer significant brand damage. In Garnica’s words, “it’s important to go in and stay.”

Tapping into clients’ concerns and interest

One way the bank seeks to develop relationships with UHNW individuals – not just in EMEA, but all around the world – is by really tapping into their mindsets, said Garnica: naturally, the sophisticated super-wealthy are not to be wooed by blanket coverage advertising. “Although everyone wants to raise visibility”, branding and marketing activities need to be much more precisely targeted for the UHNW client, he said.

For example, JP Morgan runs a global educational programme, the NextGen Leadership programme, on business succession for the children of clients or potential clients. As many of the bank’s UHNW clients come from a family business background, succession is a real worry for many and these events prove a good way to reach out to this segment, said Garnica. Another thing to remember is that these are not selling events, he said, as speakers from outside the bank are invited in.

It’s not, however, just the UHNW segment’s worries which are addressed by JP Morgan, but also its passions, and so the bank is a keen supporter of “the finer things.” This, said Garnica, is because “art and culture resonate well with this client segment.” This patronage has the added advantage of giving the bank an impressive art collection – like many of its peers. While this collection is leveraged, said Garnica, it exists “not to impress people, but rather because the bank is proud of its support… it is showcasing its patronage of the arts.”

“It’s difficult to win the trust of the UHNW, but not if you know what they’re about,” concludes Garnica, and delivery on brand promise is absolutely central to that. The main objective of JP Morgan Private Bank’s is to “preserve wealth and grow it over generations”, as, after all, “clients want their money to perform,” he said.

 Building up an attractive brand and offering in the UHNW space is then no mean feat, and the penalties can be harsh for those firms that get it wrong. Get it right though and the UHNW segment provides ample scope for growth for those with the right platform and a commitment to delivering. In the words of Garnica, “the brand will live on as long as you deliver on the brand promise.”