Three US private banking trends which global AMs need to know

Please read the following article from Citywire Selector on how private banking trends from the US could shape Asset management worldwide:


Three US private banking trends which global AMs need to know

Diversification, direction and alternative ideas. How the rise of institutional thinking could shape product pitches and future partnerships.


Asset managers need to focus on being ‘vehicle agnostic’, which involves having a wide array of strategies that would allow private banks and family offices to properly diversify in a volatile market.

That is one of the key findings of research group Cerulli’s deep dive into trends shaping the US private banking and trust bank market. The report, which was published this month, canvassed executive-level employees at US groups.

The twin effects of post-Covid-19 normalisation and rising inflation, many bank advisers are looking at defensive, as well as alpha-generating ideas, the research found. The implication for asset managers is they need to be able to offer a wider suite of solutions than before.

For example, low-vol, fixed income strategies will become increasingly important, as will alternative asset classes, such as private equity, hedge funds and non-traded REITs. Cerulli said many banks’ alternative allocations have been ‘modest’ to date, while asset managers have partnered with specialists to expand their product ranges.

Meanwhile, ETFs are more popular than before, with many banks surveyed saying these funds have taken on a ‘building block’ quality in recent years. The scalability and low cost were seen as benefits, with many banks also starting to use more complex vehicles such as strategic beta and active ETFs.

In addition, a number of advisers are starting to use active ETFs to respond to the aforementioned challenge of fixed income allocation. ‘As bank advisory teams demonstrate continued demand, there is a clear opportunity for asset managers to further educate advisors about the benefits of active ETFs within their clients’ portfolios,’ Cerulli noted.

It is not just on the product front that asset managers can aid private banks, Cerulli said. According to anecdotal evidence, private banks told the research group that they often depend on asset managers to provide commentary and positioning models to aid allocation ideas.

‘While it remains highly unlikely that asset manager-provided models will ever control the majority of assets in the channel, exposure can create opportunities for firms that cement themselves as a thought leadership partner,’ Cerulli wrote.

‘This is contributing to managers investing in the resources they use to engage with advisors and deliver information. For example, Goldman Sachs Asset Management hired a former Amazon executive to help lead the firm’s engineering strategy. The hire is part of GSAM’s efforts to improve its digital infrastructure and the client experience for both advisors and end-investors.’

It found that around 52% of private banks and trust advisors use asset managers models directly, while 39% incorporate them into their own decision making. This is with the remainder depending on third-party model providers.