Beware Impossible Demands of Ultra-Rich Clients, Barclays Says

The world’s richest clients often come with “impossible demands,” push margins down and cause internal conflict with investment banking colleagues, said the vice chairman of Barclays Plc’s wealth management unit.

People with at least $30 million to invest, known as ultra high net worth individuals, insist on paying less for services, Gerard Aquilina of Barclays Wealth, told a conference in Zurich. They also ask for credit to invest in property, which may not generate private banking fees, and demand help with getting children into schools or last-minute concert tickets, he said.

“Beware of the complexities of dealing with ultra high net worths,” said Aquilina, who until 2006 was chief executive officer for the Americas at HSBC Holdings Plc. “Demanding and often unreasonable” requests may create “impossible demands on the organization,” he said.

The ultra rich saw their wealth rise by almost 22 percent in 2009, faster than other millionaires’ 19 percent returns, according to a June report by Capgemini SA and Merrill Lynch. The report attributed the higher gain to a “more effective reallocation of assets.”

While managing the wealth of ultra-rich clients can be “very profitable,” not all institutions are successful, said Aquilina.

“It’s a very complex area because these are very demanding clients who can be very important for the firm but if you’re going to embark on this adventure you’d better do it well,” he said in an interview. “There are casualties strewn historically across this landscape.”

‘Endemic Failure’

Attracting the very wealthy also presents organizational challenges for private banks as teams in different cities or divisions may target the same clients and be reluctant to share fees or make referrals, London-based Aquilina said yesterday.

“There is endemic failure” of investment and private bankers to speak to one another. The first “disdain private bankers and the latter have an insecurity complex,” he said.

Barclays Wealth, which targets individuals with more than 5 million pounds ($7.7 million) to invest, managed 151.2 billion pounds for clients worldwide at the end of 2009.

UBS AG, which manages 300 billion Swiss francs ($295.2 billion) on behalf of the ultra rich, is targeting expansion in that part of its business, Rene Mottas, CEO of the bank’s European wealth management unit, told the same conference.

To contact the reporter on this story: Warren Giles in Zurich at wgiles@bloomberg.net

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