Top down: Eric Barnett, Group Head, SG Hambros private bank

Date: 12 Apr 2007

Citywealth

Top photo: Eric Barnett

Bottom photo: Lewis Watts

Eric Barnett has worked with SG Hambros for over two decades. Spending the first portion with Hambros, it later became SG Hambros after a take over by Société Générale.

His early career was spent on the institutional side but in 1998 he transferred over to private banking. Eric’s official title is Group Head of Private Banking which covers two broad roles: he is in charge of operations in London and also oversees the trust and investment teams. Although he doesn’t look after clients personally, he does meet as many as he can to add a personal touch to the business. He says “it’s important that clients feel they can ring me if they want.” Eric and his team manage assets of ¬£8bn between the UK, Jersey, Guernsey, Gibraltar and The Bahamas.

The wealth management industry is booming according to any measure you wish to apply to it but it wasn’t always so and in fact many looked down their noses at it. Eric says that private banking started to really heat up in 1998. Then confirms: “previously private banking was a poor relation to institutional. Published quoted accounts would have one paragraph about private banking when it was often most of the profit in the business.”

Historically Eric thinks Societe Generale made a clever decision going ‘pure play’, selling off the non wealth management areas of the business in the late nineties. He says “it was a no brainer. It’s an attractive business. The returns are high and it’s a low capital intensive market.” Although he does add with a sigh that the increasing interest in the industry has made the acquisition price of private banking organisations go up considerably.

Of the strategy for the bank Eric gives us a steer on their approach, saying “we’ve seen a large growth in onshore wealth management and fortunately we were well placed to capitalise on this. He thinks a global brand is essential or a strong local support base to capture interest from the lucrative onshore client. Eric comments “onshore we provide the usual services like financial planning, trusts and investment management but we think we are really expert at understanding risk. We use our structured products as a tool to hedge risk in the portfolio rather than just something to sell to clients. We also do a lot of fund research and use a wide

range of offerings in the market not just ours. Although one good thing about our structured products is that they are scaleable up and down to suit client purses.”

With a reported rise in regional UK wealth in hot spots like Manchester, SG Hambros have also firmly set their sight on winning clients in this market. Eric says “we sponsored a report with Datamonitor which highlighted the different type of fortunes that were emerging outside of London.” He says they fell into many categories but wealth was generated mainly by property and entrepreneurial activities. Eric adds a comment “it was a logical step for us, SG

Hambros PB have critical mass in London so the regions were a ‘greenfield’ we could move into. He says the Datamonitor report was also a very good profile raising exercise across the regions including the South East.”

Of the type of client that makes up the core of SG Hambros Private Banking, Eric says it is more new money than old money these days. We remind ourselves of the phrase ‘nouveau riche’ which was bandied around some years ago. It seems highly inappropriate now, particularly with some landed gentry struggling to upkeep large estates and conversely hedge fund

managers earning hundreds of million. Eric agrees and says “times have really changed and the majority of clients are likely to be investment bankers, people involved with finance like hedge fund founders or businessmen.” He adds “Fifteen years ago M&A was hot, then it was private equity and now it’s hedge funds. The last two decades have shown that clients can always create serious wealth in the finance world.”

I ask what skills are needed in his role and suggest that others in the industry may aspire to his heady heights, but he modestly says “private bankers have a much better time than I do. If you get a nice book of clients as a private banker then it’s likely you will get invited to A list events with a wonderful life attached to it.” He does go on to say that running a big team is a substantial part of his role as is recruitment, then comments “In 2002 we had

twelve bankers and now we have forty five. We wanted a hundred percent growth and got it.” He also says “the team is very important to me and I have to understand the balance between discipline and inspiring loyalty particularly in the current market.” Other key skills he thinks are essential in this role are numeracy and keeping a keen eye on future trends. He explains “I have to try very hard to keep one eye on the bigger picture. It’s easy to get bogged down in day to day issues.”

As recruitment is the bane of everyone’s life, I ask for his view on it. He shares his view saying “I do think you have to be careful about who you choose to work with and although we’ve taken staff from other banks, I understand that ultimately this just inflates prices for everyone. We are ‘bringing up’ people through training to ease the situation but obviously this will take time.” He is understandably pleased that relatively few staff has left in the last five years which is quite a record with an organisation of their size. Eric says “culturally this industry can be a ‘me-business’ but we only take on people who show an interest in SG Private Banking. We want staff to understand and care about what they are doing.”

Eric offers a further insight “I don’t think private bankers really reach maturity until their thirties and forties. It’s different from the institutional side where you may see high flyers in their twenties. We have senior private bankers continuing to work with us in their sixties because their skills are so well attuned to this market.”

The topic moves onto Asia. Eric is relieved the recruitment challenge isn’t

quite as difficult as it is in places like Singapore but says it’s a market they can’t ignore. He explains “Asia is growing at 8% per annum. It’s just a place any private banking organisation has got to be.” He backs up his story by citing a survey that said in the 19th century 3/5’s of global output was from China which reduced to 1/5 in the 20th century and is expected to be back to 3/5’s by the end of the 21st century, suggesting that this region will yield much greater returns than already seen.

Closer to home, I ask about

France to see if he has witnessed any flight capital prior to the upcoming elections. He says he hasn’t noticed anything and comments “I don’t think I’ve seen a particular upswing but then we have an established French clientele who represent a healthy business for SG.

In 2006 with changing UK laws the increasing settlements for divorcee meant women became a ‘new’ client for private banks, I ask if also so for SG. Eric says “we have an active matrimonial settlement business with legal fee bridging for those needing to fund legal advice. We find if we can build a good relationship during this difficult time and clients feel we’ve helped them during a major change in their life then investment work naturally comes from the process.”

As to how the private banking industry has

changed Eric doesn’t hesitate and says “it isn’t the same animal at all, there is far more bureaucracy now.” On the reverse side of the coin he says the sophistication of the client and product offering is growing on a daily basis which is making life much more exciting. He continues the thread “the most interesting thing in this business is the client. It’s much better dealing with people than corporate deals.” He smiles secretly and says “it’s especially good if you have an inquisitive nature.” Of client size he says “clients are getting richer. Five to six years ago we regularly saw intake at the ¬£3million level but clients are more likely to have ¬£5-10million now. He also says “Russian clients are increasing in numbers

And dare we ask, is there anything that could halt the private banking boom? Eric says everything is cyclical and says “I think if the market continues growing there will be room

for everyone to make money. If the stock market takes a hit, it will come down to having the right products and strong relationships. Clients will generally persevere on performance issues for a stretch if this formula is right.”

Finishing up Eric tells me gently about the SG Private Banking achievements saying “I’d really like those thinking of referring clients to us to know we are running a successful UK private banking subsidiary. In London our managed assets

have increased by fifty percent in the last year with our average client net worth also increasing in size.” He adds ” We want to be one of the leading organisations in UK wealth management and I think we are well on the way to achieving it.”

Lewis Watts who reports into Eric is based in London and is Director, Head of UK Private Banking for SG Hambros. His clients are mainly entrepreneurs who have sold their businesses. He is responsible for the London based team which amounts to twenty individuals in London rising to forty with regional staff. He started his career in private banking in 1989 at Adam & Company in London. He joined SG Hambros in 1998 and now has 18 years experience in Private Banking.

The SG Hambros Group employs more than 450 people and has over £7.1 billion of assets under management SG Private Banking, with offices in 23 countries ranks among the top 10 players worldwide (Euromoney 2007) and has over EUR 67.8 billion euros in assets under management.

Important locations for the group are France, UK, Luxembourg, Switzerland, Belgium and Asia. In 2006 SG Private Banking was named the Best Private Bank in Europe by London-based magazine, Private Banker International.

Daniel Truchi, CEO of SG Private Banking Asia Pacific, was named “Best Private Banker” for the Asia-Pacific region in 2006 by Private Banker International magazine. Since SG Private Bankings inception in 1998 their growth in the region has averaged thirty five percent a year.

www.sghambros.com

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Citywealth
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