It was a homecoming. Last summer Stefano Ferraiolo joined the private banking arm of Italy’s Intesa Sanpaolo as head of its London office – the first time in almost 30 years that he had worked for an Italian institution.
He’d held senior London-based roles in British, US and Swiss banks, so what led this 54-year-old expatriate back to one of his native country’s most respected names?
It was, he says, a matter of being in the right place at the right time.
Over the past couple of years under chief executive Carlo Messina, Intesa Sanpaolo had strengthened its position in Italy. It was ready to start building an international private banking operation.
The priority was to create a hub in London, the financial services capital of Europe.
Ferraiolo says he jumped at the opportunity to build a new kind of private bank from scratch,
in tune with the spirit of the times and free from the legacy issues that can easily smother efforts to change established institutions.
The support of a parent with “broad shoulders” was high on the list of attractions, he says. With some €200bn of assets under management, almost entirely accounted for by its Italian customer base, Intesa Sanpaolo is among the top four private banks in Europe.
There was another, surprising reason: Ferraiolo’s outspoken admiration for the work that the UK’s Financial Conduct Authority has done to push through much-needed banking reform.
London is the right place to build and now is the moment. “If the shape of private banking and wealth management 20 years from now is going to be reinvented – around regulation, around technology, around managing people, around dealing with clients – it’s going to happen here in London.”
The organisation that he intends to create will benefit from the forward-thinking regulation that the FCA has set out, as well as from the regulator’s focus on changing the culture of banking. It’s an approach that Ferraiolo believes will ultimately be adopted much more widely.
London’s global position in developing digital finance, or fintech, will be vital. The next generation of private banks will make greater use of digital and mobile technology to offer fast, highly-responsive services tailored to the needs of individual clients.
“I cannot see how a bank that is looking to establish itself in this business can do so without a plan that has digital technology at its core,” says Ferraiolo.
Intesa Sanpaolo Private Banking will initially serve its Italian parent’s traditional clientele by providing a “bridge into London” for small and medium-sized businesses – the entrepreneurs and families that form the backbone of the Italian economy. However, it will also interest expat Italians around the world who require services in London, as well as international clients seeking a route into Italy.
Clients will be provided with banking services based around a current account with debit and credit cards, and will be able to take out loans and mortgages from 2016. The private banking arm will offer onshore and offshore banking services to suit clients’ tax status under UK law, and its wealth-management services will be based on discretionary and advisory mandates.
The bank’s investment platform gives access to 3,000 funds spanning all mainstream asset classes. In time, Ferraiolo plans to complement these with specialised access to niche areas such as private equity and hedge-fund strategies, as well as long-term growth areas such as investments in African markets and early-stage businesses.
Service is crucial.
The way Intesa Sanpaolo Private Banking approaches its work will be just as important as the range of assets it enables its clients to invest in. The culture of the organisation will have at its heart staff who are well trained and supported, and who are focused on building long-term, trusting relationships with clients rather than chasing short-term sales targets.
A sales-driven culture has come to dominate many private banks, Ferraiolo says. This is largely because the big banking groups that own them have seen profits in their investment banking divisions squeezed hard since the financial crisis. They rely ever more heavily on their earnings from private banking and wealth management, increasing pressure on private bankers to push up sales at the expense of genuine customer service.
“The problem for many banks is that shareholders have become used to strong and steady profits from wealth management and private banking,” he says. “But it’s all about the relationship that you develop with your clients.”
"Clients are unique: when you start being pushed to relate to them in terms of the size of their assets, you start to lose your point of reference.”
Ferraiolo argues that since the UK banned payment of commissions by asset managers on the sale of financial products from the end of 2012, banks now have no choice but to focus on service and quality of advice. His business will not charge commission even where the rules still allow – for clients based in Italy, for example.
The opportunity to create a culture in which staff are encouraged to spend time with clients is one that Ferraiolo relishes. “We are trying to create a long-lasting, sustainable business in which we work together with the entrepreneur and get to know them so that over time you also come to know the family. You know their background and their history, and ultimately you become a trusted adviser in the old-fashioned sense, from one generation to the next.”
BRINGING THE HUMAN TOUCH
Intesa Sanpaolo Private Banking’s clients are drawn mainly from the business families of Italy, control of which – in many cases – has been passed down from generation to generation. Such entrepreneurs have an increasingly international perspective. Within Europe, London is a key centre of interest for them and one where the private banking arm aims to provide the kind of personal.
The bank will also provide a full range of private banking and wealth-management services to expatriate Italians based in London – many of whom are resident but non-domiciled for tax purposes – as well as those who are not resident in London but have an interest in the UK and need a specialist financial partner to help them navigate the local market. This may involve buying property in the UK, for example, or making other types of investment. More broadly, Intesa Sanpaolo Private Banking aims to become the natural partner for non-Italian clients who have an interest in the Italian market and require expert financial support to pursue their goals there.
“For me, the important thing is the human touch,” says Ferraiolo. “I’m talking organisationally: management and the employee. Because if that works and there’s a very respectful relationship then that feeds into the relationship with the clients.”
“Italian touch” that they expect from their domestic banking relationships.
THE RIGHT STAFF
Ferraiolo says that personal experience has convinced him that the culture he is trying to create will be critical to the success of the bank. “The best years that I had in terms of gathering assets and developing business were when I had a very inspiring mentor as my boss, who could inspire change and motivate. It wasn’t all about sales and targets.”
His aim is to hire experienced private bankers who have “that special, human touch” with clients that he believes is being squeezed out of the industry as a result of the relentless pressure to make sales. He wants to instil in Intesa Sanpaolo Private Banking staff the need to nurture trusting, one-to-one relationships and to spend time understanding people’s individual circumstances and requirements. “People need to know that if they knock on our door there will be someone here who can spend at least an hour with them regardless of whether they have half a million or 50 million,” he says. “This is very important because if we don’t suit each other we’re not going to build a lasting relationship.”
The private banking arm will offer “service with an Italian flavour”, he says. “With the people we are hiring it will be automatic that everything is done ethically, within the parameters set down by the FCA, but also with a little Italian touch that I hope will make people feel more comfortable. If we create a supportive, respectful relationship with our colleagues in the bank, that will feed through into the service we deliver to our clients.”
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